How to Manage Debt: Credit Cards, Mortgages, and Beyond

How to Manage Debt: Credit Cards, Mortgages, and Beyond

Written by Veronica Ott
Fact-checked by Caitlin Wood
Last Updated February 15, 2021

Debt can come from a variety of sources, mortgages, car loans, and credit cards just to name a few. Regardless of where your debt comes from, it’s an immense burden to carry around and paying it down, while very freeing, sadly can take quite some time. Managing debt typically requires organization and a realistic sustainable plan. You may be scratching your head as to what this is exactly, but fear not! This article will teach you how to get your finances on track to manage and eliminate your debt.

These are the top 5 reasons why Canadians are in debt.

Get Organized and Stay Organized

In general, the more unorganized and scattered your debt is, the more challenging it is to manage. On the other hand, when your debt is organized and structured, it is much easier to manage. Of course, keeping your debt organized is often easier said than done.

In order to organize and manage your debt effectively, it helps to create a system or plan that works with your lifestyle. By developing a series of processes in relation to your debt, you will better manage your debt by not missing payments, understanding how much you owe and following a plan to get out of debt. Below is a list of things you can do to get organized and stay organized.

  • Write Down Who and How Much You Owe. Knowing who you owe and how much you owe is the first step to creating a system to get out of debt. Be sure to write down the monthly payments as well so you can budget accordingly.
  • Set Up Payment Reminders. Once you know what you need to pay every month toward your debt, set up payment reminders for yourself so you never miss a payment. It is also wise to include your paycheques in your reminders so you can optimize your cash flow. Missing payments hits your credit score hard, try your best not to forget payments.
  • Determine How Long it Will Take to Pay Down Your Debt. Once you have a final number of what you owe and how much you can pay in a month, figure out how long it will take to pay down your debt. Putting a deadline on your debt will help you stay motivated and focused.
  • Budget. A good financial habit to get into is budgeting. You can create a realistic spending plan by budgeting and understand where you’re overspending. Those costs that you overspend on can be cut out easily and put towards paying down your debt.
Learn How to Tackle Debt
Check out this infographic for even more tips on tackling your debt load.

Your Plan Needs to be Practical

Finding the motivation to manage your debt more effectively can be an exciting time in your life (for more advice on debt repayment motivation, click here). After all, getting the burden of debt out of your life is very liberating! Although, with motivation, you need to remain practical. Getting out of debt can take a long time so your plan must also be sustainable for a long period of time. Think of the road to a debt-free life as a marathon, not a sprint.

To maintain practicality and sustainability, avoid putting too much pressure on yourself. You’re only human, try to be proud of what you’ve achieved in relation to paying down your debt as opposed to what you haven’t achieved. Another thing you can do is avoid expecting yourself to work miracles. If you could pay your debt off overnight, or perform other similar miracles, you would’ve already. Finally, try not to restrict yourself too much. After all your hard work, you deserve to treat yourself! All your money doesn’t need to go towards paying down your debt in order to become debt free.

Try Living Below Your Means

If you’re having challenges managing your debt, find yourself overspending on your credit card or are aiming to make this year the year you become debt free, consider living below your means. Living below your means is a great tactic which involves spending a lot less than you earn. Keep in mind that living below your means doesn’t involve living uncomfortably, it merely means regularly evaluating your financial choices and always consider the future consequences of your expenditures.

There are many ways you can live below your means. You can switch to a lower cost phone plan, switch to a bank with less fees, discontinue services you don’t need, try clothing swaps or thrift stores, use cash or debit instead of credit cards, take public transportation, keep your car longer, do your own home renovations, live in a smaller home or apartment and eat out less often.

As mentioned above, it’s important not to restrict yourself too much. It’s best to find a healthy balance between living below your means and treating yourself once in a while. What’s most crucial is being conscious of how much you’re spending.

To learn all about how ongoing debt affects your life, check out this article.

Monitor Your Credit Report

Loans Canada recommends that all consumers stay tuned into the activity on their credit report as this can help you identify fraud and ensure all your credit accounts are in good standing. That being said, you should try not to get obsessed with your credit score and report. Having good credit is important but, more often than not, paying down debt is even more important. Even if your credit takes a hit as a result of you paying down debt, credit scores can be improved over time.

Is your credit report scaring away potential lenders? Find out here.

Snowball vs. Avalanche

There are two methods you can consider using when paying down your debt: snowball and avalanche. Both methods are great strategies for paying down your debt, there is no right or wrong option. When determining which method is ideal for you, if either is good at all, be sure to consider your current financial situation and goals.


The snowball strategy involves listing all of your debts from smallest to largest. Once you’ve listed them out, you start by paying off the smallest debt first and work your way down the list to the largest debt. The catch is you put as much money as possible towards the debt you’re currently working on paying down while still making minimum payments on your other outstanding debts. As soon as you’re done paying down one debt, you move onto the next. The term “snowball” comes from the fact that you’re making a loan payment plus the previous minimum payment each time you move down the list.

The snowball strategy is ideal for people who see money as more than just numbers. Some want to feel the satisfaction and reward associated with managing finances effectively. The snowball method helps individuals feel financially successful because you’re paying down the easy, low debt first. Once you get into the habit of paying down debt, it will be easier for you to maintain the habit and feel good about what you’re doing.

Make this year the year you finally conquer your debt.


The avalanche strategy is similar to the snowball strategy in the sense that you also take inventory of all your debts. However, with the avalanche strategy, you order your debts from the highest interest rate to the lowest interest rate. Then, you start paying off the debt with the highest interest rate first and work your way down. The advantage of this method is that you’re paying off your most expensive debt first.

Mathematically speaking, the avalanche method is superior to the snowball method. In the long run, you’ll save more money because you’re not accruing expensive interest for as long. If you’re the type of person that cares deeply about saving money and are detail-oriented, the avalanche method would likely be good for you.

Video: Debt Consolidation Loans Explained

Consider Debt Consolidation

If you’ve tried to manage your debt on your own but still are struggling to pay it down, consider debt consolidation as a solution. Both debt consolidation loans and debt consolidation programs make managing debt easier for consumers.

Debt Consolidation Loan

A debt consolidation loan is a loan used to pay off all your debt. Once you pay off your debt with the consolidation loan, you only have to worry about paying down the consolidation loan, not your old debts. The benefit of using a debt consolidation loan is that you only have to be concerned with one payment as opposed to many. In addition, you may qualify for a lower interest rate on the consolidation loan compared to the debt you already have. That being said, it can be challenging for an individual to get more credit if they’re struggling financially already. A debt consolidation loan is a good idea if you can snag a decent interest rate, get approved for the loan and afford the monthly payment with ease.

What if you get denied for a debt consolidation loan? Click here to learn more.

Debt Consolidation Program

A debt consolidation program is the same concept as a debt consolidation loan but it requires that you go through a third party agency. While on the program, the third party agency will consolidate your debt for you resulting in one monthly payment that you are responsible for. Usually, interest is ceased or reduced which makes your payments lower than if you had consolidated your debt on your own. The downside of these programs is they can damage your credit while you’re in the program and individuals viewing your credit report will know you’re in the program. However, it’s okay to seek financial help when you need it and the agencies can give you additional support such as one-on-one mentoring and educational workshops. You will still be paying the principal amount of your debt too which is notable to future creditors.

What types of debt can you consolidate with a debt consolidation program? Find out here.

Need Help with Your Debt?

If you’ve tried to manage your debt on your own but you’re still struggling, you may benefit from professional help.

Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.

Rating of 5/5 based on 2 votes.

Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.

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