Tips for getting out of debt

By Caitlin in Debt
Tips for getting out of debt

Debt elimination is hard. Sometimes you’ll feel fine about it and sometimes you’ll feel like you’re trying to climb out of a hole that keeps getting deeper and deeper. Money is mostly seen as being all about numbers and math. In personal finance, money is seemingly about income, debt and budgeting but money is a very psychological thing. It provides you with security, comfort and, to a certain extent, happiness. The key to getting out of debt is to not live beyond your means but it is extremely difficult with so many ways that allow you to do so.

The first step to getting out of debt is to stop getting more and more into debt. In other words, cut up your credit cards and cancel all your lines of credit. While you are already in debt there is no reason to keep using credit. Credit cards, on a good day, are ways for companies to cash in on your debt. Sure, credit cards can be convenient and can provide you with some cash-back and travel benefits but none of these things are essential. If you are in debt, credit is more of a burden than a convenience, be done with it.

The second step is to start saving. It is so much better to have a savings fund that you can dip in to when you truly need to than to keep a credit card for unexpected costs. This may take a little while, but saving a little bit off your income every week will help toward staying out of debt once you’ve paid off what is owed. These savings are purely for emergencies and to be able to get you out of a jam if you truly need it. It’s probably wise to keep this money somewhat out of reach. For example, keeping your money in an accessible savings account that is not linked to a debit card. This way you will have the money if needed, but you will not be able to use it for impulse purchases.

The next step is the most difficult one. Once you’ve stopped acquiring debt and have provided yourself with a comfortable savings account cushion for emergencies, it’s time to tackle paying off the debt. One of the most rewarding ways to do that is with the debt-snowball method. This strategy involves completely paying off the smallest debts first all the while paying back the minimum amounts on the bigger ones. Once you move past the smaller ones you can tackle the bigger ones. There are some basic steps involved in the snowball method:

– Make a list of your debts in ascending order (smallest to biggest)

– Figure out how much money you should put towards each item on the list

– Pay the minimum amount on each debt

– Use every other bit of disposable income you have on paying back the smallest debt on the list

– Once you’ve paid something in full then add the money you were throwing at the already paid sum to the new smallest debt.

– Repeat for each item on the list

The theory is that, once you’ve paid off your smaller debts the amounts you were putting towards those will snowball into bigger amounts that will help pay off the bigger debts. Though it will still take some time to pay off the debts, the results are instantly noticeable and will very gratifying.

If the snowball method is not for you, there are other ways to focus on paying off your debt. As I mentioned before, the key to successful personal finance is to not live beyond your means. In terms of paying off debt, you will absolutely have to earn more than you spend. If you do not achieve that by curbing more extravagant finances you will have to be more frugal. There are some great cost-saving ideas out there that can benefit people who are trying to save money. Sometimes, packing lunch for work versus eating out every day can save a significant amount of cash.

You can also get another job (not to the detriment of other factors in your life of course) to provide you with supplemental income to help save to pay off what is owed. Furthermore, selling things you may not need can help out a lot.

Don’t put off getting out of the debt spiral. There’s no time but the present to get your personal finances back in order if debt is smothering you. The relief of taking action will be a great stress reliever and your success will provide great motivation for staying out of debt in the future.


All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster.

Loans Canada and its partners will never ask you for an upfront deposit, upfront fees or upfront insurance payments on a loan. To protect yourself, read more on this topic here.