12 Ways to Kick Debt in Canada: Advice From a Government Debt Expert

How to Kick Debt For Good

A lot of people in debt can sometimes feel lost…they’re not sure if it’s best to start paying it down or completely getting rid of it altogether.

Like a lot of things in life, there isn’t one silver bullet that works perfectly for everyone.

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In the interest of considering all circumstances, we’ve put together 12 ways to get you started on your journey of not only paying down your debt, but also getting out of it.


  • You can pay more than the minimum payment

One of the best ways to pay down your debt is to pay more than the required monthly minimum.

We get it, it’s tempting to only pay the minimum amount required, and use the extra money for something else, but, if you only pay the minimum, you’ll be caught in a vicious cycle – your debt will never decrease.

You see, whenever you have a debt facility drawn, and a new month rolls over, you’ll be charged interest on the balance.

Now, making the minimum monthly payment will certainly keep you compliant with your bank, but it won’t move you closer towards reducing the balance to zero…the only way to do that is to pay above the required minimum each month, which ensures you’re paying off both the principal and interest amount.

Also, when it comes to debts, always pay them on time, as a failure to do so will result in unnecessary late fees.


  • Spend less money


This tip is simple: if you want something, don’t buy it unless you can absolutely afford it.

Though, in reality, this principle is harder to apply – especially in this day and age, where shopping has become incredibly easy.

Most people go into debt because they buy what they want, when they want it, rather than what they need or can afford.

Even temporarily, this strategy will help you save money which can be used to pay down your debt.

Earlier, we spoke about vicious cycles, well this cycle is called a virtuous cycle – as you save money and subsequently channel this towards your debts to pay them off, you create a positive feedback loop.

In time, your priorities will eventually shift, and you’ll start using this extra money to invest, rather than simply pay down debt.

One way to spend less is to pay with cash, rather than credit.

Studies have shown that people spend at least 15% more on everything they purchase when they use credit.

Applying this theory to Canadian households, an annual saving of $3,000 could be achieved if purchases were only made with cash.

This cash strategy is quite hard to pull off, as the world is very much moving towards a cashless economy, however, while cash is still legal tender, give it a shot!


  • Divide and Conquer Method and David V Goliath


In a previous article, we spoke about two effective strategies one can use to pay off credit card debt – here, we re-visit those strategies (The David V Goliath and the Divide and Conquer methods).


  • David V Goliath: This method will see you choose the one debt that is charging the highest interest rate and focus all of your efforts on paying off that debt first. With respect to all of your other debts, only make the minimum payments, to ensure you comply with your lenders’ payment schedules. The reasoning behind this is that once your most expensive debt is paid off, you can refocus that money on the next most expensive debt, until you are left with your least expensive debt. This method should help you reduce your debt faster.


  • Divide and Conquer: This is largely a psychological method which suggests you should pay off your smallest debts first until you get to the largest. The idea being, that the more you pay off, the more motivating it is. For many people, this works well, as this method sees you provide yourself with a set structure, where each card is being paid out, one at a time, from smallest to largest.


  • Don’t buy a new car


For many people, the largest purchase they’ll have in their lives is a house, with a car coming in at second.

There are many good reasons to buy a car – you need it to get to work, you live in an area that doesn’t have great public transport, or you like to escape to the countryside on weekends…the problem is, many of us are tempted into buying a brand-new car and put simply, this isn’t the best financial decision.

Did you know that when you purchase a brand-new car, its value will halve within the first four years!

I’m not saying don’t purchase a car, because the reasons listed above are definitely valid…what I’m saying is, don’t purchase a NEW car.

Next time you’re in the market for a car, look at used cars instead.

Not only will you save money, but you can also use this extra money to pay out your other debts, thus improving your overall financial position.


  • Sell your car, or consider your need for more than one car


Continuing on with our car theme, this option is often 80% cheaper than owing and operating a car, and you can save thousands of dollars every year by using only one car.

The average vehicle owner spends over $9,000 per year in ownership and operation costs.

This figure can jump up drastically if you have an accident that isn’t covered by your insurance.

Alternatively, you can lower the insurance to ‘pleasure use’ only, take public transit, walk, cycle or even car pool.

Even the odd taxi trip is unlikely to amount to nearly as much as continuing to pay for a second car.

The general rule you can apply is the more assets you have, the more upkeep costs you have, so unless those assets generate cash, or grow in value over time, re-assess your needs and remove them if possible.


  • Plan your groceries


So many people lose money at the grocery store.

I’m not talking about it falling out of their pockets, but rather, they buy items they don’t need.

When it comes to groceries, make a list of what you want and only buy what is on that list.

Get in, get out and fight the urge to wander around the supermarket, treating yourself to things you don’t need.

These temptations are hard to fight off, but trust me, it’s worth it in the long run.

Also, watching for sales can be a valuable tactic.

The key to this strategy is stocking up on non-perishable groceries when they are on sale and due to the extra stock you have, you can likely skip one grocery shop every month.

Filling your pantries when groceries are cheaper and then skipping that extra grocery store visit can save up to 25% on your annual grocery bill.


  • Earn more money: Pick up a side hustle, or a second job


Another common way to pay down your debt is to earn more money, which can amplify your efforts to reducing your debts even more.

You may be able to do this by getting a second job or picking up one or two extra shifts.

For this to work, all of the extra income you earn must be applied to paying down your debt.

Another way you can earn extra money is by picking up a side hustle, perhaps by capitalizing on a hobby you enjoy or a skill set you have through sites like TaskRabbit.com or Upwork.com.

If you’re creative, sell your creations on Etsy.

If you have storage space in your garage or a spare room in your house, you could also use your home to generate extra money through Airbnb.

Side hustles are all the rage in 2020, so cash in now.

If you’re needing some inspiration or ideas, check out this article from Entrepreneur.com.


  • Track your spending and identify areas to cut back


If you’re committed to reducing your debts, you need to identify and cut your spending and the best way to do this is to develop a budget.

This budget will provide you with a blueprint of your finances and you can use it to evaluate your habits and look at the small ways you’re spending your money on a daily basis.

That way, you can audit your purchases and take account of whether they are necessary and, if so, minimise them or get rid of them.

For example, audit what you’re spending monthly and determine what are ‘must haves’.

Do you really need Disney+ and Netflix?

Can you exercise without a gym membership?

These are ‘nice to haves’ if you’re not in debt, so be strict with yourself.

Another way to address this strategy is to understand your temptation and avoid it.

It could be an online store, your favourite meal or happy hour.

Whatever it is, it’s best to avoid it altogether when you’re trying to pay down your debt.

When you’re tempted to spend more, it can be even more difficult to avoid new debts, let alone old ones.

For example, if your habit is a daily latte or lunches during work hours, the best plan of attack is to either replace it with something less expensive, or eliminate the behaviour.

Of course, pausing your credit cards or hiding them away for the time being can avoid this temptation as well.

Credit cards make it incredibly easy to spend, so take them out of your sight.


  • Get a consolidation loan


A consolidation loan is a popular strategy which involves you taking out one loan and using the proceeds to pay out all of your other debt.

Typically, the goal is to find a loan that is charging less interest than your other debt, so as you consolidate all of your debts, you’re saving money.

You’ll also reap the rewards of having a simple and streamlined debt structure – having it all in one place is convenient and involves much less administration.

Jumping on this path can be a helpful first step to getting your debt paid off, however studies show that for this to really help, you need to solve your underlying problem of spending more than you earn.

The key to achieving this requires that you create a budget.

We covered this in step 8, however it’s important, so we should cover off on some of the other benefits you’ll receive when you use such a tool.

A budget helps to ensure that:


  • You’re not building up new debt while paying off the consolidation loan.
  • You save something every month, and you set aside for emergencies or unplanned expenses, which inevitably occur.


If you want to learn more about this strategy, we’ve delved into what consolidation loans are here.


  • Refinance your mortgage


This strategy comes under the debt consolidation method we spoke about above.

It’s an attractive method for many, as the interest rate on home loan debt is far lower than that of your typical personal loan or credit card.

Essentially, this strategy will see you increase your home mortgage (you drawdown the equity available in your house) and use this cash to pay out your personal loans and credit cards.

It’s important to note the following:

  • You must have enough equity in your home to do this.
  • You are increasing your home mortgage debt by the amount of the other debt you’re paying off. Therefore, you’ll owe the same amount of debt, but the refinanced debt would have moved from a higher interest rate facility onto a lower interest rate facility.

Example below:

  • You own a house that is currently valued at $750,000 and your current debt on this house is $300,000.
  • Typically, banks will only lend you 80% of the market value of your house, so in this case, $600,000 (750,000 x 0.8).
  • Given that your current debt is only $300,000, you can draw up to another $300,000 and use this to pay out your other debts, which would likely have higher interest rates than your home mortgage.
  • The formula I’ve used here is:
    • $600,000 total debt a bank would give you minus $300,000 of existing debt.


It is important to note that having a conversation with an accredited credit counsellor first is important, so that you can consider all options and advice from someone other than your lender.

If you repeatedly use your home to refinance your debt, you can face retirement with a large amount of debt, no assets and no savings.


  • Speak to your credit counsellor


If you feel overwhelmed by the debt owing, find a credit-counselling agency and speak to a professional, accredited counsellor.

They will assess your financial situation, help you sort through your unsustainable spending habits, set up a practical budget and advise you on the most appropriate debt-relief options for your situation.

The counsellor will also help you find out what programs are available to deal with your debts.

Speaking with a credit counsellor is confidential, non-judgemental and free.

It’s a resource which is there to be used, so don’t wait and feel like this burden is yours to carry alone.


  • Create a practical budget (i.e. a spending plan)


This is the third time we bring this up…Create a budget that is practical – it doesn’t have to be complicated.

You simply need to track what you actually spend over a month, not what you think you spend.

Many people are surprised with their spending habits once they see them written down and the mere act of writing it out will likely help you identify ways to cut back your spending.

You can start this process by collecting a list of your debts and income and once you have this data in hand, you can list all of your debts and include the creditor’s name, balance owing, monthly minimum payment and interest rate.

You can then allocate the money you find to pay down your debts.

Once again, the trick here is seeing everything written down.

This helps you manage it more effectively.

A budget shows what you’re spending and where it makes sense to put your money, whether it’s from interest saved or dollars earned.

It will help you stay accountable to your debt payments and your new accelerated payments.

There are multiple resources and tools to learn how to create a budget.

For some people, this can save them almost as much as working a second job – scary but true!


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The key to removing your debt altogether, is ensuring that when disaster strikes, you will be able to weather the storm.

It’s important to know that despite the type of debt you’re in, there are multiple ways to manage it and there are multiple (more than 12!) ways out.

While it is unlikely to happen in a day, or a week, you can create a debt-free future if you create a plan, and stick with it long enough.

If you’re seeking further information on the above, please contact us for assistance.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

Gordon Sands

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