How to Reduce Debt

Reducing Debt: Tips & Tricks

If you’re grappling with the challenge of paying off multiple debts, don’t fret. This guide aims to provide you with a roadmap on how to reduce debt, devise an effective debt elimination strategy, and ensure you live a debt-free life.

Part 1: Laying the Groundwork

1.1 Understanding Your Fiscal Landscape

Before embarking on the journey to reduce debt, it’s crucial to understand your financial situation. A spending plan, also known as a budget, can provide clarity on your income and expenses. Subtract your monthly expenses from your income to identify any surplus funds. If you find yourself in a deficit, it’s time to reevaluate your spending.

1.2 Rethinking Credit Usage

Studies show that individuals tend to spend more when using credit cards. As such, it’s essential to curb your credit card usage while working on paying off your debt. One effective way to reduce temptation is to literally freeze your credit cards in a bucket of ice.

1.3 Adopting a New Financial Mindset

Shifting your mindset towards money and credit is a crucial step in learning how to reduce debt. Instead of feeling entitled to luxuries, work towards earning them by saving. While it might be challenging to change long-established habits, remember that financial freedom is worth the effort.

Part 2: Discovering Ways to Free Up Funds

2.1 Trimming Your Expenses

Reviewing your spending plan can highlight areas where you can cut back. This doesn’t have to be permanent – just until you’ve paid off your debt. Here are some resources to help you save money:


2.2 Selling Unwanted Items

An effective way to free up cash and reduce debt is to sell items you no longer need. Websites like Craigslist, Facebook, and eBay are perfect platforms for selling valuable items, while garage sales can be useful for offloading cheaper items.

2.3 Rethinking Your Savings Strategy

If you’re contributing to a savings account each month, consider redirecting these funds towards your debt. This is because the interest on your debt is likely higher than what you’re earning from your savings. However, if there are valid reasons to continue your savings program, such as employer-matched RRSP contributions, then continue to do so.

Part 3: Strategies to Accelerate Debt Reduction

3.1 Accelerating Mortgage Payments

One effective strategy on how to reduce debt is to switch your mortgage payments from monthly to bi-weekly. This simple trick allows you to sneak in an extra payment per year, potentially shaving off years from your mortgage term.

3.2 Reducing Credit Card Debt

There are two popular methods to reduce credit card debt:

3.2.1 Tackle the Highest Interest Rate Card First

In this method, focus on paying off the credit card with the highest interest rate while making minimum payments on the others. Once the highest-interest card is paid off, shift focus to the card with the next highest rate.

3.2.2 The Snowball Method

This method involves paying off the card with the smallest balance first while making minimum payments on the others. After paying off the smallest balance, shift focus to the card with the next smallest balance. This method is motivating as it enables you to see progress sooner.

3.3 Debt Consolidation Loans: A Word of Caution

While Debt consolidation loans can be beneficial, they should be approached with caution. Ensure you maintain a spending plan and consistently spend less than your income to avoid falling back into debt.

3.4 Tracking Your Progress

To ensure you’re making headway in reducing your debt, it’s important to track your progress each month. This can provide motivation and help you adjust your strategy if needed.

3.5 Building a Safety Net

Creating a safety net of $500 to $1,000 can help you avoid relying on credit for unexpected expenses. This buffer can be built by reducing spending or selling unwanted items.

3.6 Increasing Your Income

Boosting your income can significantly accelerate your debt reduction journey. This might involve taking on a second job, freelancing, or turning a hobby into a source of income.

3.7 Consult a Credit Counsellor

If you’re struggling with your financial situation, consider seeking help from a non-profit Credit Counsellor. They can assist you in assessing your financial situation, creating a budget, and exploring options to reduce debt.


Learning how to reduce debt is a journey that requires discipline and a change in mindset. By implementing these strategies, you can make significant strides towards financial freedom. Remember that success lies not just in the destination but also in the journey. Stay motivated, track your progress, and soon you’ll be living a debt-free life.

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