How to Solve Debt Problems in Canada

Solving Canadian Debt Problems

Debt problems, no matter how small or big the debt is, can be overwhelming.

Sometimes, a small debt can snowball into a major financial risk that might seem insurmountable.

Life can seem to have become a big mess.

You may dread looking at your bank statements.

Planning for your next month’s bills and finances may become frightening.

Despite the dreary picture, it is still possible to come out of your debt problems and face your financial future with more confidence and optimism.

Here are some efficient ways to fight your debt problems successfully:

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Accept that you have Debt Problems

A mindset of acceptance is crucial to take charge of the situation.

As long as you are in denial of your debt problems, you will not be able to allow yourself to look for solutions.

And, looking for opportunities and solutions is the only way to get out of your debt situation.

If you are noticing any of the following changes in your life, then you are more than likely facing a debt problem:

 

  • You are not able to make all your monthly payments.
  • You hardly have any money left to save after making your monthly bill and debt payments.
  • You are increasingly using one credit service to pay off an existing credit.
  • You are dreading phone calls because of repeated calls from creditors.
  • You are experiencing problems in your personal life as a result of these money problems.

 

If you are saying “yes” to most of the above, then it is time to accept that you are facing a debt problem.

If you are still unsure, then get help from a debt professional.

Accredited credit or debtor associations can help you understand your situation and get a grip on reality.

They may also offer free guidance on getting through your debt problems.

Make a List of Debts you Owe

Make a debt list including the exact amount of debt you owe and the respective names of the creditors.

Having a list gives you clarity about your debt situation.

This clarity enables you to plan your debt clearance strategies more efficiently.

For example, you will know the exact debt amounts that need to be paid every month.

So, you can set aside such amounts and plan your monthly expenses around the remaining amount.

While making a list of debts, prioritize the ones with high interest rates.

Such debts are usually of credit cards.

More debt can accrue as you postpone credit card payments.

So, consider clearing them off first.

It is equally important to maintain your debt list.

Update the list as you pay off your monthly debt dues.

Regular maintenance of your debt list keeps you updated about your debt situation as it evolves.

Start Each Month with a Budget and Stick to It

Make it a habit to make a budget for each month.

More importantly, ensure that you stick to this budget throughout the month.

Prioritize your debt payments in the budget.

Allocate funds to other spending such as household and personal expenses with the remaining money.

Spend in Cash

An efficient way to stick to your budget is to spend in cash.

Credit and debit cards may push you into spending more as they facilitate impulse buying.

With cash, the chances of limiting your spending are more.

If you do not have the cash to spend on a purchase, then totally avoid the purchase.

Try this strategy of using cash for a minimum of 2 weeks to make it a habit.

Set Up Calendar Alerts to Avoid Late or Missed Payments

Smartphones and their numerous apps should make the task of creating calendar alerts easier for you.

Create an alert that reminds of you of the due date several days before the deadline.

Specify the debt amount every month to make it easier for you to remember the payable amount.

If you are not able to pay the full debt amount, then pay off the minimum.

While this may not be enough, it will prevent your debt from mounting.

In addition, it will keep you in the good books of creditors and credit reporting agencies.

Avoiding late payments is important because you have to pay more (penalty included) for every late payment.

In case you have missed a deadline, pay off the due amount immediately.

Do not wait till the next month to pay the amount because by then information about the missed payment will reach credit reporting bureau.

Monitor your credit card accounts regularly to be aware of any changes in interest rates and fees.

Update your debt list, calendar details and payments, accordingly.

Seek Support from your Lenders

Not in the form of money of course, because, you are looking to reduce your debts, not increase them.

Instead, ask them if they can support you in reducing your debt burden.

Say, you have a vehicle or home loan, and you are finding it difficult to make the monthly payments.

Reach out to your lender for a solution that can ease your burden without risking their money.

Often, lenders will be supportive if you can convince them that you are acting out of goodwill and not to cheat them off their payments.

They may be willing to reach an agreement if you can promise them some financial commitment such as a minimum monthly payment without fail.

Save Money and Reduce Expenses

Saving money may seem impossible in a debt situation.

But making a commitment to save as little as possible can help you in the future to tackle any unavoidable expense.

Start your saving strategy by setting up an emergency fund.

Allocate as much money as you can afford, to this fund.

You could start with as little as $1, 000, and increase it on a steady basis.

As you build your emergency fund, you can even use it to pay off your debts in the future.

One way to save more for your emergency fund is by spending less.

Track your spending every month.

Find the areas where you are spending too much of your money.

Commit to reducing such expenses.

For example, you could replace your daily commute in your car with car-pooling.

If expensive club memberships are eating away your money, then you could consider terminating them for at least a temporary period of time.

You could change some household practices to curb unnecessary spending.

For example, you could discontinue your home phone connection if you already have a cell phone.

You could stop magazine subscriptions that you are no longer using.

You could switch to a less expensive Internet data plan.

The opportunities to save money are many; all you need to do is monitor your spending diligently.

Seek Professional Debt Relief Solutions

If you feel you are far into debt problems and cannot overcome the situation on your own, then seek the help of debt relief experts.

You can enroll into a debt management program offered by certified credit counseling agencies.

You could approach your local credit association for a solution.

Overcoming your debt problems is not an overnight feat.

It can take anywhere from 3 to 4 years to be free of your debts and plan for a solid financial future.

It takes patience, determination and discipline, to overcome your debts.

Steady practice of the above strategies is important to become debt-free in the long run.

For the best results, choose strategies that work for you.

 

Sources:

https://www.bankruptcy-canada.ca/debt-problems

https://www.debt.org/advice/

https://www.thebalance.com/how-to-manage-your-debt-960856

https://www.mymoneycoach.ca/cgi/page.cgi/2/article.html/MyMoneyCoach_Blog/solutions-to-money-life-problems-without-cambridge

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?

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