Tips for managing debt better

(NC) Debt is a growing problem in Canada. In a recent survey by the Financial Consumer Agency of Canada, 39 per cent of people reported that their debt had increased, and over a quarter were spending more than their income.

Here are some steps that will help you manage debt and get back on solid financial ground.

Create a budget.

Do you know how much money you receive and spend each month, where it comes from and where it goes? Creating a budget is a key step in paying your debts. It helps you:

• Identify your debts
• Balance your income with your savings and expenses
• Prioritize debt repayment over unnecessary expenses
• Track your repayment progress

Identify your debts.

Make a list of all your debts, such as credit cards, lines of credit, car loans, mortgages and unpaid bills. For each debt, note the:

• Total amount you owe
• Minimum monthly payment
• Interest rate

Reduce your expenses. 

Are you spending on things you don’t really need? Look at all your expenses and see what you can do without or do less often. If you can spend less money on things that aren’t essential, like restaurants and entertainment, you can use the savings to help manage your debt.

Choose a debt repayment strategy.

A clear repayment strategy can help you pay your debt more efficiently. It may also reduce the stress and uncertainty of managing multiple debts.

Set a reasonable and affordable payment schedule. This may help you maintain your progress without feeling overwhelmed.

With a shorter payment schedule, you pay less interest but have higher monthly payments. With a longer payment schedule, your monthly payments will be lower, but you’ll pay more interest. The upside is that it may make payments more manageable.

Decide which debts to pay off first.

There are two main strategies to determine which debts to pay first:

1. Start with the highest interest rate debts. You’ll pay less interest and be debt-free sooner.
2. Start with the lowest-balance debts. You may see progress quickly, which is motivating, but you’ll pay more interest over time.

You can find free resources and tips to get out of debt at canada.ca/money.