How to Get Out of Debt on Any Budget

Debt is an issue that we all face at one time or another. Whether you owe on student loans, car loans, or you have outstanding credit card balances; it is all haunting. We all want to get rid of our debt, but it’s not always that easy. However, believing that it’s normal to be in our 50s still paying off student loans is not okay. Money is a tool for us to use, not to be imprisoned by.

Unfortunately, debt doesn’t have a “one size fits all” solution. Some people have enormous student loans, while others get stuck with an insurmountable amount of revolving debt with excessive interest rates. Whatever your situation is, we’re here to provide tips and methods to put you in the positive.

You may be thinking you have too low of an income to fight your debts. That’s not true. We’ll support you with the building blocks on getting out of debt on a low income. It won’t be quick or easy, but it is necessary for your financial freedom.

Consumer Debt

With 2019 ending, Equifax Canada began compiling statistics on consumer debt, each household or individual’s debt from personal purchases. This March, the company issued its press release indicating a 2.7% increase in consumer debt from 2018. The statistics now show the average consumer to have $72,950 of debt, with a majority coming from mortgages.

Eliminating mortgages from the picture, a positive debt, the average still rose 1% to $23,800 per consumer (1). Whether the growth is less or not, it still shows a harmful habit of depending on credit for money. Before letting the problem get out of hand, we are each responsible for contributing to the debt relief Canada needs.

Beginning the Fight Against Your Debt

Before paying off your debts effectively, you must be completely aware of your financial status and spending. By tracking all your spending, you’ll be able to make a proper budget.

1.      Track ALL your spending from the previous month.

This includes all bills (phone, internet, TV, rent, utilities, gas etc.), extravagances, hobbies, and even snacks from the gas station.

Make sure you keep a note of every little thing from a cup of coffee to your car’s oil change. It may be helpful to mark notes on your phone.


Example: 3/26 Gas – $47.96

3/28 Groceries -$63.82

By becoming aware of every single penny spent, we begin to see trends in our spending habits. For example, maybe you find that you’re spending $35 a month on coffee or $60 a month on eating out for lunch. Whatever your habits are, we can use this detailed tracking method to analyze our spending. This allows us to find ways to reduce unnecessary spending.

2.      Make a Budget—everyone’s favourite thing to do.

When you start making your budget, it’s essential to list out your necessities first. These include rent, utilities, transportation/gas, groceries, phone bills and anything else you may have. Once you have all the essential things added, start adding the next category, hobbies/passions. This might include things like a gym membership, magazine subscription, bowling fees, or whatever you have. Lastly, we’ll add extraneous items such as eating out.


A quick tip: for your extraneous items, keep a fixed amount, say $50/month. As you keep track of your spending habits, you’ll notice when you hit that amount, and that’s where self-discipline comes into play. So don’t go over your fixed allocation.


3.      Compare your budget and spending to your income.

This is where things come to light for us. By being conscientious with our finances, we can find money to increase payments on loans or knock down credit card debt.

This is also where you adjust your budget to obtain a positive difference between your income and budget.

If you’re on a low income, and your bills are higher than your income, you’ll need to make some more considerable changes than just reducing spending habits.

4.      Pay more than the minimum

As long as you have the money available to do so, this will make a significant difference. In addition, paying more than your monthly minimum allows you to pay off your debts quicker, saving you more on interest over time.

Changing Your Habits

Like mentioned before, maybe you find that you have a habit of buying coffee on the way to work. Upon this realization, if you act to change that habit, you can save lots of money in the long run. There’s a lot of these habits we can change in our everyday life to reduce our spending.

  •       Give up drinking/smoking for a month and see how much money you save
  •       Cancel any subscriptions/memberships you don’t use enough
  •       Reduce your use of AC/heat in temperate months
  •       Reduce your shower time
  •       Cook every meal at home
  •       Share car rides and reduce driving time

Figure out where your money goes that is not essential. You can even save money by changing your habits to reduce utility bills. Of course, not all those items will work for everyone, but by getting creative, you’re sure to find ways to reduce your monthly spending.

Finding Additional Money to Reduce Debt

We’ve just seen how tracking our spending can give us some extra money to fight debt. What happens if your income can’t cover the bills and combat debt? Look for extra income.

1.      Pick up the 2nd Job/ Ask for Overtime

This might not be possible for everyone, given different circumstances. But, for those of you who have the option to get a second job, it’s the best way to get an additional source of money. For example, maybe you have experience waiting tables or bartending that you can use to find a weekend/night job. You could even find quick jobs like moving furniture, landscaping, or painting.

Additionally, asking your current employer for extra shifts, more hours, or overtime is another potential source of additional income. You could also look at the highest-paying entry-level jobs in Canada to get paid and get your foot in the door of a higher-paying career.

2.      Sell Old Items.

Everyone has clothes they don’t wear, old games or electronics, furniture not in use, etc. Decluttering is a great way to find used belongings you can sell. No matter the amount of money generated, it’s still a win.

Learning how to get out of debt quickly is challenging. Finding an additional source of income is also tricky, but it’s a significant step to getting rid of that debt. Of course, the more money you have coming in, the easier it is to knock out your debt.

3. Make Extra Money From Home

There are many ways to make money from home for a little extra to spend. It doesn’t have to be a lot of time; for example, you can try making money from games online, either ones that pay you to play or get involved in ecosystems that have their own markets.


Other Tips to Get Out of Debt

Some measures may seem extreme for those not living paycheck to paycheck but still have student loans or a mortgage to pay. Like mentioned previously, paying off your debt doesn’t have a single solution. Here are some more ideas for reducing payments and reducing your debt.

1.      Keep One Car per Household/Buy Used Cars

This might be difficult to adapt to, and maybe it’ll change in your daily routines. It WILL save money. Difficult or not, taking away car payments, insurance, gas and anything else that comes with a car will save you a lot of money.

If you need to buy a new car, always buy used. You will save money upfront, and your insurance will be lower on a used car.

2.      Shop Smart

When grocery shopping, look for sales. Checking out at a grocery store, you can see your savings on your receipt. You might even be surprised how much you can save! We’re not suggesting you go out of your way to buy whatever is on sale. Instead, if the food you usually purchase is on sale, stock up on it right then.


3.      Negotiate Bills

Every day we pay bills without any thought put into it. Instead of paying right away, try giving your cable provider a call to negotiate bills. Let them know you’re not happy with the service for what you pay and see what happens. Credit card interest rates, car insurance, and internet costs are all things that have the potential for negotiation.

A large bill we can often negotiate is a hospital bill. If you had an emergency trip to the hospital and find yourself with a $3000 bill, there may be some leeway. Try calling and telling them you can pay half right away if they wave some percentage. A lot of times, the hospital will be willing to reduce your payment.


Financial Steps for Debt Relief

With our new awareness of our spending, a change of habits, a budget, and maybe even additional income, we have some money to put to a better cause – reducing our debt. So let’s look at further options for reducing and paying our debt.

Refinancing Loans

One option to assist in debt relief is refinancing loans. This is not a 100% sure way to reduce payments in the long run, but there is potential. You can refinance your student loans, car loans, or even a mortgage. It is vital to be meticulous when exploring your options. If not, you may find yourself with a lower interest rate but a more extended loan period, which would cost you more money in the long run.

If you do happen to find a good deal on refinancing, use your money saved to tackle those same debts. The funds you’re saving can assist in paying off other loans with high-interest rates, such as revolving credit card debt. But, again, it may be best to use a loan calculator or talk with an expert to ensure you get the best deal possible.

Debt Consolidation

Another option that can come at some risk if not played correctly is to consolidate your debt. Instead of going to a debt consolidation program, try going directly to your credit union and asking about loans; if you can find a loan with a low enough interest rate to pay off multiple other debts that have a higher interest rate, you’re in great shape.

Consolidating your loans can also give you a psychological push to overcome debt grief. Having all your loans in one place, with one interest rate, makes it easier to manage. You will never worry about if and which loans to tackle first. However, keep in mind your total debt amount has not changed; just the method of paying your debt has changed.

Loan Payment Approaches

If you find refinancing or consolidating doesn’t benefit you, you should consider paying off your loans with other methods. There are two main approaches wwe’lllook at. Each has its benefits and appeals to individuals differently.

1.      Snowball Approach

This method directs individuals to order all their debts and loans by the amount owed. Find your lowest total balance and pay it off first. You can do so by paying the minimum on all loans but adding extra payments to the smallest loan. You can knock one loan/debt off your list by doing this, giving you a psychological reward.

Known as the snowball approach, you build progress along the way and reap the benefits of having less to worry about.

2.      Ladder Approach

Instead of looking at the balance of our loans, we order our loans by the interest rate in the ladder approach. To find your debt with the highest interest rate and knock that one out first. It may take longer to pay the higher interest rate debts first, but in the long run, it saves you money.

Financially this is the money-safe move; however, you don’t get the same psychological reward as the Snowball Approach.

Debt should not become normalized in our lives. Instead, we must take steps to fight our debt and obtain our financial freedom. This article discussed many things, but the most important is becoming aware of your financial status and limits. Understanding our spending habits allows us to budget correctly and control our spending in ways that let us reduce our debt. Find the strategies and paths that fit your needs to reduce your debt, and you’ll be sure to lower your stress levels as well.



Equifax Canada (2020). Canadian Consumer Debt is Feeling the Chill.

If you are like many, reaching adulthood and venturing out into the world was a fascinating time. You are now able to attend college to gain a career and to buy your first car. Then there is the prospect of becoming a homeowner and filling it with all the beautiful items about which you have always dreamed.

However, not long after graduating, finding a job, and starting a family, many find they are bogged down in debt.

The Amount of Debt in Canada is Staggering

The amount of debt faced by Canadian households has been on the rise. According to CBC Canadian News, currently, Canadians spend $1.68 for every $1 earned (170%). That amount is staggering, and if nothing is done will grow worse.

Although the debt statistics in Canadian households seem grim, there are ways to make sure you and your family don’t remain a part of them.

What is Debt?

What is debt, and how do you know if you’re in debt? If you ask ten different people, you’ll likely get ten different answers. A dictionary definition describes debt as the amount of money you owe.  To go a step further, you can say debt is the obligation to pay for a product or a service.

There are two different kinds of debt. Secured debt and unsecured debt. Your house and your car are examples of secured debt until you make the final payment. The lender has a lien on your house or car. After the last payment, it belongs to you. The bank or lending institution still has ownership until you make the final payment. If you do not make your agreed-upon payments or fall too far behind, the bank or financial institution can foreclose on your home or repossess your vehicle. You live in the house or drive the vehicle, but you do not own it until you make the last payment.

Examples of unsecured debt include student loans, credit cards and medical co-payments. Usually, with unsecured debt, the lender does not have a lien on the item. Therefore, they do not have the option to take back what you’ve purchased. If you fall too far behind or stop making payments, they use other strategies to get their money. Most, if not all, will post a negative report about your lack of payment to the major credit reporting bureaus. They may also hire a collection agency to contact you. Some lenders might try to collect their money by attaching your wages.

Debt can be a source of pain and suffering for many people. Even if you have the financial means to stay current with payments but fall behind or stop paying for whatever reasons, you start the spiral into debt.

Some people buy everything on credit during a month then pay the entire amount due at the end of the month. This can be a tricky area of debt. It looks like you’re not accumulating debt because you pay every month. What happens if you start to make late payments or skip payments?

When you buy that long-awaited trip on credit, you have just gone into debt if you do not pay for it by the balance due date. People who cannot pay the total amount due by that date must now pay a monthly service charge on the unpaid balance. That’s unsecured debt.

Banks or credit card companies might say that you are not in debt as long as you make the minimum monthly payment due on an interest-free account. True as far as they are concerned. The bottom line is that using interest-free credit cards is still credit, no matter how you look. You now have more unsecured debt. You made a purchase based on credit, not cash. You have not paid yet, so you are still obligated to pay. WWhat’sthe big deal, you ask? The big deal is the key to the following question. Are you in debt?

Are You in Debt?

After months or years, some people are shocked to realize that they are in debt beyond what they ever imagined. How did that happen?

Here are some things to consider if you have any thoughts of whether or not you might be in debt. First, do you earn a good salary but live paycheck to paycheck because of unsecured debt? Second, are you not sure about your account balances? Third, are you vague about your financial situation? Do you earn a minimum wage and live paycheck to paycheck as a result of unsecured debt? Third, have you ever bought something but kept the price tag on it so you can ”return it later” if you have to? Fourth, have you ever used one credit card to pay the utility bills and a different one for food because you do not want to ”dip into” your savings? Fourth, have you felt like you belong to an elite group of shoppers when you buy something from a super expensive high-end retail store?

These are some of the typical signs of debiting as a result of unsecured debt. Whether or not you have a high or low credit rating does not matter. What matters is an ongoing cycle of not having a zero balance on any unsecured debt.

Get Out of Debt Quickly by Making It Top Priority

Even if you have a low income, making your debt a top priority can help you get out of debt fast. Being over your head in debt is an emergency for yourself and your family. It limits your ability to save for retirement, for a rainy day and take the vacation you deserve.

Should you or another breadwinner in the home become sick or injured and unable to work, your family could find themselves unable to pay the bills and in deep trouble. Your family could face repossessions of the car, or worse, losing their home.

However, there is a reason to hope. By taking some common-sense steps and working hard, you can realize a debt-free life in only a few years.

How Do I Get Out of Debt?

If you can identify with any of the above signs, you could be in debt. Getting out of debt starts with acknowledging that you are in debt. That might sound simple, but sometimes acknowledgement is the most challenging part of the resolution. First, you have to admit that you have a bad financial situation because of unsecured debt.


The first recommendation to get out of debt starts with discipline. When people who accumulate unsecured debt decide to change their spending habits, they begin to realize the possibility of getting out of debt. It takes time and effort to make a change. The musician who practises every day will improve faster than the one who practices occasionally. When you practice good financial habits daily, you develop good habits around your finances.


Write down all your sources of income. There are numerous tools available to help. Spreadsheets, apps based on spreadsheets, and software programs that allow you to customize the categories. All great tools to get organized. This will give you a black and white reality check of how much income there is, period. Afterwards, list all of your expenses. All means all if you spend 10 dollars for lunch with a friend just once a month and never do it again for three months, write it down. If you have to buy a new battery for your remote at home, write it down.

This may sound like tedious, unnecessary work. But, the reality is when you look back over your expenses, you can see how much you spent. Some people include the deductions from their monthly income here; others don’t. The idea is to know precisely what is coming in and what goes out every month. It will eliminate the guesstimates. Remember, the banks and finance companies know precisely how much you owe; they don’t guesstimate. People who know exactly how much income they have and how much they owe take control of their financial situation.


Get rid of the chaos in your financial life around spending. Do not impulse buy anything. Instead, make a chart with categories to show where your money goes. Go beyond a chart that shows, Income of X dollars and expenses Y dollars. Be as specific as you need.

You might need a category for groceries and another for household items. One is for food; the other is for cleaning supplies and the like. If you can put them into one category and know what each purchase was for, you’re well on your way. Once you get organized about your unsecured debt, consider the bottom line that will ensure you stay out of debt.

Use a debit card and not a credit card. That is the best way to ensure you never incur any debt because you pay cash for everything. Sometimes people who are in debt get there by buying everything on credit.

If you lose your source of income through uncontrollable circumstances and have been buying everything on credit, you might be in trouble now. Today many institutions will honour debit cards the same way they will credit cards. If they do not, consider going elsewhere. When you pay with a debit card, you never have unsecured debt.


You realize an increase when you take complete control of your expenses and know exactly where your money goes. The increase may not be noticeable at the beginning. The goal is to stay on task and continue to update your plan as often as necessary.

Make Your Debt Plan & Put It To Work

A spending plan will help lay things out for you. Budgets, on the other hand, work well for fixed categories that may not change at all. For example, if you plan a vacation, you can add it to a plan. Then, after you pay for it and set aside how much you spend, you can remove it from the plan. The money for the trip might come from your savings category in your budget or a new one you added specifically for the journey.

Work your plan

Do what you say you will and keep it simple. Know what you want and what you need. Be realistic, do you need a new blouse, or do you want a designer brand that costs three times as much?

Set realistic goals to get out of debt. Keep in mind you should not put yourself in a position to suffer more than you already have. Instead, live your life with comfort. The mistake some people make is to sacrifice everything to pay back debt. A solid plan that decreases the debt over time as you continue to live a quality life is the best way to deal with the unsecured debt.

Adding Up Your Household Costs to Get Yourself Out of Debt

To get yourself out of debt, you must add up all you owe and compare that to what you bring home in pay. In addition to this, you need to make a household budget to manage better the income you have available.

You need to dedicate a few hours and gather all the bills you owe and write them down to do this. Make sure to include utilities and all your credit cards. Write these amounts on the left side of a piece of paper.

Then gather together the latest pay stubs from all the income earners in your household who contribute to the upkeep of your financial needs. Write down on the right side of your piece of paper the actual amount you bring home (net), NOT what you earn (gross).

Subtract the payments you make per month on the bills from the amount you bring to the home total in your household.

You might find the resulting figure a bit scary, and it should be if the amount you got is small or, worse yet, a negative amount. The number you reached only includes your payments to bills and does not consider your food, clothing, and entertainment needs.

So, by now, it has become clear that you must act to avert a disaster.

Recognizing Where You Can Cut Costs on the Big Stuff

Saving your disposable income to pay off debt must be a priority. There are areas in your finances that may at first seem immutable, such as the cost of housing or food. However, that is not the case. Since you have found you owe much more than you can pay, taking steps to lower these costs is necessary to gain the security you are looking for.

The big stuff includes costs such as housing, transportation, food, and shopping.

Housing. The cost of housing should not exceed 30% of your net income. If you are spending more, there are several options available to you to address this problem.

First, find a cheaper home. If you downsize to a home in a lower-cost neighbourhood, it can save you a bundle. If you cannot move, consider taking in someone as a border or roommate to share the costs.

Transportation.  Transportation costs are the second most significant expense most people have. Even getting about using public transport is not free, and the costs can add up quickly, especially in the rural setting of Canada.

Using a car to get to work and back may seem more comfortable and cheaper but may not be. An excellent way to see how much your transportation is costing your family per month is to keep a diary for a month of every trip you make in every vehicle you own.

At the end of the month, sit down as a family and go over the diary together to see where your hard-earned money is going. Then ask yourself some critical questions.

Were there any trips that were driven you could have done that on foot or a bicycle?

How many of the trips during the week could have been combined rather than taking more than one vehicle?

Is there anyone at work you could have carpooled with?

If you could answer yes to any of these questions, acting and using them as suggestions can cut your transportation costs drastically.

Also, it is crucial to answering one other question, do you need more than one car? Selling one of your vehicles will bring in a boost in cash and cut your transportation costs in half.

Food. The cost of food is one of the most significant areas where families hemorrhage money. So, the first thing you’re going to need to do is keep careful track for a month of all the money spent on food. This includes groceries, eating out, and that coffee shop you stop at every morning on the way to work.   

At the end of the month, sit down as a family and discuss the figures. It is for sure you and your family will be appalled at the amount you spent on this budget item.

Finding more economical ways to eat is vital to saving the money you need to get yourself out of debt. You can do this in many ways.

For one, you can start eating at home more and taking your lunch to work. Instead, pass up that coffee shop and make coffee at home and bring it to work in a travel mug or thermos.

Go to your pantry, freezer, and refrigerator and make meals from what you already have in stock. Eat meals prepared from what you already have until your reserve is used up; before you restock, make a meal plan.

First, think of the time frame you will be planning for. It can be a week, bi-weekly or monthly, depending on what works best for you. You don’t have to plan meals alone; you can enlist the help of the entire family. By sitting down as a family and discussing what to eat, you teach your kids valuable lessons.

Consider the main course first. What kind of meat would you like to have each week? Remember, you are trying to save money on your food bill, so steak is out unless it is an extraordinary occasion. Be practical.

Then decide on what vegetable and starch you will include in each meal.

DDon’tforget to plan for breakfast! The morning meal is the most important day and is missed by many who do not understand its importance.

An excellent way to save money and make tasty, nutritious meals on a tight budget is to cook. Utilizing such appliances as a slow cooker or pressure cooker to create massive amounts of food with the least effort can save tons of money.

Once your delicious batch-cooked meal has been prepared and eaten, store the leftovers by placing the extra you’ve made in the freezer.

One important tip. If you wish your food to remain fresh and not get freezer burned, invest in a low-cost food sealer system. In a few minutes, you can have your food sealed in bags that can be kept frozen for months. Then when you are ready to once again eat from the batched food, you have made merely remove the sealed food and either pop it into the microwave or boiling water and serve.

Getting Help Through Debt Settlement

According to Hoyes & Michalos Debt Relief Services, in Canada today, many businesses advertise offering consumer proposals to negotiate your debt and offer debt counselling. However, it is vital to understand that not all these companies promise to reduce your deficit, or your payments will do so. Many charge exorbitant fees and do not deliver the product they promise.

The debt settlements arranged with creditors lower the amount you owe on your existing debt under new terms. The problem with these companies performing this role is that to make money, they charge hefty fees. Worse yet, in many cases, the debt settlement companies did not contact the debtors of their clients quickly enough, and legal action was taken against the consumer. When this occurs, you lose any fees you paid to the settlement company and still end up losing.

Ontario passed and enacted regulations to help reduce debt settlement activity in the province to force settlement companies to get paid after the debt is settled, not before. Unfortunately, this resulted in many companies closing their doors or changing their focus, calling themselves debt consulting or coaching firms instead.

Debt settlement may still be the easiest and most effective way to remain solvent as a household despite the drawbacks. There are two ways to get debt relief, a debt management plan or a consumer proposal.

It is vital to remember that only an insolvency trustee licensed by the Canadian government can help you end your debt problem safely.

Debt Management Plan.

Also known as credit counselling, a network of not-for-profit organizations offer this service designed to reduce or eliminate your debt. You repay the debt in full but do not add any new interest making the payments lower and going directly to the creditor.

A Consumer Proposal.

Many Canadians are better off filing a consumer proposal than a debt management plan. This is because it has the same impact on your credit report, there isn’t a rise in your interest charges, and you repay only part of your debt, not the entire amount.

Working with a licensed insolvency trustee, you work together to develop a proposal, an offer to pay creditors a percentage of what is owed to them or to extend the time you have to pay off your debts, or both. Then, payments are made through your trustee to pay your creditors.

These proposals cannot exceed five years, so it is vital to pull in the purse strings and be devoted to cutting as much money as you can from other places in your budget to make these payments.

Make sure and check out the reputation and effectiveness of the insolvency trustee you choose. You can do so by visiting sites such as My Money Coach or contacting the government agency in your province.

Staying Out of Debt

By making a budget and sticking to it, your family can remain out of debt and lessen the strain in your home. Once you have paid off your debt, start saving. All households should have an emergency fund that equals three months’ wages. That means if your budget calls for $3,000 per month to cover your housing cost, utilities, gasoline, and food, you need $9,000 in your emergency fund.

After meeting this critical need, you can save to pay for retirement or an extended vacation. Sit down as a family and decide what you want to save for.

Lastly, be careful not to live below your means. However, don’t cut up all the credit cards in your wallet or purse. Instead, keep one or two and make small purchases each month that you can quickly pay off. However, do not allow these cards to carry such a balance that you can only pay the minimum amount.

Debt is something almost every adult in the world experiences in one form or another. Nevertheless, paying off and staying out of debt can give you and your family a long life free of the fears and constraints that owing more than what you make can bring.

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