Five quick tips to reduce your debt

Only you can solve your debt problems, and it will take commitment.

1. Commit yourself to fixing it

The first step in reducing debt is to make that commitment and decide that it’s worth the effort. Some find it helpful to talk with a financial counsellor or attend a meeting of others with debt problems. Finding other people who understand your problem can be a huge relief if you’ve been shouldering this worry yourself.

2. Stop debt spending

Take your credit cards, store cards, and gas cards out of your wallet and put them in a secure place at home. Pay in cash, write a cheque, or use a debit card. If you’re still tempted to use the credit cards, cut them up. Also cancel the credit reserve or overdraft features on your chequing account.

3. Track your spending and make a spending plan

Most people don’t know how they spend their money, so they don’t know how to control their spending. The fact is, we have too many expenses to keep track of in our heads. Tracking your spending will push you to pay more attention to where your money is going.

• Track your cash spending. Write down every bit of cash you spend and what you spend it on for one week.

• Track the cheques you write and all online and debit card payments from your bank account. As you write cheques, pay household bills online, make purchases with your debit card, or use payment services like PayPal that draw funds from your bank account, write the amounts in your chequebook register.

• Make a monthly spending record. Track your spending by week to help you get a general sense of your spending habits.

• Make a plan to cut your spending. If you find that your expenses exceed your income drastically, you may need to take big steps like selling an expensive car and buying a cheaper one instead, or even moving to less-expensive housing. For most people, it’s the casual spending on meals out, music, movies, and other “impulse” extras that have to be trimmed to make a manageable spending plan.

• Make an earning plan. Look for ways to turn your new focus on finances into extra money. From yard or eBay sales to taking in boarders or getting a supplemental part-time job, there are many ways people find to increase their income. (Just don’t overwhelm yourself with extra work.)

4. Pay down your debts month by month. Pay them off one by one

Make a list of all the debt payments you make each month. Choose one of your debts to pay off first — either the one with the highest interest or the lowest balance. Use the money you’re saving by cutting spending (step 3) to pay more toward this debt each month, while keeping up the payments on your other debts. When the first debt is paid off, take that payment amount and move on to the next one.

5. Ask for help

Managing your debt can be emotionally and financially stressful and difficult. Consider consulting a credit counsellor or financial counsellor, or joining a support group such as Debtors Anonymous.