8 Steps For Managing Debt Problems Successfully

8 steps for managing debt problems successfully


The cost of debt is high and finding a way to manage debt problems successfully is no easy task but not impossible.

Stop worrying about the average credit card debt, grocery budget, monthly income and start worrying about crushing your debt crisis.

Earlier this year Stats Canada reported that for every dollar of household income earned there was $1.79 in debt.

Managing Debt Problems

Dear Mr.CBB,

I’m a 26-year-old woman working full-time in the fashion industry in downtown Toronto which I love.

I studied fashion at George Brown College which set me back financially with a student loan.

Living in Toronto has been my dream as I’m in the middle of Canada’s top fashion district and opportunities surround me.

The problem is instead of focusing on my success I’m busy worrying about paying my debts.

I often see my friends living it up and I struggle to keep up with them.

Honestly, I’m embarrassed at times that I’m not as successful as they are or at least feel I am not because I don’t have the money they do.

While trying to keep the pace I managed to rack up $15,000 in credit card debt in two years and have a $25,000 student loan to pay back.

My rent is $1500 a month and I have a roommate that lives with me and we split the utilities.

Currently, I take home each month $4958 from my employer which has to cover all of my expenses and debt. 

I have 3 months of savings set aside for an emergency but no investments for the future.

How do I go about sorting my debt repayment problems while still enjoying my life with friends and family?


Crystal K.

Toronto, Ontario

Taking Control Of Your Financial Health

Hi Crystal,

Thanks for your email and I’ll shed a bit of light on debt repayment and 9 important steps I think everyone should adopt.

First off, let’s talk about your friends and self-confidence.

No matter what anyone else’s numbers show it won’t matter to YOU and the only debt protection you need is staring you in the mirror.

Your debt problems are equivalent to what you can afford with the income you earn each month.

I will say it again, It does not matter what anyone’s numbers look like.

Not even close.

Be proud that you graduated and are working in a field that you love, fashion.

It’s only up from here if you want it to be but you need to focus, get organized and smile!

What is Debt?

This should be a simple concept and for many people, it is but that still doesn’t stop them from creating it.

I understand that not all debt is created equally and is based on your life journey but what I do know is that debt MUST be paid back.

Debt is when you owe money to someone or a business that offered you or provided you with products or services.

Managing Debt Repayment Assistance

Consider for a moment that I’m a finance coach at a debt management centre where you are searching for advice on debt repayment.

What exactly are you hoping to get from this conversation?

If you answered, “I don’t know” then you need to understand that whatever unpaid debt you have is serious and can result in collection agencies being sent your way.

So, instead of trying to get everyone else to figure out the mess you’ve gotten into whatever way it happened, start with breaking your debts down.

No amount of credit counselling will work for you unless you put effort into the debt repayment process and budgeting your money.

Debt doesn’t disappear if you don’t pay it. 

It does the opposite, it’s in your face, on your mind and follows you like a bad smell everywhere you go.

Unless you have a solid debt repayment plan then you won’t sleep well at night.

Debt will affect your relationships and perhaps interfere with the way you perform your job.

It’s a big deal to have unpaid debt and no way to pay your debt because your finances are in a bucket.

That’s essentially what happens when you rely on paying bills based on what you have in the bank and spend as needed the rest.

Budgeting And Managing Debt

managing debt problems once and for all successfully

Unfortunately, personal finance isn’t that easy but what is easy is budgeting.

Related: 10 Step Mini-Budgeting Series

It may sound terrifying but it’s easy whether you have a zero-based budget, deficit budget or surplus budget (not a bad thing I guess).

You may not get the immediate results you want from a budget but at least you will know where you stand.

Even if you think that you shouldn’t be budgeting or can’t possibly budget since you don’t earn enough and will always be in deficit, you do.

You always need a budget no matter what your net income is.

How else do you plan to find a solution to your debt problems?

You can’t fix what you don’t know is broken and with a budget, your debt problems shine.

Sounds like it’s a party and it is because you finally know where you need to make improvements to fight debt problems once and for all.

Zero-based Budget

You have all your money going to a certain budget category each month and has a place to go. This is the type of budget we use each month.

Deficit Budget

You are spending more than you earn so your budget won’t balance.

This means you need to earn more money so if you are managing your money and find this problem there are two solutions;

  1. Slim down expenses
  2. Earn more money

You can compare this to a Federal or Municipal budget when they are low on cash they either slash spending on expenses and services or ask tax-payers for more money.

Surplus Budget

You spend less than you earn so you have excess or your income exceeds expenses.

Types of Popular Debt

Consumer Debt

This is where credit cards, department store credit cards, lines of credit, unsecured or secured debts, income tax, taxes, utilities, payday loans, etc. that must be paid back

Student Debt

You go to school and take out student loans such as bank loans or OSAP loans that must be paid back

Personal Debt

Personal debts are not investments and fall under funding consumption. This can be a loan you get from family or friends or someone who trusts you with their personal money that you must payback. It can also be secured debt where the collateral is tied to the debt or unsecured.

Mortgage Debt

A mortgage helps people achieve the dream of owning a home and a common debt.

Credit Counselling For Managing Debt

What is credit counselling?

Credit counselling is a non-profit organization that can help you get organized with your finances if you are unable to do so.

Talking to a credit counsellor will not affect your credit score so you really have nothing to lose and everything to gain.

What can credit counselling do?

Credit counsellors can help you roll credit card debt together, lower interest rates and help you to rebuild your credit successfully.

Essentially they will help you put together a debt repayment plan and assist you with financial education.

Just remember that these agencies whether for profit or not can’t guarantee to solve your debt problems.

You also must be vigilant in finding a reputable company or organization to work with so do your research.

The Financial Consumer Agency of Canada is warning consumers to be cautious when looking for a company to help them pay off their debt or repair their credit.

If you can no longer keep up with your debt payments and are thinking about getting help to pay them off, remember:

  1. Companies or agencies can’t guarantee they will solve your debt problems
  2. Companies or agencies can’t quickly and easily fix your credit score
  3. Companies should not encourage you to take out a high-interest loan to pay off your debts
  4. Companies or agencies may misrepresent services they offer as being part of a government program

8 Steps Towards Managing Debt Repayment Problems Successfully

critical steps for managing debt problems successfully

  1. What are your goals for managing debt repayment? (Write them down as these are to build your personal well-being)
  2. Write Down Everyone You Owe Money To Each Month
  3. Print a Debt Repayment Sheet (or create your own) so you can prioritize your debt repayment.
  4. Create a Budget
  5. Decide who to pay first and how much? (The Snowball method is paying the smallest balances first while paying the minimum payment on higher debts. You can also use a balance transfer to pay off debts. The Debt Avalanche is a debt repayment plan where you pay the minimum payment on all accounts and any extra money goes towards the debt with the highest interest. Once that is paid in full then you move on to the next.
  6. Pay your bills at least 3-5 days before the due date if paying online as they need time to process. Late fees are horrible!
  7. Build a minimum 3-5 months Emergency Savings Fund
  8. Celebrate your achievements whether big or small because they all count towards the end goal, Debt Freedom.

If all else fails and you’ve tried everything above then consider talking to a credit counsellor to help with managing debt successfully.

Discussion: What other steps do you take to manage debt repayment that might help Crystal?

Leave your comments below.

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