5 Debt Reduction Strategies To Adopt In 2020

debt repayment


Debt reduction strategies are based on your personal situation as they are unique to your motivation and spending habits.

Completing a financial assessment of your current situation is the best way to plan for your debt reduction strategies.

What is a financial assessment?

A financial assessment is really just a breakdown of your cash, savings and debts.

  • What do you have that you can cash in to pay off your debt?
  • How much debt do you really have?

Let’s have a look at what we would use to assess our financial situation in the CBB house.

In fact, it’s quite simple to this so don’t feel this is something only a specialized person can do.

As you can see we are evaluating our debt and our income also known as a debt to income ratio.

We want to see know what is coming in and how much must go out every month.

Another thing you will want to consider is what money you already have saved or invested.

This is where we would document our investment savings such as our Registered Retirement Savings Plan, Tax-Free Savings Account and any other investments.

For a majority of people, money saved in investment portfolios is in there for the long-haul or until retirement.

However, it’s not uncommon to hear about people cashing in their investments to pay down debt.

Don’t forget your savings accounts and not just in Canada.

Calculate how much money you have saved in any Canadian or foreign bank accounts.

For example, we have US currency, Canadian currency and British currency that we factor into our net worth each month.

Credit Card Debt Reduction Strategies

credit card debt

Will credit card companies reduce your balance?

Probably not, it’s your debt and your responsibility to pay it back. 

That’s the terms of the credit card that YOU signed up for.

However, it is worth a phone call to see if they will consider lowering your credit card interest rate.

By doing so this will help you incur less credit card interest while trying to pay the card off.

You could also consider a credit card balance transfer option for 6 months which will buy you some time to pay it off.

Snowball Debt Reduction

For most people with credit card debt using a snowball method debt reduction plan is ideal.

What is a snowball method debt reduction plan?

The snowball method is a debt reduction plan that involves the amount owed and not the interest rate.

In most cases, these debts come from revolving sources such as credit cards.

The idea is to pay the smallest balance off first while paying the minimum payment on the larger balances.

Once you pay one debt you move to the next larger debt until you reach the end.

Credit Card Promotions Can Be Rewarding

Credit card promotions are fantastic if you pay your credit card in full every month.

You also don’t want to apply for too many credit cards as it will affect your credit rating the more credit you own.

Reading the fine print is the last thing anyone wants to do especially when discounts and gifts are dangled in our faces.

By this I mean, sign up today for our exclusive credit card and get a percentage off your in-store order.

This is a popular promotion around the holidays when most people are hoping to save money.

Not understanding the terms of a credit card repayment plan is that we put too much emphasis on the obvious.

Minimum Payment.

Applying For a Credit Card

How do you apply for a credit card?

In most cases, you would complete an online credit card application or apply at the source such as a department store credit card or gas station credit card and wait to see if it gets approved.

When approved you get a credit card sent to you in the mail.

It’s that simple.

The owner of the credit card must activate it by calling the number on the peelable sticker on the front of the card.

Once your credit card is activated that plastic card is worth as much as your credit limit.

A credit limit is an amount of money a credit card company will allow you to spend or use as cash-back (if applicable).

What do most credit card holders do?

They spend money on their cards and wait for the bill to arrive.

Then what happens?

Let’s take a look at the right and wrong way to use a credit card.

How to use a credit card

  • Purchase an item(s)
  • Pay with credit card
  • Receive credit card bill
  • Pay the balance in full BEFORE the due date.

How not to use a credit card

  • Purchase an item(s)
  • Pay with credit card
  • Receive credit card bill
  • Pay the minimum balance as suggested
  • Continue using the credit card

As humans, our mind gravitates to that smaller number and in this case, the minimum payment due.

If money is tight or if you struggle to prioritize your financial situation that number looks like a cherry on a sundae.

Reducing debt quickly is only an option if you have the cash to do so however that’s not often the case.

This is why credit cards can be a deadly payment source for people who lack financial discipline.

You might even be that person who applies for a credit card just to pay your bills.

These types of behaviours are what get people into consumer proposals and in some cases, bankruptcy.

5 Debt Reduction Strategies for 2020

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We’ve already discussed a financial assessment and debt to income ratio above but I want to look at numbers 3 to 5.

  1. Financial Assessment
  2. Decrease Debt to Income Ratio
  3. Budgeting
  4. Increase Income
  5. Financial Fast

In order to decrease your debt to income ratio, you can start a financial fast, budget your money or increase your income.

These are three ways that I’ve suggested on this blog for years and will always advocate as a financial blogger.


Screenshot of 2020 CBB Monthly Budget

You MUST use a budget no matter how much debt you have or don’t have.

I don’t care if you earn a million dollars a year, you need a budget.

At the Canadian Budget Binder level, there are no excuses for not budgeting because we’ve done the hard part for you.

Our Excel budgets are absolutely free and you can play around with them as you see fit.

If the pen and paper method is more your style you can also print our basic budget and stick it in your budget binder.

Whatever method of budgeting you chose whether it be budgeting jars, envelope budgeting or using cash do it right.

Don’t half-ass the budgeting process because that’s the return on investment you’ll get.

Increase Income

In the short term, both Mrs. CBB and I needed to find a way to increase our income when she lost her job.

We had a debt to repay which was our mortgage at the time so we looked at options to increase income.

For the quick-fix way to increase income, we used focus groups, consumer product testing, coupons and rewards programs (which we still use today) to offset expenses.

This allowed us to save money in one area so we could apply it in another.

Related: Why a second income may not be enough

It worked and was part of how we paid our mortgage off in 5 years which is considerably fast.

I also worked as much overtime that was offered to me and took a second job.

My second job was part-time and my foot in the door to my full-time career so it led to something great and wonderful.

Lastly, I started this finance blog which now earns me a monthly five-figure income which will only increase.

Related: How To Start A Blog Resources

Find ways that you can earn extra cash whether it be by buying and selling stuff (which we also do) or anything that fits your lifestyle.

Financial Fast

A financial fast is where you stop spending money you don’t have and make do with what you do have.

Another great option when adopting a financial fast is to find free stuff to replace what you would need to pay for but can’t afford it.

There are many websites online in Canada including social media platforms such as Facebook that have local free stuff groups.

Trading and bartering for items is a way you can get what you need without dipping into your pockets as well.

Think outside the box when adopting a financial fast so that helps you put more money towards debt reduction.

Reduce Debt Or Accept The Consequences

Take debt as it is, the money you owe someone that must be paid back in a timely fashion.

If you fail to pay back the money you own you must face the consequences.

There are options available to you, which are you going to take?

Discussion: How have your views on debt changed over the years? What debt reduction strategies have you or will you use to kick debt in 2020?

Drop me your comments below and I’ll be sure to respond.


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  1. I’ve been debt free for a few years. I did it by divorcing a man who couldn’t control his credit card spending and then it took awhile to pay off.

    When we were together, we did just about everything you listed above. Budget. Selling stuff. Snowball method. Cash in RRSP, etc. We were debt free a few times but he couldn’t stop spending. No different than most marriages that break up due to finances. Especially when one is a saver and the other a spender.

    The most important thing after becoming debt free is to incur no further debt. He didn’t get that. Once the credit card has room, go buy more stuff. It’s like going on a diet and reaching your desired weight. That doesn’t mean that now you’ve got there that you can pig out and put all the weight back on.

    How did I lose over 200 pounds? Divorce!

    All good tips for people to reduce debt. Thanks for sharing them. I’ll send out a Tweet for you!

    1. Hi Cheryl,
      Yes, that’s the hard part. It’s as if it’s a ticket to start all over again. But wait, didn’t we just say we hated being there? There’s no promise to being able to dig out again. Anything can happen. People like that can be toxic to a relationship, especially for the saver. My wife was in a relationship like that and if I can swing it might get her to talk about it on the blog one day. Thanks for your comment and tweet.
      Congrats on the BIG weight loss, lol.
      How did your life change after the divorce or should I say the way it made you feel being free from it?

      1. With lack of income life is difficult since the divorce living in one of the most expensive parts of the country. However, becoming debt free and struggling to fully fund my TFSA even on a very low income, I might not have been able to do those things.

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