Breaking the Cycle of Debt on Financial Ground Hog Day

Breaking the Cycle of Debt on Financial Ground Hog Day

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By Bromwich+Smith Staff | 1450 words | Reading Time: 7 minutes and 15 seconds | Last up date: 2024/01/30

According to tradition if a groundhog emerges from his slumber on Groundhog Day and sees its shadow there will be six more weeks of winter; if not spring will arrive early. Around the world there are famous groundhogs- both real and mascots, that capture our attention teasing us with the hope of breaking the cycle of winter. Many adults are familiar with the classic 90’s movie where Bill Murray is forced to replay the same day over and over until he learns what he needs to and is able to move on.  

For anyone struggling with debt and managing minimum payments the movie version of Groundhogs Day can be more of a reality than they would like. Being stuck in a never-ending loop of paying minimum payments, month after month with no hope in paying down the overall debt is terrifying. If you are only able to repay the minimum balance, very little is going towards to debt itself, and it snowballs into additional interest and fees on top of the total owed making it difficult to overcome.  
 If you continue to pay the bare minimum, and not add to that debt how long will it take to pay off? Lets explore the payment details, if you are able to pay your minimum payment on a $5,000 balance, with an interest rate of $19.99%

Paying Only Minimum Payment
Your Balance: $5,000
Annual Interest rate: 19.99% (Some credit cards are even higher. Department store cards are often 25% or greater).
Your Minimum Payment: 3% of balance (3% is a common amount usually set by credit card company. Your credit card may vary).

Total Time to Eliminate Your Balance: 21 years
Total Interest Paid on Top of Original Amount Owed: $5,983. Meaning you have paid this on top of the original $5,000 debt.

Now, lets look at what happens if you were to pay the minimum plus an extra $100 a month
Your Balance: $5,000

Annual Interest Rate: 19.99% (Some credit cards are even higher. Department store cards are often 25% or greater).

Your Minimum Payment: 3% of balance + $100
Total Time To Eliminate Your Balance: 3 years and 2 months
Total Interest Paid on Top of Original $5000 Amount Owed: $1,491
By law, in Canada, credit card companies are required to include a similar break down on each statement. This can be a great tool to determine how much your debt is really costing you, and how putting a bit more down each month can make a significant difference in the how much you owe. 

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Tips and Strategies for Breaking the Cycle of Debt 

One suggestion to break the Groundhog Day debt cycle includes creating a budget and finding where you can decrease expenses or increase income. There are plenty of budgeting tools available online to give you a hand. You may want to look into some simple ways to add to your income or reduce your costs: 

  • Groceries are a huge expense, and prices continue to increase. Look at ways to reduce your overall bill by shopping the deals, menu planning and being creative with leftovers.  

  • Small costs add up, consider if you continue paying for items out of convenience or if it is something you use. This can be as small as the processing fees when you pull cash out of an ATM, or a weekly habit of picking up coffee and doughnuts for your co-workers. We know that these small costs can have a large impact on your sense of wellbeing, so we are not saying to give up on all your small pleasures- just consider weighing which ones are worth the financial cost.  

  • Consider Decluttering your home and sell items you no longer have a need for. Used baby items, children's books, clothes that no longer fit. If you do not currently recycle pop bottles, consider if this is a feasible option. 

  • Find ways to pay yourself. There are many online sites that offer cash incentives for answering surveys, testing programs, submitting your shopping receipts etc. These are simple tasks that can add up over time and help add to your income without a lot of extra work.  

Review other small changes you can make that will have a big impact on your overall debt over time. If you have any tips, we would love to hear about them and share them with others! 
When it comes to how to break the cycle of debt there are many methods and ideas. Consider trying new ways and new ideas to help reduce your overall debt.  
1.    Prioritizing debt payments: This is an easy concept that is not always top of mind. While we know we have debt and know that we should repay it- many of us do not make it a priority. If you have an additional $100, would you put it towards a credit card payment or spend it on a fun activity like a dinner out or going to the movies? Without making a conscious effort to increase your debt payments, you will continue in the cycle of debt. 
2.    Consolidating debt: Consider consolidating multiple high-interest loans into a lower interest loan, or refinance in effort to reduce the amount being paid. You will still have the same total debt owed, but with a reduced interest you will likely be able to make progress on reducing the debt quickly.  
3.    Talk to your creditors: We know that contacting your creditors directly may seem intimidating and useless. You never know what options are available to you if you don’t ask so why not inquire about ways to reduce your interest. Being open with your creditors may help them decide to accept a payment plan or reduce your interest on the debt owed. Keep in mind that you are their client, and even though you are in debt they want to keep you as a client and may be willing to work with you. 
4.    Create Savings: It may be difficult to image putting money into a savings account when you are struggling to pay off debt. By having a savings account, you may find yourself less likely to reach for the credit card or other high interest loan options in an emergency which in the long run will save you from additional debt later. Start small, and watch your savings grow over time. Create a goal and celebrate the milestone when you achieve it.  

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What happens if even with budgeting, you cannot get out of the perpetual debt cycle? 

If you have determined that your debt is overwhelming, and you can not manage it anymore- please reach out. You do not need to struggle with debt alone and there are options available to reduce your debt that work within your means to pay it back. Speaking to a Licensed Insolvency Trustee like one at Bromwich+Smith will help you understand your options. Our team of debt relief specialists will go over all details of your financial situation with you and find the best solution for your specific situation, meaning no more Groundhog Day for you! Let's break the cycle of debt together Today! 

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at    1-888-785-2210,  Live Chat  or you can request a call back at contact us page. We want to see you flourish!      


1: How can creating a budget help break the cycle of debt? 
Creating a budget helps identify areas to decrease expenses or increase income, breaking the cycle of Groundhog Day debt by managing finances more effectively. 
2: What is the importance of prioritizing debt payments? 
Prioritizing debt payments is crucial to break the cycle; allocating extra funds towards debt instead of discretionary spending prevents perpetual debt accumulation. 
3: How can contacting creditors help in managing debt? 
Talking to creditors may lead to options such as payment plans or reduced interest rates, fostering collaboration to find solutions and break the cycle of debt. 
4: Can consolidating debt be an effective strategy to reduce the overall amount paid? 
Yes, consolidating multiple high-interest loans into a lower interest loan can be effective, allowing you to make faster progress in reducing the total debt owed. 
5: How can having a savings account help in breaking the cycle of debt? 
Maintaining a savings account provides a financial safety net, reducing reliance on credit cards during emergencies and preventing additional debt accumulation over time. 
6: Is it advisable to reach out to creditors if struggling with debt? 
Yes, contacting creditors is recommended; discussing your situation may lead to options like reduced interest rates or payment plans, helping to manage debt effectively. 
7: What should be done if budgeting alone cannot resolve perpetual debt? 
If budgeting proves insufficient, seeking assistance is crucial. Contact a Licensed Insolvency Trustee, like Bromwich+Smith, for tailored solutions to reduce and manage debt. 

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