Reduce Debt Fast: Top Tips for Canadians - Debt Reduction Strategies

_{By Bromwich+Smith Staff | 1119 words | Reading Time: 5 minutes and 35 seconds | Date: 2023/02/17}

If you find yourself trying to reduce your debt, know that you are not alone. Many Canadians are struggling trying to juggle the increase in grocery prices, every day bills, mortgage rates and now the addition of holiday debt. Bromwich+Smith is here to let you know that you are not alone, and that there are solutions available.  Keep in mind that reducing debt and resolving it is simple when you know the extent of your debt and are willing to work at reducing it.

How Can I avoid accumulating debt?

1. Set up automatic bill payments to avoid missed payment and late fees.
2. Avoid impulse purchases and leave your credit cards at home.
3. Avoid Buy Now Pay Later 
4. Keep track of your purchases this includes expected expenses, things that pop up and items that were over your anticipated budget.

What can you do if you are finding yourself in debt? Often we want to try to manage our debt on our own discreetly. There are a few methods you can consider exploring.

1- Highest Interest Rate Method:

This method focuses on paying off debts that carry the highest interest rate, such as credit cards, student loans, and medical bills. The process in theory is simple- pay off the debt with the highest interest rate as soon as possible since it is the debt with the greatest flow of money that is having a hard time closing. It is important to know that this option is not going to be fast. You may not see the immediate but with time, and dedication this method will make it easier to eliminate larger and more expensive debts by giving it a priority, generating a change and will lead to saving money for long term and visualizing short, medium and long-term achievements.

2- Snowball Method:

As the name suggests, this method addresses those small debts to the largest ones. The objective of this method is to get rid of the debts as soon as possible. This will allow you to make the minimum payments necessary on the debts that you have concentrated on while putting the extra payments possible to settle the smaller debts, giving the opportunity to quickly cancel what is pending.

When you're done paying off the first small debt, direct the payments you would have made towards that debt, onto the next one on top of the minimum payments you are already making. By doing so, you will be producing a "snowball of payments" in order to pay the debt off faster. The difference between the method of the highest interest and this is that you will notice changes faster. However, you may end up paying more in the long-term method, since it does not focus on the most expensive and large debts.

3- Organize the monthly invoices:

When we understand how much debt is owed or what the total amount of the debt is, when the next and distant payment dates are, we make it easier to understand and manage debt. For this, it is advisable to use Invoice Calendars to keep all the information in one place. You can use this to understand which invoices have priority and when their next due date is. Creating habits or routines that generate positive control over monthly expenses will bring you closer to reaching your goals.

These 3 methods will help reduce those accumulated and pending debts from day to day, on the other hand, having a degree of self-awareness is essential in order to act based on what is planned and, ultimately, it is the best route to travel one; or with fewer debts. However, reducing debt is one thing, and preventing it is another.

1. Stop accumulating debt

It is very important to stop accumulating more debt, while you are trying to reduce your current debt. Eliminating credit card usage and unnecessary expenses may help, but we need to examine all areas where we can accumulate debt. This can include late payment fees, overage charges, and interest rates.

2. Limit the use of your credit cards

When you have a credit card available from different banks, you may be walking on the edge of compulsive and unnecessary debts. The most recommended way to save from going into further credit card debt, is to not use your cards. Remove your cards from your wallet to eliminate from impulse purchases and keep for emergencies.

3. Establish an emergency fund

No one is exempt from unexpected things happening. Many Canadians are one emergency away from needing financial assistance. We highly recommend having an emergency savings account set up to aide in the likely case that you will need extra funds. While this may seem counter productive while you are paying off debt, it will help you from incurring more debt down the line. In the case of an accident, a car crash, an unexpected trip, or anything else that involves a large, unexpected expense by having funds set up you will be less likely to use your credit cards. When we don't have an emergency fund, it's very normal for us to add to our debt because we don't have money to pay directly.

4. Cut Back Expenses

If you know that your expenses outweigh your income, you can see if there are areas that you can cut back. This could include:

• Reduce the amount of times you order take out/ eat out
• Reduce your electric/ water consumption
• Eliminate unnecessary bills including streaming platforms, magazine subscriptions, online shipping fees, unused gym memberships etc
• Be a smart shopper. Shop the flyers, or shop on sale days.
• Reevaluate your social budget, movies, spa dates and ski adventures may not be in your budget right now.
• Consider downsizing your living space, or vehicles.
• Shop with cash, or credit cards that offer cash back points
• Grocery shop with a plan, don’t buy items you wont eat and avoid stocking up if it is not on sale AND an item you will utilize

Debts have been one of the biggest challenges for many over time, generating anguish and even despair for many families and individuals. Remember that for every challenge there is an opportunity to grow, learn, evolve, act, and that every solution entails a process of time, organization, planning, and action to reduce debts as much as possible. Take the time to implement a forecast plan and be patient and believe in the process. These methods and steps will allow you to reduce your debt and be closer to that stability and economic peace that you are looking for and that you deserve.

If you are facing overwhelming debt, remember that you are not alone. 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 1.855.884.9243, or request a call back at contact us page.