Holiday Hangover and The January Debt Cure

2019-01-30   minute read

Debt Solutions

Lifestyle Debt

Another new year is upon us, and with that comes a fresh batch of resolutions. Debt woes can affect adults of any age, education and income level — and debt repayment is consistently a top priority for may Canadians this time of year. While the stress and anxiety that comes with debt can often feel overwhelming, the good news is there are a wide range of options available the help anyone escape the cycle.


If you’re looking toward a financial fresh start in 2019, these steps will give you a head start on the journey to a debt-free future.

Step 1: Know What You Owe

To fix any problem, you first need to know what and how severe the challenge is. In this case it means meticulously combing through your statements and online banking platforms to tally up your outstanding balances.

Be sure to include any and all money owing, including credit cards, lines of credit, personal loans, student loans and car payments. If you’re behind on things like utility payments, mobile or cable bills, you’ll want to include those as well — the full picture is essential to create a plan best suited to your unique circumstance.

Step 2: Calculate Your Debt Servicing Costs

One of the biggest dangers with debt isn’t what you owe, but what it costs to owe that much. Interest payments not only make it difficult to balance your budget, they can also thwart your best intentions and get in the way of your debt reduction efforts.

It can help to visualize your debt servicing costs using a five-column spreadsheet. Here, you’ll document each individual debt, the outstanding total, minimum monthly payment, interest cost and principal paid. 

Debt type Debt Total
Minimum Payment
 Visa  2,700 45  35 10 
 MasterCard  12,500 230  220 10
  Line of Credit  20,000  100  100  1
 Totals   35,200  375  355  20


The above example paints a stark image of just how little of your minimum payments contribute to reducing your overall debt. Of the $375 paid over one month, a staggering 95 percent lined the pockets of each respective lender, while the total amount owing was reduced by a meagre $20.

Step 3: Crunch the Budget

Now that you can see you can’t rely on the minimum payments alone to meet your debt-reduction goal, its time to review your budget to understand how much more you can afford to contribute each month.

First, comb through your bank statements, credit statements, receipts, expense tracking apps and any additional information sources for the past three to — ideally — six months. Next, calculate your total net (take home) income over the same period.

Subtract your expenses and minimum debt payments from your net income — this will reveal the maximum available for additional payments against the principal of your debts. Multiply that number by 12 to learn roughly how much you can expect to pay off over the next year if you stick with your plan.

Step 4: Make Changes as Required

It’s possible that either (a) the total available funds for debt repayment will be a negative number or (b) the total available funds for debt repayment will be significantly lower than you’d hoped. But don’t feel discouraged.

Take a few minutes to thoroughly review your expenses, you’d be surprised at how many superfluous expenses you may be able to cut. One or two less dinners out per month could free up $1,000 over the next 12 months. You might be able to save $800 by disconnecting your cable for the year. You may also consider renegotiating several bills such as your insurance premiums or mobile plan.

Step 5: Free Confidential Consultation

Don’t worry cost cutting isn’t enough to make a dent in your debt. There are still ways to get the financial fresh start you need. During a Free Confidential Consultation, a Licensed Insolvency Trustee will review your financial situation and explain your options. Whether you qualify for a Life-Changing Debt Solution — such as a Consumer Proposal or bankruptcy — or would benefit from another opportunity, they’ll help you make the choice that’s best for you so you can get on track to a debt-free future in 2019.

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