Understanding debt and how to manage it

If you’re like most Canadians, you have some debt. And, if you’re like most Canadians who just lived through a pandemic, you probably have more debt now than you did before.

In fact, 43% of Canadians say that they’ve experienced an increase in debt in the past year.1 With the cost of living and interest rates going up, many Canadians have turned to credit cards and loans just to help them with regular day-to-day expenses. But debt isn’t necessarily a bad thing and pretty much everyone has some level of debt. What that debt is attached to, and how it is managed, is what is important for long-term financial security.

Debt for real estate

Let’s be honest here, pretty much no one is buying their home outright with cash. But this isn’t necessarily a bad form of debt to have. Assuming you have consulted with a financial advisor, and you can manage the debt load of a mortgage, then carrying debt in the form of a mortgage on real estate may be the right decision for you.

Debt for daily living

When you need to take on debt to be able to pay your bills and put food on the table, it can be very stressful and, before long, seem like a hole from which you can never come out. In times of need, people often turn to their credit card(s) for a quick source of money and to make immediate purchases. The average credit card balance in Canada is around $4,0002 as household stretch their dollars to meet rising costs. But, before racking up those credit card bills, consider the interest cost of that money and evaluable it against other options like bank loans and debt consolidation.

What can you do to help manage your debt?

When money is tight and you see debt building up, you may start to feel trapped but there is a way out. Take a deep breath and then take a close look at what you are actually spending every week or month. Now, be honest about your spending. Are there places where you can cut back or eliminate, even if only temporarily, like multiple streaming services, for example.

Next, make a list of all your debt, noting the following:

  • Total amount owed
  • Minimum monthly payment
  • Interest rate

Now, it is the time to prioritize. Create a budget and make sure that you address the most important items (like hydro and your mortgage/rent) and your highest interest items (credit cards, payday loans) first. You may also wish to consider consulting with a credit counselling service to better manage your debt or to explore options for consolidating your debt through a consolidation loan.

Next  stick to your budget3. Consider ways to save like taking transit or carpooling to work. Check your local grocery stores for items that are on clearance or on sale, then stock up and or cook in bulk and freeze for future meals. If space and climate allows, consider growing your own vegetables.

The best time to start is now

It’s hard when you feel overwhelmed but even taking the smallest first step will help you feel more in control and put you on the road to a more secure financial future.

  1. https://nomoredebts.org/wp-content/uploads/2023/02/credit-counseling-society-2023-credit-survey-report-final.pdf
  2. https://www.transunion.ca/lp/iir?utm_campaign=int-ca-23-f146520+canada+q2+23+ciir&utm_content=landing-page&utm_medium=press-release&utm_source=press-release
  3. https://itools-ioutils.fcac-acfc.gc.ca/BP-PB/budget-planner


  1. https://www.canada.ca/en/financial-consumer-agency/services/debt/plan-debt-free.html
  2. https://www.tiaa.org/public/learn/retirement-planning-and-beyond/managing-your-money/seven-steps-to-more-effectively-manage-and-reduce-your-debt

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