Financial Literacy: Managing Debt

November is Financial Literacy Month and this year the theme is “Managing your money in a changing world.” Interest rates are rising, inflation is increasing and managing your debt is more important than ever. We’re outlining some tips for managing debt and resources to help achieve financial success.

Identify what you owe

Make a list of everything you owe such as mortgage, car loans, credit cards, etc. For each item, note the total amount you owe, the minimum monthly payment and the interest rate.

Review your budget

“A budget is a plan that helps you manage your money.” – Financial Consumer Agency of Canada

When reviewing your budget, put needs before wants. Try to reduce your expenses where you can and you’ll have more money to pay down your debts.

Choose a Strategy

Once you know what you owe and your budget, make a plan to pay off the debts. Create a timeframe that is reasonable and realistic. If it’s too long, you’ll end up paying more interest. But if it’s too short, you won’t be able to keep up with the payments. Generally, start with the debts with the highest interest rates. However, if you have a debt with a low balance that you can pay off sooner, it will help to keep you motivated. Finally, talk to your financial institution and creditors to discuss your situation. Sometimes you can negotiate a lower interest rate or extend your payments to reduce your monthly bills.

Avoid taking on more debt

Once you’ve paid down your debt, it’s important to close those accounts so you are not tempted to spend again. Also, do not take on more debt to pay off your debt. Instead, see if you can consolidate your loans. Pay for purchases with cash and put money aside into savings.

Paying off debt can be a daunting task. But with knowledge and understanding, a plan and motivation, you can conquer your debt.

“It always seems impossible until it’s done.” – Nelson Mandela

For more tips and advice about managing debt, visit the Financial Literacy Month website and check out their resources. Also, take a look at the additional resources listed below.


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