4.6.3 Tips for managing debt

Mortgage, car loan, consumer spending … Sometimes, despite your best efforts, you find yourself with more debt than you can handle. Although it may seem impossible, you can get out of debt. The first step in solving your financial problems is to admit that you have them and take control before they get out of hand.

Here are five tips for getting out of debt:

1. Use savings to pay off balances.

You may be able to cash in an investment or sell an asset. But keep up your regular savings plan and always keep an emergency fund on hand.

2. Pay down your highest interest rate debts first.

If you carry a balance on your credit card, this is likely the debt with the highest interest rate. Use cash or a debit card while you pay off this debt to avoid accumulating more.

3. Switch to less expensive credit cards.

4. Contact your creditors.

As soon as you realize that you are having trouble making ends meet, call your creditors and explain the situation. In most cases, they will work out a modified payment plan that will make it easier for you to pay off your debt.

5. Talk to trusted financial professionals.

These may include your bank representative, your financial planner or a credit counselling agency. With their help, you will be able to evaluate your current debt situation, determine your present and future needs, make a budget and find ways to pay off the debt. See the section titled Credit counselling for more information.

View the video Tips for managing debt for more information on how to keep your costs down when borrowing and how to manage debt better.