By Jasmin Brown - Licensed Insolvency Trustee

BDO First Call Debt Solutions

How to End a Toxic Relationship with Debt

Feb 12, 2020 | 11:17 AM

Do worries about your debt load keep you up at night, make it hard to focus at work and invade your thoughts more than you would like? Chances are, you and your debt are stuck in a toxic relationship. If you are ready to be free, February is the perfect month to rid yourself of those bad feelings and mend your relationship with your finances.

Now is the time to pull the plug on your consumer debt

Does this scenario sound familiar? The holidays aren’t far behind us, and you are still trying to catch up on your bills. You have promised yourself that this will be the year that you make real progress on paying down your debt, but expenses keep coming up. In addition, family, work and social obligations are making it difficult to keep your focus on debt repayment. You are not alone. Just a few months ago, the BDO Affordability Index poll found that one-in-four Canadians admit to feeling overwhelmed by their personal debt.

Whether your debt is negatively impacting your health, relationships, job, family finances or all of the above, it’s normal to feel overwhelmed. However, this does not have to be your reality. Getting out of debt can take time, yes, but there are tools and options available to help you on your debt relief journey.

How to put your unhealthy relationship with your debt load behind you

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Winter is a great time to tackle your debt because it will give you time to create goals and develop good financial habits that can carry you through the summer when the pressure to spend is also high. Here are a few ways to break your debt cycle:

1. Imagine a debt-free life. Are you tired of your debt holding you back? Envision what you would do with that money if you were free of your credit card or student debt, your vehicle loan or your line of credit. Would you begin to plan for a secure retirement? Invest in a new business venture or hobby? Travel with your family? Changing your mindset is the first step to changing any unhealthy financial habits. A new outlook can help make your vision a reality.

2. Know what you are dealing with. Before you can be rid of debt, you must face reality. Add up all of your outstanding debt balances, making note of the interest rate associated with each debt. This debt reduction spreadsheet can help with that.

3. Agree to part ways. As with any unhealthy relationship or behaviour, you may need to say goodbye at some point. Refuse to add to your existing debt by switching from credit to debit or cash whenever possible. Learning to live on a cash budget – especially for discretionary purchases – can help you avoid new debt.

4. Invest in yourself. If overspending has contributed to your existing debt problems, review your spending habits. Be honest about the circumstances that have contributed to your spending habits. Reviewing your bank transactions from recent months can help with this process. Invest the necessary time to create a solid budget to monitor your spending, avoid additional debt and track your debt repayment journey. This new online budget planner from the Financial Consumer Agency of Canada can help you create a workable budget.

5. Find a debt solution that works for you. If you think you can deal with your debt on your own, find a strategy that works for you. Debt snowflake, debt snowball and debt avalanche are just a few of the options available.

Alternatively, if you find it difficult to get started or you are not making the progress you want, speak to a Licensed Insolvency Trustee who will review your financial situation and explain all available debt relief options. You can even compare some of those options using our debt repayment options calculator.

You don’t need to commit to a lifelong relationship with your consumer debt. You can end the stress and anxiety by making a plan to break up with your debt for good. For more tools and inspiration, explore the Financial Consumer Agency of Canada’s Financial Toolkit.

Do you use a budget to help you pay down debt? Share your story with us on Twitter and Facebook!