Ask the Money Lady: Shed the debt

 In Opinion

Dear Money Lady Readers,

December is the eat and spend too much month. January is the go on a diet and pay your bills month.

So, have you decided to really create a budget this year to get your finances in order?

Or is it going to be like that gym membership you’ll sign up for that will fizzle out by March because you just can’t find the time to go?

I know we all have the best intentions to do things at the beginning of a New Year, but then life gets in the way, challenges come up and we give in to the failure of our January goals yet again.

According to a recent study done by Stats Canada, (September 2023) three out of five Canadians are dealing with debt. So don’t beat yourself up if you have debt too, especially after one of the most expensive months of the year. It can always be fixed. No matter what reason you had for going into debt, you will want to have a strategy to repay it in full during the life of the asset or at least by the time you reach retirement. Here’s how you’re going to do it.

First you want to review all your options, so make a list of all the debt you currently have. You’re going to want to categorize it into large and small debts; for example, it’s going to be a lot easier to pay off a credit card for $10,000 than it is to pay off a mortgage of $200,000. Just list everything you owe so you can get a good understanding of what you are dealing with and if you have a lot of debt, (over $100,000 in consumer debt) you may want to ask yourself: Could you downsize your home, refinance, or even change your job to earn more so you can reduce your debts?

Now when it comes to consumer or credit card debts the easiest and fastest method is to consolidate high interest loans into a new mortgage or a secured line of credit. Your goal is to capture a lower rate of interest so that you can increase your monthly cashflow. Obviously this should be viewed as a one-time credit fix and not something that you do every couple of years to drain the equity from your residence, use your home as an ATM and get a free pass to spend again. Also make sure your amortization on your mortgage matches with the date of your retirement (for example, if you have 15 years to retirement, your mortgage amortization should also be 15 years).

But, what if you don’t own a home, and you still have debt? Well, we’re going to have to do it the old-fashioned way. Take that list of all your debts and decide which one you’re going to tackle first. You will want to concentrate on putting as much as you can down on this debt every month, (for example a credit card balance) whilst only paying the minimum payments on the other debts that you have. Once this debt is paid off, then move to the next one, repeating the process of paying down one and maintaining the others with only minimum payments. This process takes a lot longer to accomplish and can be quite frustrating at times, but it does teach you how to create new habits for saving and definitely helps you learn how to budget for 2024.

Now if you still can’t resolve your debt situation because there is too much to handle – declaring bankruptcy should be viewed as a last resort. You want to make sure you’ve exhausted all other solutions before contemplating a bankruptcy or consumer proposal. Please don’t think that a consumer proposal won’t be as bad as a bankruptcy. They both will hit your credit bureau and drop your score once initiated. But if all else fails and you must declare bankruptcy to get you back on the road to financial recovery, don’t worry too much, your credit rating can be restored. Once the bankruptcy has been settled and cleared, you will want to begin re- establishing good credit right away. It could take up to three years to do so, but remember you’ve got to get back in the game. So, don’t be afraid to use credit again. Remember, your credit score is the only way to measure your credit worthiness not just for the banks, but also investment firms, insurance companies, some employers, security checks and rental housing.

Christine Ibbotson is a finance writer, national radio host, now on CTV Morning Live, and CTV News @6, syndicated across Canada. Send your questions through her website at

Recent Posts

Leave a Comment