Business & FinanceDebt Management

Effective Debt Solutions to Your Debt Problems

Debt Problems

Many of us have debt problems, but one thing is for sure, not a lot of us have debt solutions. And even if we did, it wouldn’t necessarily mean that one person’s solutions would work for another.

With that said, there are still some ways that we can all understand and work towards solving our debt problems.

We need to understand debt before it becomes an unnecessary burden, weighing us down and choking the very life out of us. Some debt is okay to accumulate, and we refer to this as “good debt”.

Going into debt with your first mortgage might seem like a lot of debt for instance, but it’s a move towards completely owning a major real estate asset. Other good debt includes borrowing for education. Sometimes this kind of debt can get out of hand and into the area of $30,000 or more. It’s important to weigh your future earning potential against your future debt burden before you begin or continue.

Other debt should be avoided at all costs. Credit card debt, for example, typically has high-interest rates and low monthly minimum payments. This way, you’ll be mired in debt for the next 40 years. When spending on lines of credit, credit cards or on a loan, make sure your purchases are adding value to your life.

For instance: renovating your house increases the value of your property when you sell, so this is a good option. Or, purchasing a reliable vehicle for a new job in which you will be required to drive is another smart move. According to finance industry veteran Rob Clegg, “Avoid accumulating debt for meals, clothes or vacations that won’t help you in the long run”.

Having a budget is the most important debt solution. It prevents you from over-spending and can often increase the amount of money you can put toward your debt each month. Track how much you are spending by writing down all the payments you will need to make in a month.


Gas: $200
Groceries: $400
Utilities: $200
Mortgage: $600

After that, compare all the spending you are required to do to how much money you earn in the month. Chances are there will be a nice chunk of money left over. That’s the money you spend every month on things you don’t need or on entertaining yourself. Lots of times, we don’t even remember what we spend this money on. The next step is to a lot yourself a portion of that money for monthly spending. Part of the remaining amount can be set aside for emergencies and part of it can be put against the debt you owe.

If you have multiple debts, concentrate on paying down one debt at a time. Start with the debt that has the highest interest rate and continue to make minimum payments on the others. Put as much money as possible onto that debt and when it is gone move on to the debt with the next highest interest rate. You should never make only minimum payments on all of your debts. It will take you years to pay them all off with thousands of added dollars in interest.

If you feel like you can’t get out of debt on your own, visit a financial institution or talk to a credit counsellor. They can help you with more structured options.


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