For many of us, managing some debt is just part of life. We add it to our budgets and pay it off, little by little. No big deal. Except sometimes it is. Sometimes, debt can get out of control and become a major source of stress. So how do you know whether or not your debt is a problem?
Here are six warning signs to watch out for, as well as advice on starting to solve your debt problem.
1. You don’t know how much debt you have
If you don’t know exactly how much debt you owe, how can you make a plan to pay it off? Make sure you know your total debt amount and check it on a regular basis so you know whether or not your plan to decrease your debt is working. Otherwise, it’s easy for debt to get out of control.
2. Your debt goes up each month
Well-managed debt decreases over time - it shouldn’t go up every month. Maybe one month you have an unexpected expense and you have to skip your regular debt payment - that’s OK, life happens and you can get back on track. But if your debt is always increasing, you need a new plan for how to manage it.
3. You can’t afford your everyday expenses
If your debt payments are so big that you can’t afford to pay bills or buy groceries, it’s time to re-evaluate. The last thing you want to do is use up all your savings paying for daily expenses.
4. You rely on credit and loans
Taking on more debt to pay off the debt you already have is a damaging cycle when it comes to your finances - and your credit score. Some debt management strategies involve consolidating debt with a low-interest loan, but we recommend talking to an expert before taking that step.
5. You’re losing sleep to debt worries
Debt is one of the leading causes of stress for Canadians - you're not alone. If you’re so worried about your debt that you can’t sleep or focus though, it can negatively impact your mental and physical health, your job, your family, and your relationships.
We strongly recommend talking to a financial advisor about your debt. They can help you make a plan to manage your debt and reduce your stress.
6. You’re hiding your financial situation from friends and family
We’re firm advocates of open and honest conversations about money. Still, we understand that for many people, talking about money problems can feel embarrassing, even taboo. If your debt is having such a big impact on your life that you find yourself hiding things from your family and friends, that’s a clear sign that your debt’s become a problem.
How to start solving your debt problems
If any of these warning signs sounded familiar, it’s likely that you have a debt problem. That’s OK! While there might not be a magic solution, there are several things you can start doing right now to better manage your debt. Here are five tips.
1. Add up your debt
Make a list of all the debt you have. Once you’re confident that you know exactly how much you owe, it’ll be easier to make a plan for paying it off.
2. Make a budget
Regular debt payments should be part of your monthly expenses. If you don’t have a budget, it’s hard to know how those payments will fit into your current spending and saving habits. The good news is that making a budget is simple - it’s essentially a list of all your expenses that you can examine to find opportunities for saving. Here are some tips for getting started.
3. Start with high interest debt
When you’re trying to decide which debts to pay off, start with anything high-interest. Paying off high-interest debt, like credit card balances, will reduce the amount you owe and the amount of interest you’re paying more quickly than starting with lower-interest debt.
4. Stay on track
Make your payments on time, as often as possible. Add alerts to your calendar or set up automatic payments so you can avoid late fees and higher interest. It’s not the end of the world if you miss a payment, but try to get back on track as soon as possible.
5. Get expert advice
Ask for help! It’s literally our job. Our financial advisors would love to talk to you about finding ways to manage your debt that help you feel good about your money and confident in the future.
Learn more about managing your money
How to get your savings on track
8 tips on managing your money during a crisis
What is financial wellness?