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Step 3 – Pay off your debts

Perhaps you're in debt and maybe one of those who keep spending on credit instead of saving. It's essential you pay your debts off first.

Note Before you do anything else, take the 7 tell-tale questions test.

How to get out of debt?

  1. Start by pulling out all your latest statements with a balance owing.

  2. Use the "List your debts and make a plan to pay them off" spreadsheet below. List all your debts, including:
    • credit card balances
    • line of credit balances
    • alimony and child support
    • taxes
    • "Buy now and pay later" financing statements (furniture, appliances, etc.)
    • unpaid bills (phone, hydro, cell phone, Internet provider)
    • auto and student loan balances
    • loans from friends or family members
    • salary advances, etc.

Calculate

List your debts and make a plan to pay them off

  1. Select the order in which to repay your debts
    Learn about the 2 ways to pay back your debts. Don’t forget, you can make new resolutions at any time of the year. Go ahead, make the decision to repay your debts quickly

Did you know?

Your debt repayment plans should be spread out over a maximum period of 3 years (36 months). It's been proven that after this period, most people in debt start losing steam, and start spending again at the expense of debt repayment. Some fall back into the credit trap to the point of having to declare bankruptcy. A 3-year debt repayment plan is demanding, but it's a fast way to become debt-free.

Find out more about bankruptcy.

  1. If paying off your debts in 3 years seems like an impossible task, there are ways to save on interest costs and other remedies to help you save time.
  2. Tell someone you respect about your plan. This way you put a bit of pressure on yourself to work harder at the difficult task of paying off your debts.

Did you know?

In Quebec, nearly 37% of people are in debt. You're not the only one living with the daily stress of debt. But rest assured, solutions to the problem are close at hand. See A case like mine and a financial planner's advice.

The next step

After you're made a plan to pay off your debts and put it into practice, you'll slowly but surely have more money to put in your emergency fund. See why it's important to create an emergency fund.

For more information
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Money question

Do you know where you currently stand financially?

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A few statistics

Institut de la statistique du Québec, 2007:

  • Average rate of consumer debt: 36.2% (debt to disposable income ratio).
  • Average personal savings rate: 5% (savings to disposable income ratio).