There’s no doubt that the last year was hard financially. With many Canadians taking reduced pay or losing their jobs altogether, some were forced into using credit cards to pay for essentials like food and power. Others may have always had some credit card debt to begin with and may now feel like there is no way out. No matter where the debt came from, the process outlined below will help you build a debt repayment plan that you can stick to to get out, and stay out of debt.

1. Gather information

One of the first steps in any financial planning process is to figure out where you stand. A map with well defined routes is meaningless if you do not understand where you currently are.

You will need to collect all of your most recent credit card and line of credit statements and list the balances. Note the interest rates for each card or credit line next to the balances. Total them all up to see how much debt you will be needing to pay off.

CardBalanceInterest Rate
Home Depot Credit Card$4,659.0025.99%
Line of Credit$10,554.007.99%
MBNA Mastercard$1,874.0018.99%
CIBC Visa$598.0012.99%
Total$17,685.00
A hypothetical debt load

2. Set a Goal

Now that you know what you are up against, it’s time to set a goal for getting it all cleared up. While goal setting may not seem necessary to you at first glance, it just so happens to be one of the most important elements of any financial plan. If you do not know where you want to be, how can you ever expect to get there? 

Try to set a S.M.A.R.T. (Specific, Measurable, Attainable, Relevant, Timely) goal rather than generally saying, “I want to pay off debt”. For example, “I want to pay off all of my credit card debt by the end of June 2025. 

You might need to revise your goal as you proceed through the rest of this process as you may realize the goal you first set isn’t as attainable, or could potentially be done a lot sooner than you originally thought.

3. Make a Budget

I know nobody actually likes to budget, but it may be necessary for those who have been struggling to pay down their debt for some time and aren’t having success. There are several online tools to make this part a little easier, such as YNAB or MINT, but pen and paper will do the trick as well.

Basically, list your combined income from all sources for a given month (potentially your partner/spouse’s income as well if applicable), including any investment income if you happen to have any. This is the amount you have to work with. 

Next, list all of your expenses, including one time or periodic expenses and average them down to a monthly number. Also include the minimum payments of all your credit cards or lines of credit. Add all of these up to find your total expenses each month.

Income Expenses
Wages$5,500.00Rent$1,800.00
Gov’t Benefits$500.00General Insurance$350.00
Total Income$6,000.00Utilities$450.00
Groceries$1,200.00
Car loan$600.00
Gas/Auto maintenance$200.00
Entertainment$300.00
Cell Phone / Tv / Internet$200.00
Savings$200.00
Total Expenses$5,300.00
A basic budget

Subtract your total expenses from your total income and you should (hopefully) have some money left over. This number will be the amount you can commit to debt repayment. If you don’t have any money left over, go back to your budget and see if you can cut some expenses. You will likely need to sacrifice on some things in order to get your debt paid off in a reasonable amount of time.

4. Rank Your Debts by Interest Rate or Balance

Now sort the debts by interest rate with the highest interest rate at the top. This is typically the debt you want to pay off first as it is the one that is costing you the most in interest. This strategy will save you the most money in the long run.

CardBalanceInterest Rate
Home Depot Credit Card$4,659.0025.99%
MBNA Mastercard$1,874.0018.99%
CIBC Visa$598.0012.99%
Line of Credit$10,554.007.99%
Debt ranked by interest rate

You may find it more encouraging to sort your debt by balance, with the lowest at the top, and pay the cards down from shortest time to payoff to the longest. This gives you the benefit of seeing progress quickly helping you stay in line with the goal you set earlier.

CardBalanceInterest Rate
CIBC Visa$598.0012.99%
MBNA Mastercard$1,874.0018.99%
Home Depot Credit Card$4,659.0025.99%
Line of Credit$10,554.007.99%
Debt ranked by balance level

Either way is fine and both will get you out of debt, it just comes down to what you will find most motivating.

5. Start Making Payments

Now that you know which debt to tackle first, any and all free income should be going to this debt. Continue to make minimum payments on your other cards, while putting the rest of your debt repayment funds onto the card at the top of your list. 

Once you have one card paid off, keep budgeting the same amount a month to debt repayment. The money you are not using to pay the paid off card’s minimum payment is now going to accelerate your paying off of the other card’s balances.

6. Revise Your Goal

After you have made a few payments you will have a better idea of how long it may take you to pay off all of your debt. 

Make sure to revisit your goal and update your time horizon, whether it be bumping it to an earlier date or postponing it. Just make sure if you postpone your goal date, it’s because you’ve realized it’s impossible to attain your original goal, and not because you’d rather spend your money elsewhere.

7. Stay Out of Debt!

Once you get all of your credit card balances paid off, use the money that you were paying off debt with to prevent you from ever going there again. 

You’ve just proven to yourself you can get by on a certain portion of your income, so why not continue to do that and put the rest into savings to continue building your net worth?

Tips For Success

Below are some popular strategies for those who want to turbocharge their debt repayment.

Cut or Freeze the Cards

If you are having a hard time not going back to the cards for spending then you might want to think about cutting the cards up (yes… with scissors) so you physically cannot use them. 

If you aren’t quite ready to destroy your credit cards you can try freezing them in a block of ice. This way you would be forced to wait for them to thaw out before you could use them and most likely the desire of wanting to purchase whatever it is you wanted will have passed.

Make Micro-payments

You do not need to make your entire debt payment in one go. It is perfectly okay to throw $20 on your credit card whenever you notice you have that to spare, even if you did that every day of the month. There are interest savings to be had here as well since credit card interest is usually calculated daily.

Try to Negotiate a Lower Rate

If you have a large balance with a higher rate you may be able to negotiate a lower rate with your credit card provider. If your cards are through a bank set up an appointment and explain the situation and what your plan is. Once they find out you will be paying down the highest interest cards first, they might just try to make sure they are not the highest interest rate card to keep the interest payments coming for a little while longer.

Tell Others About Your Goals

Sometimes people just need to be held accountable to keep going with something. If you have someone you feel comfortable talking to about your debt then tell them what you are trying to accomplish. Having it “out there” naturally makes you not want to give up.

Be Honest With Your Peers

You don’t need to share the details of your debt situation or repayment strategy with your friends and family (unless you want to), but you can be honest with them when they ask why you declined to go to the 4th Wing Wednesday this month. There is nothing wrong with saying you can’t afford to go out again or would rather save the money. If they seem very interested, it may just be that they are in a similar situation (in that case forward them this blog post!).


Hopefully this post will help you feel ready to take action against your debt. If you’re still stuck, contact me and I’d be happy to help you come up with a plan that will help you get rid of that debt once and for all.

As always, please feel free to comment below with any questions or concerns and I will happily reply back.