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Are You Really Reducing Your Debt?

Many of us say that we want to get out of debt. If you are in that camp, you need to honestly evaluate whether or not you are truly making efforts to pay down your debt. Do you have a plan to reduce your debt? Or is getting out of debt merely wishful thinking?

What are You Doing to Get Rid of Debt?

A recent survey conducted by Leger Marketing for the Bank of Montreal showed that half of Canadians expect to be out of debt in five years. In this study, these Canadians include their mortgages in their calculations. This survey has me wondering if these Canadians are in touch with reality. Will they really be out of debt in the next five years? Or are they being overly optimistic.

For the most part, it’s possible to be out of debt in that amount of time, as long as you have a plan. The reality, though, is that you need to make a concerted effort to get rid of your debt, paying it down aggressively. Think about the your finances, and what you are trying to accomplish. Answer the following questions to determine whether or not you are likely to be out of debt in the next few years:

  • Do you pay more than minimum? The hard truth is that paying the minimum won’t get you out of debt in anything approaching a reasonable time frame. If you only pay the minimum payment, you could end up paying triple or quadruple what you originally borrowed, and it can take up to 10 years (or more) to repay your debt. If you only pay the minimum, you likely won’t be out of debt in five years.
  • Have you stopped adding to your debt? Many people think that they are paying down debt when they make good-sized payments, and then use the card to buy more. It’s one thing to use a credit card and pay it off each month. It’s quite another to pay down $100 on your card and then spend $80. At that rate, you won’t be debt free any time soon.
  • Are you actively finding ways to boost your debt repayment? Are you looking for new ways to pay down your debt? Maybe you sell some things from your attic, or take on an odd job or two. Perhaps you cut your spending and apply that to your debt. If you want to get rid of your debt as quickly as possible, you need to actively look for more money to put toward paying it down.

In the end, whether or not you will really pay off all your debt in five years depends on how you use your financial resources. Create a plan to pay down your debt, and you will find success. If you aren’t doing anything but thinking about how nice it would be to have no debt, and if you are only putting a small amount toward your debt reduction efforts, without a real plan, you will probably be in debt for a long, long time.


  1. Frank Wiginton

    Hi Tom, I agree with you about Canadian not likely understanding how long it will take for them to get out of debt. Just wait for the next iPhone or a major car repair or something like that to come up and all of sudden the debt repayment plans go out the window!
    You are bang on – they need a plan and the resolve to stick to the plan to pay it out. Without it, other priorities will surface, they will lose faith in the debt repayment plan and then it is all downhill from there. I build a sophisticated debt destruction calculator to help people organize, optimize, and pay out their debts quickly and efficiently. It will show the user how to optimize their debts to pay the least amount of interest and gives them a report that shows them exactly how much to pay against each debt each month. I am working on making it more anonymous and that should be completed by the end of the week by asking people to “pay with a tweet” to use the calculator. Let me know what you think?
    Bottom line is that if people don’t get their spending under control first there are no amount of advice and tools that will get them out of debt. 🙂

  2. Money Beagle

    I think that not taking on new debt is the biggest key to long term success. Too often people will say “Oh, I just finished paying of $10k so I can afford to take on a new loan.” They might even justify it further by taking ‘only’ a $5k loan, so that they still see themselves as ahead. Still not a good strategy if your goal is true debt freedom.

  3. Kathleen @ Frugal Portland

    Yes, yes, and yes! Graphing my progress helps tremendously. I only wish I had the data from when I had $20K in credit card debt, alone!

  4. Vision Investment Properties

    Tom, great article. I would like to just quickly point out to those readers who may not know about it, that there is a real opportunity to leverage assets in order to pay down debt. Did you know there are realistic ways to take your existing mortgage (or get a new one as an investment property) and then use your RRSP account to access cash that can be used for pretty much whatever you need…including paying down existing debt? Then, once you’re debt-free, you can continue benefiting through further investments or savings for retirement.


    So many people forget the basic mooney management skills and than they got caught in debt. Paying the minimum is no enough. If using credit cards one has to use them smartly, plus use cash back cards, which in itslef recovers a small portion of the purchase in cash.

  6. Bryan Jaskolka

    Applaud, applaud, applaud. Too many people pay their minimum balances each and every month, only to be left wondering every time the 30th rolls around, why they’re still swimming in debt. Three TERRIFIC questions to ask yourself, and that will be able to tell you if you’re TRULY paying off your debt; or just falling into the creditors’ trap of thinking you are. Thanks so much, great post!

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