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My Best Financial Tip: Pay Off Debt

If you want to get your financial house in order, the best thing you can do is pay off debt. Paying off debt can lead to financial freedom, and free you up to build wealth. I realized this once we paid off all our consumer debt, it really made a difference in our monthly budgeting now that there was some room to spend, save or invest.

Stop Making Other People Rich

First of all, when you have debt, you are paying money to someone else. When you borrow, you pay interest charges, which represent a fee you pay just for the privilege of borrowing the money. You don’t receive goods or services in return for this interest payment. You just pay the money straight to someone else.

That is money that you could be using to build up your own wealth. If you are paying $50 a month in interest charges on a credit card, that is $50 a month straight into someone else’s pocket. You could be using that money to invest, boost your RRSP contributions, or shore up your finances with an emergency fund.

Instead of enriching others, pay off your debt and then use your financial resources to better your own situation. You’ll have more money, and be more secure for the future.

More Freedom in Your Monthly Spending

Realize, too, that debt represents a drain on your resources. Your debt is an obligation that needs to be paid. When you have debt, you can’t spend money on what you want because you have to meet this obligation. Having debt restricts your monthly spending options.

Instead of spending money on debt, you can free up your monthly spending so that you end up with more to spend on what you want. You have more choices with your money when you aren’t weighed down by obligations. Pay off your debt, and you’ll be surprised at how much more money you have each month to spend on the things you want.

Less Financial Stress and Anxiety

We also have to remember that money is tied to emotion. Even if you don’t realize it, having debt adds stress to your life. When you have debt, you are more likely to worry about money. You have all these bills to pay, and that can make you anxious.

You feel out of control when you have a great deal of debt. Instead of letting your financial fears rule you, take charge. Create a plan to pay off your debt. You’ll feel better for making the plan, since you can now feel in charge.

Plus, once the debt is paid off, you will have less anxiety. You will have more money in your budget for groceries and gas and even entertainment. You won’t worry as much about money, and that can help you in your relationships as well as help your financial situation.

Pay off debt, and you can really get on the right financial track. There are a lot of ways that debt can strain your finances, as well as add emotional stress to your life. Pay it off, and you will have fewer worries, and your money will go toward things that help you, instead of going toward things that don’t matter to you.


  1. SavingMentor

    I totally agree Tom. There are times when it makes sense to have some debt but paying it off as quickly as possible is almost always a good thing.

    There’s usually no better risk-free tax-free return on your money than paying off debt.

  2. NSDaddy

    I second SavingMentor’s comment. The only “investment” that can ever have a gaurenteed return is to pay off debt. If you owe $1000 on a credit card with a 19% APR, and you have $300 in your slush fund making the bank’s abysmally low rate of 1.2%, you can consider the 17.8% you save as profit.

    What other investment can you think of that will gaurentee you 17.8% returns?

  3. Devin

    That is “your best financial tip”. Sorry but isn’t that a little backward thinking. How about not get in to debt in the first place. Or more positively put, only do what you can afford. If you never get into debt you never have to find your way out. Yah I understand if you are already there by all means get the hell out of debt as fast as you can at almost whatever means necessary. Beg, borrow, steal….. well maybe not steal….. how about sell what you have, work extra. Every dollar helps. Interest is your friend when you are on the positive side of the ledger. It is like a good friend with a truck. Interest when you are in debt is like having “insert whatever you love here” taken away from you and not being able to enjoy it while it dangles in front of your face until you get out. That is what stress does to your life. It stops you from enjoying life and you are tormented by life you know you could lead if you were out of debt. Sorry for the rant, but man don’t get there in the first place and avoid the headaches, lies, fights, stress, and all the other crap that comes with debt. There it is out.
    By the way I am debt free and just imagine how stressed I would be if I was in debt.

    • Tom Drake

      Fair enough that not getting in debt would be even better, but for the majority of Canadians that advice would be coming too late. On top of that, the fact that debt levels are getting to record highs and interest rates have more room to go up than down, I believe my tip will have a bigger impact than telling readers they never should have gotten in debt in the first place.

      • Devin

        I hope so to. With Christmas just around the corner I highly doubt most Canadians will spend only what the budgeted. I just don’t understand why people can’t do the simple math of money in money out. Then to top it all off can’t calculate the interest on their so called great deal that took 4 months to pay off. I’m concerned that we Canadians are fooling ourselves in thinking we are better off financially then our southern neighbors. As for a greater impact, perhaps saving those who have not fallen to the debt-side is where true value is. I often wonder how many actually get out of debt before they retire? Not that it is a lost cause and all, but more of if the next generation never gets there then perhaps that is something worth striving for. I truly enjoy this blog but all to often in the blogging world the appeal is to the biggest audience instead of the writing right message. Let that message be heard. That is why I read this blog and so many others and support them. Please keep up the good work.

  4. Amy @ JobCred CV Builder

    It’s really stressful to have a debt especially if it’s not meant for good investment. Financial advisers say it’s wise to have debt only if the amount borrowed can generate more income. Unfortunately in my case, the debt was due to health emergency expense.

  5. JM @NJFCU

    Constantly thinking about money and saving for the future causes a lot of stress to anybody. But to initiate a plan to not let yourself fall with all these debts hanging over your head is a start. While it’s wise to stick with your plan no matter what, the economy is quite unpredictable and so we have to allow rooms for adjustments.

  6. Money Dave

    Thanks for writing this article, Tom. Debt has been a financial cancer to myself and my family. I hope everyone heeds your advice.

  7. Scott Kwas

    What about mortgage debt only? Should I be paying off my mortgage currently at 2.80% for 5 years vs contributing to RRSP/TFSA, etc?

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