"How to pay down debt quickly according to the experts"/ "Experts share tips for young Canadians finding themselves in debt for the first time"

Dec. 12, 2022 "How to pay down debt quickly according to the experts": Today I found this article by Iva Poshnjari on BNN Bloomberg:

Canadians who have taken on debt may be looking to pay it back as soon as possible as fears of a recession loom ahead. 

The average Canadian is in debt by $21,188 as of September 2022 (excluding mortgage debt), according to Equifax Canada. Credit card balances in particular reached a record high of $2,121, the survey showed. 
 
Servicing debt amid growing calls for an economic downturn is likely to be top of mind for Canadians who are already battling with a rising interest rate environment. The best way to get out of this debt quickly is to find a strategy that works specifically for you and stick with it, experts advised. 
 
There's two common strategies people use to tackle their debt, one is logical and the other is emotional, Natasha Macmillan, the director of everyday banking at Ratehub.ca, said in a phone interview. 
 
“Some people choose to pay off the credit card with the highest interest rate first, this is commonly referred to as the avalanche method (logical strategy), 

while the second is the snowball method (emotional strategy), where you tackle paying off the credit card with the lowest balance first,” Macmillan said.   
 
She added that either strategy has proven to be successful so long as you stick with it.
 
For those who have chosen to remain committed to paying off their debt, making more frequent payments will help pay the debt down faster, Macmillan added.  
 
“One tip is to make weekly payments instead of monthly,” she noted.  
 
Being regimented in your plan to get out of debt is the key to the process, one expert explained. 
 
It comes down to living within your means and changing the habits that caused the problem, Bruce Sellery, the chief executive officer of Credit Canada, stated.  
 
He recommended implementing the five-step process below to eradicate your credit card debt. 

 
LAY THE FOUNDATION 
 
Begin by writing down every single lender you owe money to, 

and how much you owe them, 

followed by the interest rate on each credit card 

and the minimum payment, Bruce explained. 
 
“This first step is all about transparency and figuring out what's actually going on in your personal debt picture,” he said.  

 
DETERMINE WHAT YOU WANT
 
Once you know where your debt stands, it's time to figure out when you want to be out of it and get clear about the timeline, he added. 

 
DEVELOP A PLAN
 
With the period set, you now have to figure out the exact amount of money you want to put towards debt payments every month, Sellery said. 
 
“Let's say you'd like to pay $400 a month to debt, your priority is to find out how you're going to come up with that money. 

Is it cutting back on an entire expense category from your budget, like no longer dinning out or using Uber Eats? 

Or, is it going to be picking up a second job to put that cash towards your debt," he advised. 

 
TAKE ACTION
 
Here's the tough part — you actually need to do the thing you committed to in step three, he said. 

 
STAY ENGAGED
 
“Don't lose your momentum until you're done reaching your goal,” he noted. 
 
Sellery added that staying out of debt will come down to changing behavioural habits.

If you have an addiction, such as gambling or substance abuse that kept you in debt, you should seek professional help.
 
“If you don't find a way to change your habits, you will rack up that credit card debt again,” Sellery cautioned. 
 
Canadians who are particularly worried about clearing their debt before the risk of a recession, may benefit greatly from seeking outside help, Julie Kuzmic, the senior compliance officer of consumer advocacy at Equifax Canada, stated. 
 
“A lot of people are not aware that there are non-for-profit credit counselling agencies who will give free sessions to anyone,” she said  
 
These organizations will sit with you and comb through your credit for free, while creating tailored strategies to get you out of debt, Kuzmic added. 
 
She explained that many people hold a lot of shame and fear around their debt situation, which may stop them from seeking help. 

However, it's particularly the decision to have an open dialogue with yourself about your debt that can help you to get to the other side of it, she noted. 
 
“If you want to get out of the situation, you have to be honest about the situation,” Kuzmic, said. 
 
Support links: If you're seeking help for addictions, you can reach out to the Canadian Centre on Substance Use and Addiction

How to pay down debt quickly according to the experts - BNN Bloomberg

My opinion: I like this part the most and can be said about any situation or problem:

“If you want to get out of the situation, you have to be honest about the situation,” Kuzmic, said. 

Dec. 20, 2022 "Experts share tips for young Canadians finding themselves in debt for the first time": Today I found this article by Caitlin Yardley on BNN Bloomberg:

While enrolled in university, Eloho Orogun was approached on campus to apply for a $500 student credit card, advertised as a means to improve his credit score.

Met with a self-described shopping problem, it was not long before Orogun opened a second student card with a larger limit.

"The more money I had, the more debt I would get myself into," he said.

Poor spending habits and a lack of understanding of how credit cards work led him down a debt spiral that took him seven years to break.

A report from Equifax Canada published earlier this month found that Canadians 35 years of age and younger owe the least amount of money, but are the worst at paying off their credit card balances.

The average delinquency rate among Canadians in the third quarter of this year was seven per cent higher compared with the same time last year. That number was higher among young Canadians with the 18-25 category seeing a 33 per cent rise and an 11 per cent increase for those between the ages of 26 and 35.

Rebecca Oakes, head of advanced analytics at Equifax Canada, said there were far fewer missed credit card payments during the pandemic, whether from spending less money or with the help of government support.

While delinquency rates are still below pre-pandemic levels, Oakes said that the increase could indicate challenging times to come.

"It's not an alarm bell yet, but there is clearly some financial stress starting."

Natasha Macmillan, director of everyday banking at Ratehub.ca, said there are two main reasons for the upward trend.

The first is pent-up spending from the pandemic as many are looking to go on vacation and to the events they felt unable to attend during the pandemic.

The second is the impact of inflation, with financial pressure making more people turn to their credit cards for support.

Oakes said younger age groups tend to be a little more susceptible during periods of high inflation because their incomes do not adjust in the same way that other generations' might. She said young people are also less likely to have higher savings that can offer a buffer against high prices.

On top of the rising cost of living are the added expenses of festivities and gifts brought by the holiday season.

 It is easy to spend far more during this time of year, but Oakes said that it is important to consider future repercussions.

"Come January, February, can you make those payments? That's always a good place to start," she said.

Instead of buying extravagant gifts, Macmillan said to consider making presents or doing a Secret Santa gift exchange to cut down on the number of gifts bought.

If you do find yourself struggling to manage debt, Macmillan suggests tracking your monthly spending and creating a budget, especially to pinpoint where non-essential expenses can be trimmed.

"Calculate your average monthly budget and see what you have left over to put toward your debt repayment," she said.

Macmillan recommends two methods to pay down mounting debt: 

the avalanche, paying down the debt with the highest interest rate first, 

and the snowball, paying off the smallest balance first for one less thing to worry about.

"It really depends on what works for people and where they get those little wins."

Orogun took an aggressive approach to finally break out of his debt cycle.

He put all of his money that wasn't being used for essential payments towards paying down what he owed.

"A credit card is a tool, that means you are the one in control of it, you use it to your advantage," he said.

Experts share tips for young Canadians finding themselves in debt for the first time - BNN Bloomberg

My opinion: I like this part the most:

"A credit card is a tool, that means you are the one in control of it, you use it to your advantage," he said.