How to Manage Debt – Before Debt Manages You

How to Manage Debt – Before Debt Manages You

This post was brought to you by Sean Cooper in partnership with Loans Canada.

Debt, it’s the four-letter word everyone loves to hate.  Rightly so.

Debt comes in many different shapes and sizes; consumer debt via credit card debt and mortgages are certainly the big ones.

While taking on too much debt can leave you in financial trouble, debt can be a tool to build wealth when used responsibly.  It’s all about managing your debt before it manages you.

Thanks to Mark’s site today, I’m going to share how you can organize your debt, how to tackle your debt and what options might be available to consolidate your debt – should you need to do so.

Getting Organized

The fact is:  the more organized your debt is, the easier it will be to manage it.

When it comes to organizing your debt, there’s no one-size-fits-all solution.  What may work for me, may not work for Mark, and that might not work for you.

I know from reading Mark’s site, managing his debt is just one of the ways he intends to master his money.  Along with paying himself first, and focusing on long-term investing inside his TFSA and RRSP, he diligently pays down his mortgage including making lump-sum mortgage payments.

Based on my own experiences, I believe it’s all about finding a system that works best for you and sticking with that.

Here’s my list of the top-5 ways to organize your debt:

  • Write them down. Sounds simple enough and it is – list your debts.  It will be hard to reach debt freedom if you don’t know how much you owe; to whom; when. 
  • Implement reminders. Once you’ve figured out what you need to pay each month towards your debts, it’s helpful to set up automatic payment reminders so you never forget to make a payment. Missing a payment can have an adverse effect on your credit score – something you can read about here, so it’s best to avoid that as much as possible.
  • Figure out your debt free date. Once you’ve figured out your total debt load; how much you’re paying off, I suggest you figure out your debt free date. That’s the date you can pay off your debts in full.  When I was aiming to burn my mortgage – my interview with Mark is here, I did this myself and I found it to be a very powerful motivator.  I chose the date I wanted to have my mortgage paid off in full and it really helped me stay focused towards my goal of mortgage freedom.
  • Create your budget. To keep yourself accountable on your debt-free journey, it helps to create a budget.  I know Mark believes this approach is a better way to budget.   Like I mentioned above, I believe you need to come up with your way.  By creating a budget, you can help keep your spending in check. Just be sure what you have created is realistic.  If it’s too strict, just like a new diet, you could lapse, and you could be setting yourself up to fail.
  • Track your spending. While a budget on its own is helpful, it’s even more helpful if you track your spending.  By tracking your spending, you can see if your spending behaviours align with your budget goals.

How to Tackle Debt

Now that you’re organized, let’s really get after it by nailing down your approach.

There are two popular ways to tackle debt: the snowball and avalanche strategies.  Again, there’s no right or wrong way.  But finding an approach you can stick with will help you become debt-free sooner than later.

1.       Snowball

With the snowball strategy, start by listing all your debts, smallest to largest.  The snowball approach works by focusing on paying off the debt with the smallest balance first, working your way down the list to the largest debt.  It works by putting as much money as you can afford towards paying down the smallest debt, while making the minimum payments on your other debts.

I think this strategy works well to help deliver quick wins.  You can see progress more readily.  It makes sense if you’re someone who wants to see some personal satisfaction from your work sooner than later – helping you stay motivated towards bigger goals.

2.       Avalanche

This strategy is a lot like the snowball strategy, but it differs in that you list your debt in order from the highest to lowest interest rate debt obligations.

You start your debt avalanche approach by paying off debt with the highest interest rate, and then working your way down the list.

This avalanche approach works well since you tackle your most costly debt first; usually credit card debt. 

I know for me, when I was focused on paying off my mortgage that was my highest form of debt, it was very inspiring to see how extra mortgage payments could make a HUGE different in becoming debt-free.

What Options are Available (to Consolidate Debt)?

Overcoming debt can seem impossible to tackle on your own.  There is certainly no shame in getting help – in fact it’s probably just what you need.

1. Debt Consolidation Loans

A debt consolidation loan is when you take out a single loan to pay off all your debts. A debt consolidation loan can help simply your financial life – simplifying the management of many existing debts.

Once you take out a debt consolidation loan, you only have one monthly debt payment to worry about instead of several. But that’s not all. You might also qualify for a lower interest rate compared to the interest rates you were paying on your individual debt, making it an even better option.

A debt consolidation loan is an option for those who can qualify for a decent interest rate; who can get approved; and who can afford the monthly payments.

2. Debt Consolidation Program

A debt consolidation program is a lot like a debt consolidation loan, except you’re required to go through a third-party agency. As part of the program, the third-party agency will consolidate your debts, so that you only have one monthly payment to worry about.

In most cases, interest stops or is reduced, making your payments lower compared to if you consolidated your debts on your own.

These programs aren’t perfect though.  For one, your credit score may take a major hit while you’re in the program.  Also, any companies pulling your credit report will be able to see that you’re enrolled in the program but, this transparency is a good thing for you too.  It will probably increase your accountability and help you improve your personal finances for the better with time.


These are by far and away not the be-all, end-all solutions when it comes to debt management.  I do hope however that some of these tips (based on my partnership with Loans Canada can help you out).  Thanks to Mark for his website real estate to post this article, and I look forward to your comments about debt management below.


Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. 

My Own Advisor disclosure – there is no compensation nor any affiliation between My Own Advisor (Mark Seed) and Loans Canada, including any links in this post.   

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

13 Responses to "How to Manage Debt – Before Debt Manages You"

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  2. One thing I did when I had debt was to actually have a payment schedule that broke down each payment into its principal and interest portions along with a running total of each as well. Seeing how much of each payment that was interest was a motivating factor to reducing that number. I also put that amount in context of how many hours I had to work (before deductions) to come up with that interest payment.

    1. Those are good details Lloyd. I too, put in context how many hours I have to work to pay off that debt. When we bought our last new car (never again I don’t think…) in 2011, I calculated that the car cost me after-tax, >1/3 of my tax-home after-tax salary. That put things into perspective very quickly in terms of how much of my salary I was giving up just to own a car – a depreciating asset no less. Not very smart.

    2. Good point Lloyd. I remember deciding on my last mortgage in the late 80s and doing all those calculations manually first. I had a thick mortgage table book and rates were ~9.5% then- a lot of money in interest. Decided on a 10 yr mortgage. Then maxxed out options for knocking it down, 10% extra bi-weekly, 10% of principle annually etc. Ended up paid off in less than 6 yrs. Looking at those enormous interest numbers was a huge motivator.

      Mark, great that you’re able to get down to one car conveniently now. And yes same here, never again on a “new” car.

      1. “never again on a “new” car.”

        Ya, I thought that way as well. But then the ’03 Cruiser stopped putting out heat last winter and the A/C wasn’t much more than a cool breeze this summer. Not going to put money into it. I just walked into a local Chevy dealer and bought a Trax last week. Didn’t give it a second thought.

      2. We always wanted to buy 1-3 years old car as it’s obviously best value for money. But somehow always ended up with buying a new car in past couple decades. It’s easier to buy a new car as we don’t know cars that well. Well, time and energy is equally important for us right now if not more than money. We don’t buy expensive cars anyway. It’s well within our capability. We plan to drive the car a very long time, too. So I think it’s OK.

        As for debt, we never had any debt other than mortgage. I don’t think anybody should borrow to buy any consuming goods if one can manage. Cars are consuming goods in my opinion so I will never borrow to buy a car. If I don’t have enough money, I will just buy a used one within my budget.

          1. Great points May. Knowing how to use debt and how NOT to use debt (i.e. to buy a depreciating asset like a car) can mean the difference between a 5 figure net worth and a 6 or 7 figure net worth.

  3. Hi: I am always in the right track, organized with my bills, live nice but frugal. My only dilemma is that I can never maintain stable employment to the point that I have to live on credit or gov assistance and work pro-bono. What would you advise to someone who wish to be more ambitious when financial situation is in the (-) Are there any financial institutions that help the skillful destitute? Thanks so much.

    1. If your employment is unstable or your income is fluctuating Lily to a great degree (e.g., seasonal work?), I would likely tackle/try to stabilize that first. I think it only makes sense to try and even-out any cash flow issues to the best of your ability before you come up with a spending plan that may include killing some debt with some of your after-tax take home pay.

      Not necessarily financial institutions you need to talk to but potentially a money coach or similar so that you can best breakdown your cash flow and better understand where the money should go, why; how often, etc. I hope that helps?



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