Financial Friday: How should I handle debt?

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Nobody gets a credit card and says, “I am going to live in a never-ending loop of debt,” yet the Bank of Canada reports that the average debt held by residents of Ontario as of March 2020, excluding mortgages, is $24,406.

Personally, I was always careful with debt until I got married. Fresh out of university, my wife and I spent a lot of money on our wedding, and we did not have the luxury of having our tuition paid for.  

Like many couples, we wanted to travel the world and experience what life has to offer.  We pushed ourselves to a financial limit that had us sitting at our kitchen table scratching our heads wondering how we got there. It was simple; we kept up with our friends’ spending, and we wanted things right away, so we borrowed money to get them.

Our number one mistake was not having a budget that properly allocated funds. This left us wondering whether we could spend money on something we wanted. The problem with this is that when you do spend, you have no idea how much you can spend, and you always have a feeling of guilt or uncertainty.

But, once you have that budget set, things get much easier.

Tips for Handling Debt

If you are in the position that I was a few years ago and you want to clear your debt, here are some strategies that you can use to go after it once and for all…

  • Change your thought process. You need to realize that things can wait. Do not worry about how others are spending and focus on yourself.
  • STOP SPENDING! Sooner or later you will have to pay all that money back. Do your best to use cash or debit to avoid overspending.
  • Structure a budget and stick to it. No matter how much or how little money you are making, you need to live below your means and have balance in your life.
  • Snowball debt reduction strategy. Use this strategy to start chewing away at your debt. How it works is that you list all the different sources of debt you have and work on the smallest one first. Make the minimum payment on everything else. Once that small debt is paid off, close the account, and ensure you do not access it again; then move onto your next debt source.
  • Debt Loans. If you feel like you cannot handle the above, you can visit your bank and ask for a loan to consolidate your debt. Please ensure you ask how loan consolidation may affect your credit before making a decision. Also note that this is simply grouping all your debt into one. It is not the same thing as the ‘debt consolidator’ or ‘debt relief’ products that are sold by many for-profit businesses.
  • Understand the different types of debt. Student loans, credit cards, lines of credit, car loans, and mortgages are all different and have varying percentages of interest. They all affect your credit differently and deserve to be analyzed differently.

Use these strategies to manage and reduce your debt, while keeping in mind the importance of building an emergency fund that can cover 2-3 months worth of expenses.

Once you have done this, you can tackle your debt one account at a time and eventually become debt free and focus on growing your investments and savings account.

If you have any questions or would like to discuss your specific situation, please feel free to reach out and we can chat.

Dan is a Wealth Advisor with DMF Private Wealth, who provides independent financial advice.

Dan is happy to answer any questions you may have about your financial picture. He can be reached at 905-512-5629 or by email at

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written, designed and produced by Dan Fernandez for the benefit of Dan Fernandez who is a Financial Advisor for DMF Private Wealth, a trade name registered with FundEX Investments Inc., and does not necessarily reflect the opinion of FundEX. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds Provided through FundEX Investments Inc.


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