Paying Off Debt – How To Become Debt Free Faster


How To Get Out Of Debt Fast

All of us can probably attest that at some point we were spending too much money. Or maybe cruising down the theoretical highway of life constantly on empty. We were just hoping we make it to the next “gas station”. We always made it, until one day an unexpected expense didn’t leave enough cash for gas. Personal finance isn’t easy, and not knowing how to spend your money can lead you down a bad path, debt. Now you are desperately looking to find a way to pay that debt off. You’ve come to the right place.

Lets Talk About Paying Off Debt


Get out of debt and stay out of debt with this book by Jerrold Mundis

At Stocktrades we are trying to aid those who have paid their debt or those never in debt in the first place, to start generating income from investments. It did not occur to us that we also needed an article or two in assistance of people who are wanting to pay off their debts. There has been numerous articles written on the world wide web since its inception on whether you should pay off your debt or invest your money first. This is a pretty easy question to answer. Just ask yourself, do you have any outstanding debt besides a mortgage or an extremely interest friendly HELOC or line of credit? If you do, the answer to your question is to pay off your debt. The theory behind this, in a nutshell, is if your interest on your debt exceeds the amount you are making on your investments, investing is actually a net negative.

In order to get out of debt, you have to figure out how you arrived there in the first place

No doubt there are people who are just generally bad with money. It’s a problem that has burdened society well, ever since money existed. To some, a credit card feels like a free ride. It’s easy to get tunnel vision when the $2000 bill for your new TV you bought on the 1st doesn’t come until the 30th. Personally, at Stocktrades we blame this on the fact that public schools seem to ignore setting their students up for financial success at an early age. Instead, we rely on our children to teach it to themselves. We don’t ease them into it either, we throw them to the wolves who are just licking their chops waiting for the next sucker to make a poor financial decision.

Canadians are in a boatload of debt

As of December 2016 Canadians on average are in debt to the tune of $22,081. Unfortunately no, this doesn’t include your mortgage payments. This is consumer debt. This is hey, I’ve made some decisions somewhere and now I feel trapped. In total, Canadians are in 1.7 trillion dollars of consumer debt. Yuck.

Here are some excellent numbers we managed to extrapolate from Pete Evans article from the CBC. We will go over the average Canadian debt by age, but if you would like a deeper look at specific cities and provinces in debt (ahem, Calgary Alberta), check Peters article out.

Average Canadian Debt By Age



    • $8,343


    • $17,064


    • $26,697


    • $32,594


    • $27,840

Age 65+:

    $ 15,238


It’s actually fairly alarming that the age group that has the highest amount of debt are the ones who are theoretically getting ready for retirement. Now, this isn’t to say that these people are dragging themselves through the mud with debt. Maybe their kids moved out and are off to college. Hooray for no more contributions to their RESPs. No more paying for them to eat, insure and gas their vehicles. Let’s go buy a Corvette!

Ultimately debt really only becomes a problem if it spirals out of control. A person who buys a new car but can comfortably afford the payments regardless of their situation is in debt, but are they in a dangerous situation? No. A person who purchases a car knowing if they lose their job or face an unexpected expense it could put their payment plan in jeopardy is in a whole different world.

Stocktrades Seven Step Procedure To Getting Out Of Debt

If you are maybe in the latter situation with the scenario above, you may just not be treating debt like it is a priority. This seven step guide will help you hammer down debt faster than you could imagine. That being said, no one is stopping you from returning to reckless spending. So, you not only need to follow this guide but you need to sculpt the mental fortitude needed to execute day in and day out.

Step One: Get your debt on paper

In this day and age an excel spreadsheet may be a little more savvy but you get the point. I would bet that a lot of people who declare their debt out of control don’t even know how much debt they are truly in. This is your time to find out. Start by noting down every single penny of debt you have. In addition, keep note of your current minimum payments and their interest rates.

Tally up your total, and either be somewhat pleasantly surprised or try not to dread. No need to fret, you will be crying tears of joy by the time you finish executing this guide.

Step Two: Set Achievable Goals

If I were to tell you in the next 3 years we were going to reduce your consumer debt from $60 000 to $0, would you be intimidated? Rightfully so, that’s a ton of money in a short amount of time. It is essential to set up achievable goals when paying down your debt. Remember “achievable”. It’s all fine and dandy thinking you are going to dedicate 50% of your net income to paying off your debt, but why set yourself up for failure? Make the goal 25%, and when you manage to pay 50% towards your debt, give yourself a pat on the back.

An estimate to see exactly how long it will take to get out of debt is to simply take your total debt and divide it by what you want to pay back per month. A person making $2500 a month after tax decides they can afford to pay $500 towards their debt of 25 000. 25000/500. It will take them 50 months to pay that balance off. Note that this formula doesn’t allow for interest calculations. So in theory, you will be paying that balance off for more than the calculated time, but this gives you a rough estimate.

When the debt becomes too much

To someone who is in an unmanageable amount of debt it may be a sigh of relief that it will only take four years to get rid of the balance. But let’s do the math on someone who is $50 000 in debt. 50 000/500 is 8 years 4 months before interest is factored in. The idea of paying $500 dollars towards essentially what feels like a black hole for the next 100+ months is enough to make most people queasy.

That’s why you need to break your debt down into theoretical goals. Granted it will take you the same amount of time unless you can jump your payment amount up, but looking 8 years into the future is a recipe for failure. Start your first goal at $5000. Heck, have a frugal party when you hit that point. Reward yourself, you’ve come a long way.

Step 3: Get rid of your nastiest debts first

The feeling of “finishing” a debt may lure people in to paying their debts off the incorrect way. Say you have a $1000 line of credit at 5% interest and a $15,000 credit card balance at 19.99%. You may feel warm and fuzzy by eliminating your line of credit debt first, but you are making a huge mistake. In fact, you will pay more than double the whole line of credit balance in interest on that credit card in a year. Check out this credit card interest calculator to see why you need to get rid of big interest debt first.

This is why we advocate paying off what we call “nasty” debts first. Focus all your attention to eliminating the debt that burdens you the most, first. The minimum payment on that $15 000 could be more than $400 dollars a month. The best part about eliminating it? It opens up that minimum payment to be put towards your other debts.

That being said, if your line of credit has a low balance with a high limit, it makes sense to take money from your LOC and pay off higher interest debt. This consolidates 19.99% interest into 5%. Always reduce your interest rates when possible, this can make a huge difference over time.

Step Four: Get rid of unnecessary assets

Ever heard the saying “It’s not much, but it gets me from point A to B”? This is exactly the mentality you need to adopt. If you have a vehicle that you are making payments on, you simply need to get rid of it. Someone who is really dedicated to crushing their extensive amount of consumer debt should be willing to sacrifice luxury. As a result, if you have a car that’s worth $20 000 sitting in your driveway, get rid of it.

Think of it this way. That $15 000 credit card debt that would take you years to pay off, can be erased with one payment. $20 000 car out, $5000 car in. Fairly simple math isn’t it? The luxury of a nice car should be reserved for those who aren’t buried in debt.

It doesn’t stop at cars either. Golf clubs, lawn mowers, snowmobiles, boats, and whatever other fancy toys you have buried yourself in debt purchasing need to go as well. If you’re truly in this much debt, you didn’t have the money to purchase them in the first place.

Step Five: Get another job, or find some extra work

It takes no genius to realize the more money you make, the more debt you can pay down. I’m sure you’ve been in this position before, the only difference is it was the more money you make, the more you can spend. Not this time. Find any way you can to make a little extra cash every month and dedicate one hundred percent of that money to paying off your debt.

Ask your employer if they need somebody to work some overtime, or cover some shifts. Lot’s of people hate cleaning or doing yard work. But some people who aren’t in tons of debt will pay someone to do these things for them. You’d be surprised at how much interest you can save over the years just picking away at the principle.

Step Six: Selling unused items

Let’s face it, you’ve probably bought a lot of “things” over the past 5,10 or even 15 years. The fact is, you probably don’t need most of it. That guitar you purchased when you were bored hoping to learn how to shred like Tom Morello? You haven’t touched it for 5 years, let’s sell it.

The best way to go about this is to take a couple weeks to mentally note what you use around the house. You’d be surprised at how much you could truly get rid of and not even notice. That being said, there may be some things that you do frequently use that you might not need , like a gaming console or that wireless surround sound system. Consider selling these if the price is right.

You may think that this process will take the life out of you. However, we aren’t stating that you need to give these things up for the remainder of your life. You will have plenty of time to wisely buy back recreational items when you are out of debt. The fact is the longer you are in debt, the more interest you will pay. The quicker you become debt free, the less money you will pay to creditors in interest.

stop spending when paying off debt

Step Seven: Using your surprise cash

If you have an RRSP plan at work there is probably a good chance that you will be receiving money come tax time. In previous years you probably would have spent that return on something you really didn’t need. This time, you’re going to take that money and directly apply it to your debt. A good rule of thumb for making the most of your surprise income when you are in debt is anything obtained outside of your paycheck goes towards debt payments.

It may come off as offensive to most, but ask for cash when you would be receiving gifts. The best way to go about this is to simply state your situation to family or friends. Explain the fact you don’t need a new hockey jersey for Christmas, you need to eliminate your debt. If I was a family member in this situation I would feel ecstatic to give cash, especially since you are trying to better yourself.

Things you just shouldn’t do when you’re in debt

There are people who are desperately trying to better themselves but due to lack of income just simply cannot pay their debt off. Then, there are those who are in mountains of debt and still continue to do things that make you wonder if they really want to get rid of it at all. Here is a list of things you should not do when you’re in debt:

    • Visit malls regularly.


    • Frequent the bars.


    • Get the newest Iphone every 6 months.


    • Register more credit cards.


    • Take the family to Mexico.


    • Buy a new TV when hockey season starts.


    Buy a new couch when your leather is fading.

Obviously, these are some pretty dramatic examples of what to not do when you’re in debt, but you get the point. A method that I always found worked for me is when I wanted to purchase an item, I would wait seven days. I would drive the car and electronics salesmen mad. I would be dead set on buying a certain television, but would take seven days to go home and think about it. And you know what, I would say 80 percent of the time I never ended up making the purchase. I’m not the only one who uses this theory either, check out Enemy Of Debts article on a waiting period for teens.

Life After Debt


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There are lots of reasons people fall into debt. Here is a great article by Grayson Bell at Debt Roundup highlighting the top 10 overlooked causes for debt. The fact is, once we are in debt there is only 2 solutions. One being bankruptcy, which I hope no one ever reading this article has to succumb to, and just sucking it up and paying it off.

Now, the feeling of finally becoming debt free is about as exhilarating as it gets. It is like a giant weight lifted on your chest. Debt used to suck the life out of you, made you lose sleep. The human brain is a marvelous thing, but one burden is the fact that it’s hard to break habits. Get a program like YNAB. Create a budget, but remember, a budget is only as good as the dedication and discipline put towards it.

If you have any tips on paying off debt or budgeting, please feel free to leave them in the comments below!