How to Pay Off Thousands of Dollars in Debt in 24 Months

Debt is a crushing reality for many Canadians. Amidst rising costs, a post-pandemic recovery, and record-breaking inflation rates, it can seem impossible to make any headway towards debt-free living. But if you are carrying debt, now is the time to pay it off.

Credit Canada's compassionate and certified credit counsellors help clients deal with all sorts of debt issues, from credit card debt and budgeting to negotiating with creditors and helping clients manage their student loan debt. 

In a recent segment on the Moolala podcast, one post-graduate explains how she was able to pay off $38,000 in student loan debt in just 24 months. 

With the average salary six months after graduation being $41,000, you wonder: how can anyone pay off that much so quickly?

Not everyone is in a position to aggressively pay down debt, but every step helps and should be celebrated.

Here’s how to pay off thousands in debt in just two years. You might not be able to do everything on this list, but just taking the first step towards paying off your debt, whether it’s asking for help or reworking your budget, is a step in the right direction.

1. Don't Wait for a Wake-Up Call

Debt is a source of anxiety — who wouldn't be stressed out by thousands of dollars in debt on a modest salary? Add rent, inflation, and groceries, and it's easy to feel overwhelmed.

But you can't let anxiety stop you from making a plan. Many of us avoid addressing our debt because of how uncomfortable it makes us feel, despite the repercussions. But the more you avoid it, the worse it gets. (Hello, compounding interest.)

When a large chunk of your paycheque is going towards paying off debt and loans, it can be difficult to build the funds needed in case of an emergency. 

For some people, an emergency like a family illness, divorce, job loss, or injury can be a debt wake-up call that pushes them to act. 

They may decide to buckle down and make a plan to pay off their debt in order to free up more money to cover extra costs or make up for lost income. 

But a debt wake-up call can be something as simple as a maxed-out credit card that shakes you into realizing it's time to act. 

Don't let debt intimidate you into inaction. Our credit counsellors would be happy to help you get started. (All of our counselling is free!)

2. Decide: Increase Income or Reduce Expenses? (Probably Reduce Expenses)

Maybe you're working an entry-level position in your field or picking up retail shifts as you search for your dream job. Or perhaps a salary increase in your current role simply isn’t an option. 

It's easy to imagine the solution to debt: make more money — but that's not always realistic.

Between having a full-time job, possibly kids, and the millions of other obligations we typically have in a day, picking up a part-time job like tutoring, blog writing, or dog walking may not be possible. 

Alternatively, selling items online has never been easier, but even then, you might not make enough to put a significant dent in your debt. And if that's the case, it's time for plan B: reduce your expenses.

3. Change Your Biggest Expense

What eats up most of your income? Likely housing. 

Your housing costs make up an average of 35% of your monthly expenses, and it’s likely higher if you live in Toronto or Vancouver. The best way to free up budget money is to reduce this massive expense. 

Some people have gone so far as to move from a big-city rental to renting a modest home in the country. And while they might not always have the same amenities nearby or comforts (e.g., poor insulation or no air conditioning), they adapt for the sake of their budgets. 

But maybe a city move isn't feasible. After all, you need to be close to your job or family, right? 

If you rent, consider these ideas to reduce housing costs: 

• Get a roommate: If you have a 2-bdrm apartment or even a one-plus den, a roommate is a fabulous way to reduce your housing expenses, sometimes in half!
  
  
• Sublet when safe and possible: Thinking of visiting family over the summer? Don't let rent drill into your budget when you're not even there. You can scour secure sources and/or personal references to find a sublet.
  
  
• Find cheaper housing nearby: Is your rental agreement almost up? Don't blindly renew your lease. Check out the market and look for other neighbourhoods with more reasonable rent. 
  
  
• Negotiate rent: Ask, and you shall receive — ok, not always, but you never know until you try, right? Present any local rental competition to your landlord to negotiate a lower rent or to convince them not to increase it. This is especially promising if you have a history of being a good tenant – your landlord might prefer to appease you than to go through the trouble of finding another tenant.

4. Eliminate Nice-to-Haves

A bottle of wine at a restaurant? Nice to have. Salon visit? Nice to have. Weekend getaway up north? Very nice to have.

But none of these are must-haves, so you can chop them out of your budget. Remember, the chop doesn't have to be permanent. Once you tackle your debt, you'll have more room to treat yourself. But for now, regular luxuries don't mesh well with paying off debt.

5. Set a Debt-Free Date

Having a clear idea of when you will be debt-free can be extremely motivating, especially as you make cuts to your monthly costs by eliminating nice-to-haves.

Laying your debt out on a spreadsheet can help you understand your budget better and take control of your debt journey. Use our Debt Calculator to learn how long it will take you to be debt-free using five different debt repayment strategies, and how much you could save in interest. 

Of course, reducing expenses and making debt repayments are fantastic starts, but a little strategy and goal-setting go a long way.

6. Lean into Support

Listen, your family and friends won't always understand your financial goals. And that's okay — they don't have to, but you should stay firm on your path. That means spending more time with the loved ones that support your goals and even help you facilitate progress rather than the friends who lament your absence during expensive night outs.

Mind you, paying off debt can affect your relationships. For example, you might disagree with your partner about your vacation budget or other lifestyle choices. It happens. Communication is key to ensuring understanding and compassion. 

Crush Debt with Credit Canada!

Managing your debt might be your most significant obstacle to doing what you love, so let us help you. 

Our credit counsellors will listen to your situation without judgment, help you budget, share essential resources, and guide you through debt relief options.

Book a free consultation with a credit counsellor today!