01/03/2013 12:14 EST | Updated 03/05/2013 05:12 EST

Pie-in-the-Sky Resolutions Won't Get You Out of Debt

cut credit card
cut credit card

The start of another New Year provides us with the opportunity to reflect on the past and think about the improvements we want to make moving forward. For a large number of Canadians, these wishes and hopes for positive change typically include tackling debt and getting our financial house in order.

Unfortunately, most New Year's resolutions prove to be nothing more than lofty, pie-in-the-sky expectations that are unattainable. In fact, without a solid plan of action to achieve these resolutions, more than 90 per cent of people allow these good intentions to fall by the wayside.

Instead of making unrealistic and lofty resolutions this year, start 2013 off on the right foot by committing to a personal financial goal, and create a plan to achieve that goal.

Start by asking yourself what type of financial changes you want to make, and what are your perceived barriers to making those changes?

Once you have determined the changes you would like to make and the challenges you will face in making those changes, you can begin to set SMART financial goals for the month and year ahead. In order to succeed in achieving these goals, make sure they are Specific, Measurable, Attainable, Relevant and Time Bound.

Paying off debt is never as simple or as easy as racking it up in the first place. This is why it is unrealistic to resolve to eliminate debt in 2013. Instead, set an ultimate goal to reduce debt by a specific amount over the next year, and make short term goals to reduce it by a relevant amount each month. Not only will you be more successful in reaching your goal(s), you will also create the momentum necessary to continue measuring and achieving your financial goals throughout the year.

To help you get started on the road to financial health, try some of these proven methods to tackle debt, and make your 2013 financial goals a reality:


All good financial goals start with a plan. Creating a realistic household budget that accounts for your income and expenses will give you a solid starting point to set your debt repayment plan into motion. By understanding where you stand financially, you can begin to prioritize expenses and identify ways to measure and achieve your 2013 financial goals.

Stop creating debt

Now is the time to put away your credit cards and stop spending money. Reducing your spending alone will not eliminate debt -- but at least your debt won't get worse. Sticking to a cash budget will help you be more responsible with your money.

Increase your monthly payments

If you are only making the minimum payments on your debts, it will take years to pay them off -- and with interest you'll probably have paid double or triple what you originally charged. Use an online credit card calculator to determine how long it will take to pay off your balances by increasing your monthly payments.

Ask for lower interest rates

Higher interest rates keep you in debt longer because the majority of your payment goes towards interest instead of the balance. If you have a good payment history, ask your creditors for a lower interest rate. This will allow you to dedicated more money towards paying down your debts.

Consolidate debt

Rolling all of your credit card debts into a single monthly payment with a low interest rate can help you reduce debt and achieve your financial goals. With solid credit scores you may qualify for credit card balance transfers or an unsecured debt consolidation loan. Either way, payments are lower each month and reduced interest rates allow consumers to get out of debt faster.

Create more cash flow

Tracking your spending, identifying areas to cut back and getting a second job are all proven strategies to increase cash flow. Allocating any extra earnings or budget savings to debt repayment can help accelerate the time it takes to pay down debt and achieve financial goals.

If you're having a difficult time managing your debts and don't know where to start, contacting a trained, not-for-profit credit counsellor will put you on the right track. They can help assess your debt and provide you with options to make debt repayment a priority in 2013.

Visit for more information on credit counselling, debt management and budgeting.

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