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September 07, 2017 | By: Helen Ramlal

Top 6 Tips on How to Pay off Your Credit Card Debt Quickly

Emergency Fund

A recent Ipsos survey, conducted on behalf of accounting firm MNP, showed that 48 percent of Canadians are living within $200 each month of not being able to pay all of their bills or meet their debt obligations. This is a definite problem. An unexpected expense, like a car repair or a medical expense, can throw a budget into complete disarray while sudden (and unexpected) unemployment can create a full-blown financial crisis.  

Without money put aside, these unforeseen emergencies can wreak havoc on your budget and lead to missed bill payments. We already know creditors don’t like missed or partial payments, and missed payments are very bad for your credit score. So, without savings, how do we manage to pay for these emergencies AND stay up-to-date with debt payments?

Credit. We often reach for a credit card when we find ourselves in a rough spot, but doing this can force us into a vicious cycle of paying down debt and then building it back up again. Five years later, our balances could be the same or even higher.

This is a very discouraging and self-defeating loop.

So, what’s the solution? You cannot put all of your money into debt repayment. It may seem counter-intuitive but in order to get out of debt and stay that way forever, it's important to build an emergency fund at the same time.

But what if there is no money leftover at the end of the month?

The Solution: Creating an Emergency Fund

The first step is to stop thinking “end of the month” and start thinking “every payday.” Here are a few more tips on how to create an emergency fund when your budget is tight:

  1. Make up your mind. Decide to start saving and make it a priority, no ifs, ands or buts. Make it critically important and get proactive. Increase income. Reduce expenses. Curb back on the mega-bundles. You need to “find” extra money in your budget. Use our Budget Calculator to shed some light on your spending. Cut back as much as you can to free up some monthly cash.

  2. The HABIT of saving money is much more important than the amount. At least at the beginning. Learn to keep some money for yourself. It’s ok to start-off small. Try just $20 every paycheque to see how it feels.

  3. Automate your savings amount. Arrange for a fixed amount of money to be transferred from your chequing account to a savings account (preferably at a different bank) on each payday. Putting aside the money will keep it safely out of reach.

  4. Increase the amount you save once you’re comfortable with the habit of saving regularly.  

  5. Do not spend this money on anything but true emergencies.

  6. Use this money when emergencies arise. So you don’t use credit and sabotage your plan to get debt-free.

Consider Credit Counselling

If you’ve tried but still can’t find the money to save and build up an emergency fund, consider an expert second opinion from a credit counsellor.

It’s a free session. Your counsellor will review your budget and give you a personalized financial projection on how you’re doing and offer insight into what can be changed.

Once you're paying down your debt and saving money at the same time, your debt repayment plan is much less likely to be ruined by life’s emergencies.

So, start saving today! It will reduce your stress and keep you debt-free forever.

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