(© Bonnie Schiedel. Originally published in Chatelaine, January 2006)

Money troubles got you stressed? We’ll show you how to solve them. 

Not long ago, despite earning a decent salary teaching English as a second language, Nancy Zimmerman was deep in debt. $18 000 in student loans and a $4000 balance on her credit cards meant that she was scrambling to make payments every month, and unplanned expenses like dental work or car insurance would wipe out her bank account. “I would use purchases to make myself feel better,” she remembers. “My boyfriend dumped me and the very next day I bought a plane ticket to the UK. I put it on my credit card and figured I’d deal with it later. When I got back from my trip I was at the drugstore and my Visa was declined and then the clerk actually cut it up. I was so mortified. I slunk home and thought, ‘why am I living like this?’” 
Nancy decided to take control. She began to track her income and expenses with budgeting software on her computer, and slashed her “buy a round of martinis” spending. Within two years, she had made a dramatic dent in her debt. Her experience spawned a whole new career. Today, as a money coach and owner of a Vancouver financial education company, Your Money By Design, she helps other people reclaim their financial lives too. “Debt saps your energy, creates guilt and diminishes your self-esteem,” she says. “But when you put yourself in charge, you get all your power back.” 
Think it’s time to take charge? We talked to a variety of financial experts and educators, as well as Chatelaine readers who have given debt the boot and are on their way to a healthy financial future. Here’s how to get out of debt—fast!


Psych yourself up
“Begin with your brain,” says Zimmerman. “What will work with your personality? For example, if you need to meet a goal quickly to feel successful, there’s what I call the ‘fast and furious’ method: Make your minimum payments, and also direct as much money as you can each month to one debt. until you get it paid off. This gives you a real ‘woo hoo’ sense of satisfaction. Then, move on to the next bill.”

Pick up the phone
It’s crucial to get a better interest rate on the amount you owe. There are a variety of ways to do this. Negotiating a lower interest rate on your plastic is as simple as calling your credit card company, says Lynnette Khalfani, a financial educator and author of Zero Debt: The Ultimate Guide to Financial Freedom (Advantage World Press). “People think that interest rates are set in stone, but credit card companies know that it’s a competitive marketplace, so they want to keep you as a customer,” she says. “If you have a good history of paying at least the minimum on your cards every month, nine times out of ten your rate will be lowered on the spot.” Call and politely say that you have been a loyal customer for however many years, their competition has offered you a better rate, and can they beat it? (This worked for Khalfani herself: before she was a money coach, she had a jaw-dropping $100,000 in credit card debt, despite a six-figure salary. She negotiated lower interest rates , and wiped out the debt in three years.) A new rate of 10 to 11 per cent is reasonable, but see how low you can go! 

Refinance your house
Sabrina Sabo, a health care aide in Stratford, Ont., got a handle on her payments by refinancing her mortgage. She and her husband went to their bank half-way through their five-year term and increased the amount they owed on their mortgage—but kept their interest rate at a decent 5.8 per cent. “With the extra money we were able to pay down some of our debt (which consisted of student loans and a car loan), and our mortgage payment only went up by $30 a week. Before, our non-mortgage debt payments had been $500 a month because of higher interest charges.” And shop around to get the best rate on your mortgage. Try www.allcanadamortgage.com to find a mortgage broker in your area.


Consider a line of credit
Talk to your financial institution about a personal line of credit. This means that it will pre- approve you for a maximum amount of a loan at an interest rate that’s substantially lower than the 18 per cent or so that you’re paying on your credit cards, says Christine van Cauwenberghe of the Investors Group in Winnipeg. Your rate will depend on your credit rating and your assets (for example, whether you’re a homeowner or not). Use the cash to pay off higher-interest debt, such as credit cards. You repay a minimum amount each month, but unlike some loan repayments, you can pay off more than the minimum at any time.

Start small
Get out of the minimum payment trap by setting up automatic money transfers with online banking, suggests Jessica Ludgate, an engineer in Whitby, Ont. “Start by transferring an additional piddly $25 a week from your account to your credit card account or student loan. You won’t miss it at all, but it adds up to $1300 a year. Then, as your debts decrease, increase the amount of the weekly transfers.” In just three years, Ludgate and her husband
zapped $7500 in student loans and $5000 in credit card debt.


Think big
Nancy Nelson of northern Saskatchewan, turned her love of wild berries into a successful business. In between farm chores, she started selling homemade preserves on eBay.ca, and soon branched out to antiques, clothes and collectibles found on her yard sale and auction jaunts. The profits went into a separate bank account. “Within a couple years I had earned enough to pay off our mortgage!” she says. 
Hellen Koufakis of Toronto also set her sights higher when she was saddled with $12,000 in back rent and unpaid utility bills after her divorce. “I was a receptionist and was determined to find a better-paying job. I moved to a temp agency and landed a contract position as an executive assistant, which is now a permanent job. I now make almost twice as much and that income, combined with a budget that has become a habit, means I’m doing marvelously well for myself now.”

Make creative cuts
The old “tighten your belt” advice is true: start cutting costs wherever you can. You’d be surprised at how quickly small cuts make a big difference. “One of my clients paid off her debts almost a year ahead of schedule just by colouring her hair at home, rather than at the salon, and applying the savings to debt repayment,” says Bamber. Kathryn Anderson, a program administrator for a government career centre in Vancouver, agrees. “When I
tracked my expenses, I found that I was buying a lot of groceries, but wasn’t using them because I was eating in restaurants instead. Now I have a monthly food budget that I decide how to spend, and if it’s a lot of restaurants and a few tuna sandwiches, it’s ok as long as I stay within my budget. This way I don’t feel deprived.”

Get a loan (Yes, that’s right, a loan!)
Toronto resident Sera Weiss was fed up with only making the minimum payment on her credit cards each month and living paycheck to paycheck, she took action. First, she discussed her situation with her family, and her grandmother and auntgave her a one-time-only cash Christmas gift to help her get out of the hole. Then she went to her bank and got a $5,000 loan with set payment terms and a repayment schedule, at a substantially lower rate of interest than her credit cards. “My bank really wanted me to open a line of credit instead, but I knew that wouldn’t have worked for me—it would have been too easy to dip into and I would have ended up further in debt. I needed to know I had to repay a certain amount each month for a limited amount of time.” 
If you are employed, have a good credit rating and some form of collateral, such as your house, you likely qualify for a consolidation loan from your financial institution, says Bamber. “This is good for people in a tight, but not extreme, situation,” she notes. “ A consolidation loan is a single bank loan with payments that go towards paying off your combined debts, and a good interest rate.”

Dip into your RRSPs
Does the very idea make your hair stand on end? Guess what: RRSPs don’t have to be sacred. “If you’re earning a generous 8 per cent interest on your RRSP assets and paying 18 per cent interest on your credit card debt, the idea of saving for the future is a complete illusion,” says Bamber. Crunch the numbers to see if it’s worthwhile for you. Then, once you’ve paid off your debt, talk to your financial advisor about balancing your RRSP withdrawal with a low-interest RRSP loan (that’s generally easy to qualify for) that can be used to reinvest, lower the amount of tax you pay, and get you back on track.


Mine your savings
Freeing up non-RRSP investments can work well too. A few years ago, Kathryn Anderson invested a small inheritance from her grandmother. When she was stressed out by her line of credit and car payments, she cashed in $9000—everything but her RRSPs—to pay off part of her $25, 000 debt and still minimize the tax hit. She talked to her financial advisor and was careful to pinpoint the investments that had the fewest early-withdrawl penalties and load fees.

Reduce student loans
See if you qualify for student loan forgiveness. For example, in British Columbia, students who graduated after December 2004 in fields including speech pathology, physiotherapy and audiology, and who are working with children in underserved areas, may be eligible for provincial student loan forgiveness. That’s right, no repayment. Ditto for nursing, medical,
midwifery and pharmacy school grads as of August 2002. Visit www.bcslservicebureau.com for details. Check http://canlearn.ca and your provincial or territorial student assistance centre for information on other programs, including interest relief and debt reduction.

Talk to a pro 
If you really need to get your act together, talk to an accredited credit counsellor. Credit counselling agencies work with you and your creditors to resolve your debt. Many are non-profit, which means you pay little or nothing for the service. Ask your financial institution for recommendations, or visit www.creditcounsellingcanada.ca to find an agency in your area.
Credit counsellors offer a number of services, but one of the most common is a debt repayment program (also known as a debt management program), says Margaret Johnson, president of Credit Solutions, a credit counselling service in Surrey, BC. In a debt repayment program, a credit counsellor contacts the creditor on your behalf and offers to pay the whole amount over a fixed period of time, usually five years. In return, the interest stops accruing immediately. The downside to this is that your credit report takes a nosedive for three years after the debt is completely repaid, giving you a R7 rating (R1 is perfect and R9 is bankruptcy). 
For Gloria Ciccale* (name and city has been changed), a retail employee in Charlottetown, credit counselling was the way to go. “Before, I was paying almost $700 a month just in minimum payments,” says Ciccale, who got behind in her payments—including those on a loan with a staggering 33 per cent interest rate— after she separated from her partner. “Now I pay $132.50 every two weeks and will be debt-free in five years or sooner. I can’t tell you what a relief it is. I can sleep at night now.”


Quiz: Do you have a debt problem?

1. Do you stick to a budget?
a) That’s ridiculous. Life is too short to count pennies like that
b) Sort of. I have a rough idea of how much I have to work with, and it seems to work out fine.
c) Absolutely. I like knowing exactly what’s going on. 

2. Do you pay only the minimum amount due on your credit cards and other loan amounts?
a) Of course. There’s no way I could pay more.
b) Only if it’s a particularly crazy month with unexpected expenses.
c) Are you kidding? I always pay the whole bill in full. 

3. Are you ever late in paying your bills because you don’t have the money?
a) All the time. I figure late fees are just part of life.
b) Occasionally. My life is just so hectic!
c) I forgot once, but it was because I had the flu. 

3. When you pay your bills, you
a) hold your breath, cross your fingers and tell yourself that paying Visa with MasterCard is a good idea
b) occasionally pray that your paycheque is deposited in time to cover everything
c) are confident that you have more than enough to cover the amount

4. Do your financial troubles affect your life?
a. Yes. My partner and I fight about bills, creditors are calling and I’m stressed out every time I see the mail. 
b) Rarely. I have the occasional sleepless hour but I’m almost always on top of things. 
c) What financial troubles?

5. Do you rely on credit cards for everyday expenses like groceries?
a) Yes. It’s only temporary though... 
b)Sure, but only because I get reward points. I almost always find enough at the end of the month to pay the bill. 
c) No. I use cash or my debit card so I know exactly where I stand. 

mostly As: Drowning in debt
Consider this your official warning: you’re headed for disaster. Ask yourself how your life would be different if you got your financial life in order, and then take action. See our debt-busting tips. 

mostly Bs: Treading water
Your finances are probably in good shape, and your debt isn’t running your life. Be careful, though. If you have one or two A answers you could be on your way to trouble. Try tracking your income and expenses for several months to pinpoint your weak spots, and implement some of our debt-busting .

mostly Cs: Savvy surfer
You are one organized financial goddess! Whether you have a lot of cash or a little, you make wise choices. Just remember to loosen your grip on your wallet once in a while and invest in some juicy life experiences.