6 ways to get out of debt fast

When it comes to tackling debt, most of us know what to do: Spend less, save more. But if it were really that simple, Canadians wouldn't be so mired in red ink. Stephanie Holmes is a Nova Scotia-based financial advisor and author of Diffusing the Debt Bomb and $pent, who recognizes that there is no easy answer to any debt problem.

Holmes offers small tweaks that will help you speed up your repayment and get out of debt faster.



6 ways to get out of debt:

1. Pay bills every pay day
Most debt statements are due monthly, but most salaries are paid every two weeks. So pay part of every bill, every time you get paid. Benefit: smaller amounts feel more manageable and the chance of missing a payment (and incurring a penalty and more interest) is reduced.

Automate bill payments so that you pay your creditors without having to write a cheque or log on to an online account.

Ratchet it up a notch: Let's say your credit card minimum payment is $100. Pay $60 every two weeks and you'll make more headway with over payments you barely notice.

2. Change your debt structure
When it comes to debt vehicles and the lending institutions that have extended them, "the fewest number possible means the least amount of effort and stress," says Holmes.

If you want to get out of debt, get rid of the retail credit cards, since they have onerous interest rates compared to those from major lenders. Two credit cards should be enough; close the rest. You'll pay less in annual fees.

3. Start a debt 'snowball' plan
Make a list of your debts (excluding your mortgage), starting with the smallest balance and ending with the highest. Make the minimum payments on all your debts, but make an extra payment on the one with the smallest balance. When that debt is paid off, divert the payment you were making on it to the next debt on the list. By the time you get to the second and third debts, you'll be making significant payments to the principal, which is the only way to actually eliminate a debt.

Holmes recommends the website WhatsTheCost.com. "I love it," she says. "It's a neat little calculator that when you press 'solve', it gives you a table so you can literally see how fast you could pay off that debt." When a debt is paid off, close the account associated with it.

The success of snowballing is based on the assumption that you can afford the minimum payments on all your debts. (If you can't, consider credit counseling.)