Digging out of debt: Managing debt effectively for financial freedom

April 21, 2026

Drew Maginn

While everyone has their preferred personal finance strategies and money management techniques, most of us have one unfortunate thing in common: we’re stuck managing debt. Whether it’s paying off student loans, striving to be mortgage-free or simply dealing with the cost of everyday expenses, most paths to financial wellness depend on how well we manage our debt now and into the future.

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How did we get here? Common reasons Canadians find themselves in debt

According to CIBC’s Financial Priorities Poll, paying down or eliminating debt remains the leading financial priority for Canadians in 2026, while avoiding debt, specifically keeping up with bill payments, comes in at a close second. However, before we can assess our options, it’s helpful to understand why debt management is so common.

Rising cost of living, inflation and unexpected events: It’s well documented that our everyday expenses continue to rise. Add in unexpected costs like a pricey car repair or the sudden stress of losing your job, and it’s easy to see how debt can happen to any of us.

Growing interest charges: When choices are limited in managing day-to-day expenses, many people turn to credit cards, lines of credits or loans for help. However, in many cases, these options carry high interest rates when they aren’t paid in full and can often make matters worse.
Instability in the housing market: Whether renting or managing a mortgage, household budgets are stretched further than in the past. This impact can be two-fold, as housing costs take up a larger portion of our monthly budget and reduce our ability to prevent or manage debts in other areas.
Gaps in financial literacy: Debt can accumulate quickly, and without an understanding of how to manage your finances, even well-intended actions can have disastrous results. This, combined with many individuals feeling uncomfortable reaching out to an expert for support, means the stress of debt can take a serious toll on our financial and mental health.

” Whether it’s paying off student loans, striving to be mortgage-free or simply dealing with the cost of everyday expenses, most paths to financial wellness depend on how well we manage our debt now and into the future ”

Exploring your options: Creating a debt repayment plan that works for you

While there are variety of options available to reduce your debt, it’s important to find a way forward that aligns with your short- and long-term goals, as well as your saving and spending habits. These can include the following.

Revisiting your budget: When debt becomes a problem, it’s typically best to start by taking a hard look at your budget. By reviewing your spending in detail, you can understand what expenses your money is going toward and identify opportunities to reset some of your habits. This could mean small changes, like packing a daily lunch or cancelling subscriptions and memberships, or larger ones, like downgrading your living situation or eliminating a vehicle. Once your new budget is developed, you can then focus on redirecting money toward managing your debt in a planned way.

Negotiating with creditors: Many people support their debt management planning by reaching out to creditors to explore their payment options. This may include asking for lower interest rates or setting up defined payment plans. While these may not solve all your problems, there is no harm to making a call to see if anything can be done to improve your situation.

Exploring debt snowball or avalanche methods: As reducing debt becomes a greater priority, different methods may help, depending on your situation and mindset. The snowball method requires paying minimum balances on all debts and using extra money to reduce your smallest debt first, before moving on to the next one. This method can allow you to build confidence when starting out and maintain momentum by seeing real progress in the short term.

On the flip side, the avalanche method requires minimum balances to be paid first, using extra money to pay off the debt with the highest interest rate. While this approach may not lead to quick wins, it can pay off in the long term by saving money on interest rates.

Consolidating your debt: If managing multiple areas of debt is overwhelming, you can opt to combine multiple debts through debt consolidation. This allows all your debt to be monitored and paid in a simpler way and is often offered at a lower overall interest rate.

Setting yourself up for success: Avoiding common barriers to paying off debt

Anyone living with debt wants to improve their situation, but there are often barriers that prevent us from taking action. If you find yourself failing to take meaningful steps to managing your debt, consider whether any of these common pitfalls are holding you back.

You’re not honest about your debt: Accumulating debt can be stressful, and avoiding the problem altogether can become a way to cope. It can also be a huge strain on your relationships with others. By accepting your current financial situation and committing to taking action, you can stop spinning your wheels and truly take control of your finances.
You don’t budget with intention (or at all): In spite of growing financial concerns, many of us simply don’t have a budget, or if we do, it isn’t being followed. Developing a budget won’t change your habits and situation if you don’t hold yourself accountable to it. This includes tracking your spending, evaluating your progress and revisiting your plan on a regular basis. If you don’t, your budget can look great on paper but not reflect the reality of your life.

You won’t get help: According to Innovation, Science and Economic Development Canada, only 30 per cent of Canadians with debt actually seek help from a professional. With a number of agencies and credit counselling services available, many offered free or at low cost, it’s worth exploring for anyone struggling to get started. By finding the right professional, you can not only find a path forward to reduce your debt, but also benefit from the reassurance of someone who has helped others untangle themselves from similar financial situations.

Managing debt is hard, and the stress of owing money can lead to many sleepless nights. However, there is some comfort in knowing that this stress is common for many of us. While the solution might not seem clear at first, rest assured that with the right plan and support system, you can put yourself on the right track to a better financial future.

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