Canadians Have Debt and We're Doing Something About It

We all have debt. Whether it's for the long term, such as mortgage, student loans or car loans, or short term, we're a country of people who owe money.

But is debt really that bad? Isn't it part of the natural cycle of economics to owe money and pay it off? Unlike our friends in Greece or Spain, Canadians have been listening to the economic reports and are taking measures.

Canadians aren't putting their heads in the sand when it comes to what is owed, in fact ..."Canadians are focused on reducing their debts amid warnings about rising household debt." In fact, 49 per cent of Canucks have put down a lump payment in 2012 to help reduce their debt says CIBC.

So what else can we do to cut the debt?As a country, the Federal government has focused on reducing household debt since 2008 with reducing the amortization period for new mortgages from 40 years to 30 years, increasing the minimum down payment requirements and requiring all borrowers who qualify for five year fixed-rate mortgages to get insurance.

As individuals, we need to know what we can afford. Here are some tips to help you manage debt:

1. Assess what you earn, what you spend - create a money diary, writing down everything about your money - what you earn, what you spend, what bills you pay, etc....after a week or two weeks, it will be clear on where the money goes, where you can save and what's really a necessity.

2. Make a plan - meet with a financial advisor, bank representative or investment counsellor to help you figure out the next step - small debts may need to come first such as student loans, before taking on bigger debts, like a mortgage.

3. For homeowners - draw up a grand plan - consider what you want, whether it's renovation, purchasing a second property, vacations or investments. Meeting with a financial advisor can help you clarify how to meet short term and long term goals to pay down the debt.

4. For wannabe homeowners - are you buying on your own or with someone? Figure out individual goals and collective goals and be financially realistic about when it can happen. Just because you're getting married or have worked in your career for five years doesn't mean you need to buy a home right now and take on debt.