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Young (no) money

Tips for saving yourself from the vicious cycle of debt

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Millennials have gotten a reputation as a generation of our self-interested slackers. Apparently, the reason that we’re putting off getting married, buying a home, or starting a family is because we spend too much time on our smartphones—not because we’ve been saddled with tuition fees that rose 40 percent in a decade.

Faced with these mounting debts, and the skyrocketing costs of urban living, young Canadians are struggling to find their financial footing. We’re increasingly turning to services like pawn shops and payday loans to pay our debts, and for many of us this risky behaviour is still not making a dent: the debt delinquency rate for people aged 18-25 jumped 11.7 percent from last year.


But wait, there’s a light at the end of the tunnel.

“When I was 25, I was maxed out with nearly $30,000 of debt, most of it consumer,” says financial blogger Cait Flanders. “Because I was maxed out, I had no choice but to take the situation seriously. And I cut back on my spending and paid off all my debt in exactly two years.”

Sure, Flanders’ story sounds like the stuff of flashing internet banner ads, but it’s actually, truly doable. Take a deep breath, close all your online shopping tabs, and follow these simple steps:

Prioritize your debt

For a lot of people, the biggest obstacle is their credit card balance. Since most cards come with brutal interest rates that range between 20 and 30 percent, it really doesn’t take long before that $500 Sephora shopping spree transforms into a $800 burden you’re paying off long after your mascara’s dried up. Clear your credit card balance immediately, and consider freezing your card in a block of ice until you can trust yourself again.

Next up: student loans. Yes, that Sociology/Film Studies degree was a solid investment in your future, but now it’s time to pay it off. Note, most student loans allow you to defer payments if you’re struggling to meet the minimums, so you should still prioritize your credit cards first if you’ve got a balance there (debt grows way faster on your high-interest cards). You’ll still be charged interest on the student loan, but it’s practically guaranteed to be at a lower rate than any credit card. And government student loan interest is tax deductible!


If by some chance you’ve actually managed to line up a mortgage, this should be the last debt you prioritize—while you still make the minimum payments, of course. Mortgage interest rates are pretty miniscule, to the point that you may be better off allocating some of your extra money into investments. Definitely check with a financial planner before making this choice though.

Know where your money is going and set goals

By now, most people know that swapping their Starbucks habit for a homebrew can make a major difference on their finances. But you might be surprised by other kinds of hidden “money sucks” that’ll slow down your debt progress.

“Before you cut back, you need to actually know where your money is going, so I always say start by tracking your spending.” says Flanders. “Write it down, look at where your money is going and figure out what you want to cut out—not what the experts tell you to cut out.”

Staring down a $30,000 debt load can be terrifying. Be kind to yourself and design a repayment plan that breaks it down to monthly chunks that are challenging but still doable.

“I consistently set new goals for myself during the two years I was paying off my debt,” says Flanders. “I wanted to pay off $10,000 of debt in six months, so I did it. I wanted to pay off half my debt in one year and so I did it. And I wanted to pay off the full amount in two years and I did that too. Be really specific with your goals. Make a list of the steps you need to take and then actually make them happen.”

FOMO is real—anticipate it, and make compromises

Whether it’s a trip to Iceland, a night at the bar, or lining up at the hot new brunch spot, your friends are going to keep inviting you to do stuff that costs money. If you give in each time you get a Facebook event notification, you’ll never make progress on your debt. But blow off your friends completely and you’ll a) become an antisocial hermit and b) be that much more likely to make impulse purchases when you finally crack.

“It’s really important to still have a social life while paying down your debt, if for no other reason than it teaches you how to create balance,” says Flanders. “Give yourself a “fun budget” every month, so you don’t feel totally deprived. But you can also suggest cheaper, or free activities. Go for coffee instead of brunch, that kind of thing.”