Debt is a scary thing. After years of living it up – often financed with easy credit – Canadians are feeling the crunch and looking to learn how to get out of debt. Almost half a million of us are behind on our credit card payments by 90 days or more, says Jeffrey F. Schwartz, executive director of Consolidated Credit Counseling Services of Canada, a national nonprofit credit counseling organization.

But how do you get out of debt? The problem with big debt loads is that repaying becomes more and more difficult – especially as interest snowballs. Given today’s roller-coaster real estate market and the lag time between big-picture economic recovery and an actual uptick in job opportunities and income, the smart money’s on paying down debt now, rather than later.

Easier said than done, right?

We asked Schwartz for his professional advice on getting the most bang for your debt-repayment buck.

1. Lay it all out
"Determine how much you owe by laying out your statements and totaling up the amount you owe on each credit card," says Schwartz. Taking a cold, hard look at how much you really owe can be sobering – yet empowering. You're taking your first step from being in the red to getting back in the black.

2. Prioritize your debts
Pay off the highest-interest debts first, says Schwartz, even if it means tackling "bitty" balances in the hundreds or lower thousands, before chipping away at that whopping five-figure line-of-credit balance that’s keeping you up at night.

"Your highest interest rate debt is your most expensive. You're paying more for those dollars to be loaned to you. To be efficient, pay off the highest interest debt first and then work your way down from there," says Schwartz.

3. Assess where you spend – and where you can save
Your next step will be creating a household budget. But first, find out how much you spend each month, and think about where you can save. (Think also about how you might add to your income each month, too.)

"Write down what you're spending," says Schwartz, from your mortgage and debt payments, to lattés and DVD rentals. By tracking your spending habits, you'll find it easier to identify where you can cut back.

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4. Make a household budget
"Sit down with your family and physically write out a budget," says Schwartz, remembering to include your debt repayments.

"A detailed budget allows you to identify opportunities for savings or changes in spending patterns. Recording your expenses in a meaningful and organized way will help you to track where you have come from and where you are going," says Schwartz.

Stick to your budget: it's your road map to Debt-Free Street.

5. Get credit counseling if you need it
If you're drowning in debt, get help.

Call a credit counseling agency if any of the following apply to you.
• Your credit cards are maxed out and you're only paying the minimums each month.
• You're using cash advances from one card to pay another.
• You're dipping into your savings to pay your bills.
• You're spending more than 15 per cent of your take-home pay on debt repayment.

A professional credit counselor can work with you assess your situation, set financial goals, and help you with budgeting.

They may also put you onto a debt repayment program, working with your creditors to lower your interest rates by as much as 10 per cent so you can repay your debt faster. Although this may temporarily affect your credit rating – "It may show up on your credit report that you're making payments through a credit counseling service and that may prevent you from obtaining additional credit while you are on the program," says Schwartz – in the long run, you'll be better off.

"Once you've completed the program, your credit will look much better than it does now," says Schwartz.

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