Christopher Liew: How to deal with financial stress if you’re deep in debt

Rebecca Oakes, VP Advanced Analytics at Equifax Canada, joins BNN Bloomberg top discuss the type of debt Canadians are really struggling with.

Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

Is your debt stressing you?

Dealing with multiple payments, high interest rates, and the ever-present pressure to stay on top of bills can feel like an uphill battle, both emotionally and physically.

However, there are ways to regain control, get out of debt, and take the emotional pressure off your shoulders.

Learning how to prioritize your debts, simplify your repayment strategy, and deal with your thoughts and emotions, you’ll be able to reduce the mental burden of debt while making real progress towards a debt-free life.

Managing your money

The psychological impact of debt shouldn’t be underestimated.

Just as Sisyphus was condemned to an eternity of rolling a stone up a hill, only for it to roll back down once he reached the top, forcing him to start all over again, you may feel like your debt is condemning you to a lifetime of trying to pay it off, repair your credit, and keep up with bills. This leaves little (if anything) left over for you to enjoy or invest with.

Here are some ways you can deal with the psychological effect of feeling overwhelmed by debt.

Acknowledge your stress

Debt often creates a cycle of stress that can lead to ‘“analysis paralysis,”’ followed by avoiding the problem (and its stressful emotions) altogether. Ignoring these emotions doesn’t make them go away, though. Eventually, the problem and its emotions will come to a head.

By acknowledging your stress, you can take control and direct it into productive action. Some things you can do to facilitate this include:

• Write your stressful thoughts on paper to get them out of your head
• Speak to a friend, family member, or therapist who’s willing to listen
• Find a healthy outlet for your stress (exercise, a walk in nature, meditation)

Shift your mindset

Debt can often bring along with it feelings of guilt. A guilty conscience can keep you up at night, make you avoid others, and just generally make you feel miserable and unworthy.

This is not the mindset you want to have if you’re going to tackle your debt.

Instead, practice shifting your mindset from guilt to progress. Be grateful for all of the small wins. Whether it’s making a payment on time, reducing a bill, or cutting back on expenses, by shifting your focus from “how big the debt is” to “how much progress you’re making,” you’ll be able to stay motivated and on track to pay your debt down.

Give your debt structure

Uncertainty often fuels stress, and giving structure to your finances can restore a sense of control. This might include making a list of all debts, setting reminders for due dates, or using budgeting apps to track progress. Personally, I’m a fan of big whiteboards that I can edit and update daily.

Knowing exactly where you stand and having a clear plan reduces the mental burden of uncertainty, allowing you to see the light at the end of the tunnel.

Tips to make your debt more manageable

A 2024 report from Bank of Canada staff analyst Jia Qi Xiao reported that nearly 50 per cent of Canadians with a credit card will carry a balance for more than two consecutive months. Those who do are more likely to experience financial stress due to added interest payments.

As you move forward, try to avoid carrying a balance or taking on more debt. To this end, I highly recommend stashing away some money for unexpected expenses and creating an emergency fund.

Here are a few other tips to help make your debt more manageable.

Automate your payments

Setting up automatic payments ensures you never miss a due date, which helps you avoid late fees and protects your credit score. Even small, consistent payments add up over time and remove the stress of trying to remember multiple deadlines.

Consider debt consolidation

If you’re balancing multiple debts with different due dates and interest rates, consolidation can streamline everything into one monthly payment. This may also reduce your overall interest costs, provided you qualify for a competitive rate.

Debt snowball and avalanche method

Two of the most popular repayment strategies are the snowball method (paying off the smallest debts first for quick wins) and the avalanche method (paying down debts with the highest interest rates to save money long-term). By having a clear strategy, you’ll be able to take simple, consistent action every month to get out of debt quicker.

Final thoughts

Breaking your debt repayment into small, manageable steps makes the journey easier and less stressful, while also allowing you to manage the emotional stress. By setting up systems that simplify repayment and systems to deal with stress (i.e., journaling, healthy activities, talking to somebody), you’ll be able to make consistent progress toward your goal.

While the progress may be gradual, every payment, no matter how small, moves you closer to freedom from debt and a healthier financial future.

More from Christopher Liew:

• Are you responsible for your parent’s credit card debt when they die?
• How to split finances fairly if your partner makes more than you
• Extreme weather is making home insurance more expensive. Here’s how you can keep costs under control
• The harsh truth about side hustles in Canada