Now that the holiday season is over, many of us are waking up to the same holiday hangover. January is the month when those credit card bills start rolling in and we see how much debt we’ve racked up over the festive season. But 2022 is a brand new year and this is the year you’re going to get out of debt. Right? With that New Year’s resolution in mind, we’ve written this article to help you get out of debt faster.

Budgeting to Get Out of Debt Faster

Budget planner and a pencil on a desktop. Budgeting is key to becoming debt free fasterBefore we discuss two ways to get out of debt faster, we need to create good financial habits. Your first step is to sit down and create a budget. A budget is a way to organize and track your monthly spending. You begin by determining how much after-tax income you receive each month. Your after-tax income is the amount of money on your regular paycheque after all deductions. 

After determining your monthly after-tax income, you need to list all of your monthly expenses. When going through this process, gather your past 6 months of bank and credit card monthly account statements. From these statements, you will determine the average amount of money you spend on each expense item every month.

Once you tally up your expenses, subtract them from your monthly after-tax income. This number is the amount of money you save each month. Make budgeting easier. Download a copy of our monthly budget template here.

Our next step is to start using a portion of your savings to pay off your outstanding debt. 

Snowball and Avalanche Out of Debt Faster

Two highly effective methods will help you get out of debt faster: The Snowball and Avalanche Methods. Both of these methods prioritize the debt you pay off first and each has a distinct advantage.

The Snowball MethodPerson pulling empty pocket out of jeans

Using this method, you will make minimum payments towards all current debts except for the smallest balance obligation. Next, you’ll use the free cash flow from your monthly budget to make the largest payment possible on your lowest outstanding balance. As you eliminate the balance on this form of credit, you move on to paying off the next smallest outstanding debt.

The benefit of this method is that you will experience wins faster which helps you maintain a positive mindset and keep you motivated to get out of debt. 

The Avalanche Method

Using this debt reduction strategy, you prioritize the highest interest form of credit first. Similar to The Snowball Method, you make minimum payments on all forms of debt except for the debt with the highest interest rate. As you pay off this form of credit, you will move on to paying off the next highest interest rate form of credit. 

Since interest rates impact the minimum monthly payment that you must make each month, this method works by reducing your monthly expenses faster and freeing up more cash flow to get out of debt faster. Thus, the advantage of this method is that not only do you get out of debt faster, you will also pay less interest by using this method.

Mathematically, The Avalanche Method helps you become debt free faster than any other method. However, the benefit of piling up small wins with The Snowball Method motivates you to keep working on your strategy. Ultimately, you must choose which method you are most likely to stick to.


The Snowball Method and Avalanche Method will both help you get out of debt faster. But the key to remaining debt-free is to create a monthly budget and stick to it. To stay within your budget, it helps to make this a regular habit. We recommend reviewing your budget at least once a month and reviewing all purchases made during that time to ensure that you’re not overspending unnecessarily. 

Once you’ve become debt-free, create a reserve fund with at least three to six months of expenses to help you get through any unexpected emergencies. Use this account only in case of an emergency and resist dipping into it for things you don’t need. Set savings goals for items or experiences you wish to purchase. Share these goals with your friends and family to motivate yourself to stay on budget. Once you become debt-free, you will build a stronger financial future for you and your family.


About the Author

The column's goal is to level up your financial knowledge and help you avoid common pitfalls and mistakes along the way. Although money management sometimes seems like an intricate task, it doesn't have to be. The advice here is common sense and simple to follow. The first step to a better financial future starts here, and it's never too late to begin. Adam Stapley is a Mortgage Broker with Pineapple Financial and author of the personal finance Newsfeed He is intensely passionate about helping Canadians build wealth through the power of real estate. Many of the articles in this column come from Adam's experience assisting Canadians to understand and shape their personal finances. Pineapple Financial Lic #12830