An important part of any financial plan is dealing with your debt. For most Canadians, debt is a fact of life and is not detrimental to their overall financial goals. However, too much debt can negatively impact financial health. Missing payments may end up hurting your credit rating; as well you may not be able to save and/or invest the money you need to in order to accomplish your long-term goals.

Not all debt should be considered "bad". Debt that is incurred for the purposed of attaining assets that will more than likely increase in value is considered "good" debt. This includes buying a home, borrowing money to invest (stocks, bonds, RRSP's) that can end up making you more money than what you spent on the interest payments. These assets can also be used to secure the debt in order to qualify for lower interest rates. Money borrowed for investment purposes may also be tax-deductible.

Debt that is viewed as "bad" comes in the form of purchasing items that depreciate in value (cars, electronics, etc), or is used for daily spending habits. Debt is usually incurred this way in the form of credit cards. In fact, debt in this form can actually hurt your chances of getting a mortgage and/or the amount you are qualified for. Credit cards that have really high interest rates can keep you in debt for a long time if you cannot afford to pay off the balance immediately. 

There are ways to manage your debt without having to to take the drastic measure of declaring personal bankruptcy. The following tips can be used as a guideline not only for those currently in debt, for also for those who wish to avoid having their debt become out of control.

• Spend less than you earn. Keep a running log of everything you spend. Make sure to factor in expenses that may only occur once a year (house insurance, vacations, Christmas spending, etc). These expenses should be divided by 12 and added to your monthly total of what you spend. Your log will be able to help you determine your earnings/expenditure ratio, and give you an idea of where you can cut back, i.e. taking lunch to work, etc.
• Restructure your debt. Almost half of Canadians are paying more interest than necessary due to the fact that they haven't shopped around. Invest some time researching getting a cheaper interest rate for not only credit cards, but for your loans. 
• Refinance your mortgage. You may be able to get a lower interest rate on your mortgage by refinancing it. You also may want to consider using a home equity loan and use the money to pay off credit card debt, which is generally higher in interest payments.
• Personal line of credit. This can be one of the cheapest ways to borrow money. Lines of credit can be secured against your assets, or unsecured. The rates do vary with the prime, but will be considerably less than the interest charged for credit cards. Money obtained through a line of credit is available for any purpose.
• Consolidation loans. Unlike a line of credit, this money is borrowed for the specific purpose of paying off debts that carry higher interest rates. The bank may directly pay off your creditors in order to insure that the money is spent in the manner for which it is intended. The bank may also require that you cut up your credit cards and/or that no new debt is incurred.

The amount of your debt along with the amount of your income will determine the best way for you to manage your debt. The end result will be a healthier financial plan, and the realization of your long-term goals.