Since finishing university, I’ve realized there are varying degrees of student debt. There are the incessant spenders, who will buy new clothes, food and pricey drinks at the bar, and then complain that they’re broke and have no money. Next, there’s the OSAP-ers who need to pay for school and living expenses and have no other option. Lastly, there’s the borderline debt group, which includes people teetering between the red and green, barely keeping themselves afloat.

The common thread among all of these groups is that, although debt can’t necessarily be avoided, especially in the case of the OSAP-er, a lot of stress can be alleviated if you budget properly. Once you have a firm handle on your money, the areas where you can cut spending become a lot easier to identify.  

Although I’m not personally in any debt right now, it’s something that affects many people around me. Since this is my second summer with Investor Education Fund, I’ve accumulated a wealth of budgeting resources and tips to help my friends pay down debt.

Here are 10 easy ways to achieve financial freedom and pay off debt:

1. Gather all of your financial facts
   Before you can make a budget, or even try and cut down your spending and tackle debt, you need to have a handle on where your money is going. First, make a list of all the items – and their costs – that you’ve bought in the last three months. Whether it’s a gym membership, a dinner out, your morning coffee or lunch, make sure you include everything. These expenses are crucial to finding places you can cut costs.

2. Determine what your monthly spending patterns are
   Create a spreadsheet or table that has headings of all your overarching expenses, such as groceries, dining out, clothes, etc. If you buy a drink every day, such as a coffee, make sure you document this expense in a separate column to give you an accurate amount of how much you’re really spending on java. Plug in all the personal data you uncovered in tip #1 above into the correct headings and add it up. The results may not be pretty, but this will give you a clear idea of where your money is going.

3. Determine your needs versus wants 
   Highlight fixed costs such as utility bills and gas if you have a car since these are expenses you have no control over. Expenses like groceries, clothes, dining out or even your cell phone bill can be adjusted to save money. For example, do you really need all that data for your smartphone? Call your provider and see if they can offer you a plan that better suits your needs. If you’re lucky, you might even be able to convince them to give you better rate on your monthly bill – all you have to do is ask.

4. Make a realistic budget that you’ll be able to stick to
   I cannot stress enough the importance of making a budget. It’s the only way you’ll be able to track your money properly. GetSmarterAboutMoney.ca has an excellent, free worksheet to help you get started.

5. Pay off debt with the highest interest first and always pay at least the minimum on each bill
   High interest debt does nothing but weigh you down. By only paying the minimum on your highest interest bills, you end up forking over more money than what you initially owed. GetSmarterAboutMoney.ca presents a perfect example, with a case study about the real cost of an item when you pay by credit card. If you can afford to pay down more on your highest loan, do it. It’s important to at least pay the minimum balance on your other loans to avoid racking up more charges and to protect your credit rating.

6. Have a plan for how you’re going to pay off debt
   The only way you’re going to become debt-free is if you have a plan and stick to it. Tools such as GetSmarterAboutMoney.ca’s How long will it take to pay off credit are excellent ways to get a realistic idea of how long it’ll take to pay off your loans.

7. Learn to live within your means
   If you don’t have enough money in the bank for something, don’t buy it. It’s a simple concept, yet many of us have a hard time following it. I’d be lying if I said I don’t make the occasional splurge – but I only do it when I truly love something. To ensure I only buy products I truly need and really want, I have a golden shopping rule I always abide by:

   If I don’t buy it right now and walk out of the store without it, will I…

   1. regret it?
   2. think about it the rest of the day?

   If the answer is yes, it’s not an outrageous price and my bank account can afford it, I buy it.

8. Splurge – but only when you really love something and it won’t completely blow your budget
   My view of budgeting is similar to dieting: no diet will work if it’s not realistic and you don’t give yourself a break sometimes. The same goes with tracking your money; it’s unlikely you’ll be able to stick to your plan if you’re frugal all the time. As long as you don’t make it a habit and go overboard, splurging once in a while is perfectly fine. Besides, a latte or lunch with a friend every now and again are worth it. If you miss out on too many outings with friends or fail to ever treat yourself, sticking to your plan will be incredibly hard.

9. Leave room for the unexpected
   Many of my friends who are in the red keep racking up more debt because they don’t leave themselves any financial wiggle room. They vow not to spend a single dime and live frugally, but when everyone is going out, they cave in. Don’t make this mistake. No one likes feeling left out, but when you’re in debt, you can’t go to every event. Plan ahead and set aside some money each month for “friend time” – and be realistic. If you know your friends go out at least once a week and you don’t want to miss out, then estimate how much you realistically need (don’t buy drinks at the bar!) and find any extras in you budget you can cut down on. For example, buy a cheaper brand of food at the grocery store, walk to work or take public transit and don’t buy any treats such as coffee or gum. It may not seem like a lot, but these little purchases add up and will make a world of difference when you’re crunching the numbers later.

10. Transfer 15% of your paycheque to a savings account dedicated to paying off debt
    If the money is taken automatically out of your everyday bank account, it’s like you never had it in the first place. Open a free, high-interest, online savings account and start saving up money to pay off debt. Every other month, transfer 95% of the money out (since most bank accounts require a minimum balance) and put it towards your highest loan. Your money will earn interest, which will help you pay off your debts faster.

For more tips on how to become debt-free read Master of Money Caroline Cakebread’s post “How to Score Your Own Triple-A Credit Rating” and checkout GetSmarterAboutMoney.ca’s Financial Planning section on managing debt.