Valley First

Becoming Debt Free

Everyone would like to be debt-free, but getting there is not always easy and requires discipline. The following tips can help you on the way to becoming more financially healthy.


Steps in becoming debt free

  1. Assess your debt situation—figure out how much money you owe and who you owe it to. Determine which debts are costing you the most interest and then either pay those debts off first or consolidate your debts at a lower interest rate. That way, more of your payment goes to paying the principal amount you owe instead of interest.
  2. Manage your income and expenses—determine how much money is coming in and how much is going out so you get a clear idea of what finances you are managing.
  3. Create a budget—once you can account for your income and expenses, you’re ready to create a financial plan that frames your income and expenses against a timeline. You’ll be able to determine when you’re getting money and when you need cash to pay for your expenses. Then, you’ll be able to forecast this budget plan out for months at a time.
  4. Track how you’re doing—each week, take a look at how you did in balancing income against your expenses. Soon your excellent planning will be second nature and you’ll be well on your way to being debt-free.
  5. Curb bad habits—if you’re overspending each week or buying items that aren’t getting used or food that isn’t being eaten, then this is an easy way to put some extra money back in your account.
  6. Accelerate your debt payments—find that you have a few extra bucks in the budget? Use this money to make extra payments against your debts and you’ll find that they disappear that much faster.
  7. Prevent debt in the future—each paycheck, put some money aside for larger ticket items or for buying the things you want. Soon you’ll have a nice little nest egg of cash and you won’t need to go into debt or use credit cards for the next time you want to buy something.


Get the most mileage from your credit by ensuring that your credit is managed properly and your payments are made on time. A good credit report is the key to getting the best credit terms and rates.

Tips for becoming financially healthy

  • Be aware of the signs of being in a credit crisis so that you can put corrective measures in place before large, long-term debts become an issue.
  • Paying only the minimum on your credit card each month significantly increases the total interest you pay and the time it takes to pay your credit card bill so try to pay as much as you can within your budget each month.
  • Eating out frequently will add up fast and can sabotage any budget. Create a shopping budget and stick to it, buying in bulk or items on special. Also, limit yourself to less frequent, larger shopping trips so you can reduce impulse buying.
  • Transportation costs account for nearly 14 per cent of personal expenditure. If you live close to work, why not try walking or cycling? Planning trips so you only have to go out once and make multiple stops can also help reduce transportation costs.


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