Planning for a Debt-Free Life

A recent poll by CIBC find that Canadians expect to be debt-free once they reach 56 years old. However, some Canadians see themselves paying debt until over 60 years old. Additionally, 29% mentioned they have no debt and 13% say they will remain in debt.

More than 50% of Canadians over 65 years old mentioned they still have debt, with lines of credit and credit card as the most common. This group of respondents also said that they expect to pay off the debt by 70 years old on average.

On the other hand, younger Canadians have a more optimistic view about debt. Those in the age group of 25 to 34 expect to pay off debt by 47 years old. Current statistics suggest that this is an overtly optimistic outlook. More than 68% of Canadians 45 years old and over still, have debt, while 31% still have to pay mortgage.

Of Canadians with credit, 32% mentioned that they budgeted or sacrificed to manage and reduce their debt.

Different ways will help you achieve your goal of becoming debt-free even if you accomplish it by 60 or 50.

Budgeting

A budget is what you need when you plan on retiring early and staying debt-free. Examine your finances and make difficult decisions on where to spend your money and where to reduce.

A budget acts as your blueprint when you plan your daily to weekly to monthly expenses. Reduce expenses on luxuries as you inch closer to your chosen retirement age.

The Save Vs. Spend Dilemma

As you age, you will make decisions about saving, spending or investing constantly. These decisions will be difficult, but they have to make them. Set money aside as savings as soon as you get your paycheque or source of income; paying off debts can wait. However, pay off mortgages if you have enough disposable income as interest rates will add up over the years.

Avoid dipping into your savings when an emergency arises, especially if you are still capable of making that money back. Use credit cards as a last resort for emergencies instead of paying for luxuries.

Slowly but Surely

It may take you a while, but paying off debt and staying that way is possible as long as you make the tough decisions and save money for the future. You do not have to be completely risk averse, choose investments that you are comfortable with. Find an additional source of income such as freelance work or part-time jobs to add to your nest egg.

Source: CIBC Poll http://finance.yahoo.com/news/debt-freedom-canadians-expect-debt-080000225.html

Debt Delinquency Down to 2.58%

TransUnion, a credit monitoring agency, revealed in their reports that Canadians seem to get better in handling consumer debt with an overall delinquency rate of 2.58% on non-mortgage consumer debts from 2.69% rate in 2014. Delinquency rate is described as the ratio of all accounts that are 90 or more days past due.

TransUnion’s director of research, Jason Wang, thinks that this is encouraging news.  According to him, this speaks to the fact that both sides (borrower and lender) are bearing in mind the importance of responsible lending.

Auto loans increased from 1.06% to 1.10%, credit cards by a mere 1% from 2.17% to 2.18%, installment loans went down from 3.65% to 3.12% and lines of credit from 0.81% to 0.74% showing 8.37% decline next only to installment loans.

“Delinquency rates of all credit products are relatively low, but even so we have observed a pronounced improvement in some of the most popular credit products such as lines of credit. This is a positive sign that Canadians are both increasingly aware of the importance of making payments on time, and have the capacity to do so. The recent interest rate cuts may have in part made it easier to manage lines of credit, which typically carry variable rates,” he added.

Educating people on financial management is very important to meet the expectations of both the lender and the borrower. For example, Canadian Payday Loans Association (CPLA) ensures payday loan companies in Canada help their customers make informed financial decisions. This aids in consumer protection while preserving the companies that take the risk when they loan their resources.

While it is best not to incur debt, for some, it is actually inevitable. This happens when a household is strapped for cash for certain emergencies or unforeseen yet unavoidable household expenses. To avoid this in the future, we strongly advise strong financial management with our clients such as setting an emergency fund for these kinds of situation.

We sincerely wish to help our customers when they come to us needing financial assistance. We offer fast, transparent and hassle-free transactions that help alleviate our client’s financial stress.

At GoDay, we believe that if we can help you get through a few financial hurdles, that would be terrific; but if we can help you avoid them altogether, even better.