Financial Planning -> Free In 30! -> Get out of debt
Get Out of Debt Now!
This is the Most Important Issue Facing Canada and Canadians Right Now.
Most developed countries in the world are increasing their spending and debt. Most governments will not stop their excessive spending until they are forced to do so. This happens because they cannot sell their debt (e.g., Canada Savings Bonds, Government of Canada bonds, provincial government bonds, crown corporation bonds, t-bills) without paying substantially higher interest rates . Once they are required to pay higher interest rates they can no longer afford the interest on the debt. Therefore, they will have to slash spending, raise taxes, or both.
Western Europe, Japan, United States and Canada are in imminent danger of having to pay higher interest rates on their debt. This will start a downward spiral of their economies, which will lead to a recession. Some people think parts of these economies have been in a recession since 2008. A recession is falling Gross Domestic Product (GDP) and higher unemployment. Governments usually try to counteract this by increasing spending and lowering short term interest rates. Unfortunately (or fortunately), the governments will not be able to increase spending because of the debt, and interest rates can't really go much lower. Canada and the rest of the developed countries are going down the same road as Greece, Ireland, and Portugal. See our article on Debt in Selected Countries.
Recessions are a normal part of the business cycle, but if we go into a recession now because of sovereign debt, it may be long and nasty. You can't really tell when a recession begins or ends until probably five years after it's over. We entered a recession in 2008, but at this point we can't really tell if the recession ended in 2010, or if it is a double-dip recession that we are still in.
What can be done?
The most important thing you can do is reduce your debt, especially debt on which the interest is not tax-deductible. You can also lobby your governments (federal, provincial and local) to eliminate the deficit, reduce debt, and become better managers of your money. You can do this by contacting your Member of Parliament (MP), provincial and local government representatives.
For investors, we've added a recommended lower risk portfolio for more conservative investors.
Get out of debt and stay out of debt (this is the most important advice we can give!)
At whatever age you retire, you must own a home and be free of non- tax-deductible debt. Otherwise, your income will be reduced, and there would be very little money left after rent and/or loan payments. If you retire at 65 and will be relying on CPP, OAS and GIS, the maximum you will receive is about $1,550 per month for a single person, or $2,710 for a couple. This is not the time to find out that you don't have enough money to retire comfortably. See our Seniors page to find out how much your pension will be when you retire. If you want to retire early, or have more money when you retire at 65, you will need either savings or a pension from your employer.
If you have or plan to have children, you should try to ensure that the mortgage on your home will be paid off before your children enter university. This will free up funds for their education.It is very important to stay out of debt until you buy a home. Debt is the reason many people are not financially successful. Being in debt can be very stressful, and can reduce your quality of life.
The information below will help you on the road to financial freedom.
Start saving money as young as possible.
Tax Tip: Start saving early.
If you think you are insolvent (your liabilities are greater than your assets, and you cannot meet your financial obligations as they become due), then a good resource is the Office of the Superintendent of Bankruptcy Canada. They provide alternatives to bankruptcy, and many other resources. One of their resources is a directory of all trustees licensed by the Office of the Superintendent of Bankruptcy. Please note that if you are seeing ads on our site for firms which help you resolve debt problems, this does not mean that we recommend or endorse them.
Be better organized / make life simpler
Tax Tip: Pay yourself first by payroll deduction or automatic bank transfers.
Tax Tip: Nobody plans to fail - they just fail to plan!
Your financial plan should include the following steps:
Revised: November 14, 2022
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