According to a poll carried out by Investors Group, 62% of Canadians plan to retire while still being in debt. In fact, many people polled indicated that they were willing to retire regardless of whether their mortgage was paid off.
As well, the poll results indicated that Canadians seem to be worried about rising interest rates. There is a big concern right now that Canadians are taking on too much debt at these incredibly low interest rates, and then when interest rates begin to rise, it will cause many Canadian households to be under financial stress due to increased interest payments.
We as Canadians need to become more responsible for the amount of debt we are taking on. Although it may seem really affordable right now, we have to remind ourselves that we are enjoying historically low interest rates. They won’t last forever. In fact, the Bank of Canada may even increase their rates as early as June 1st.
If you are currently considering making a home purchase, be sure to consider not only the cost of borrowing in the current rate environment, but also be sure to ask how much it will cost when the rates go up. You do not want to end up in a position where you end up not being able to sleep at night because you are worried over your finances. Life is already complicated enough, don’t add to your complications by digging yourself into a hole financially.
An article on globeinvestor.com discusses the Investors Group poll results in more detail. The thing that struck me the most, however, was the fact that people are willing to retire before they have paid off their debts. I cannot understand why anyone would want to do something like that, but apparently more than half the Canadian population is fine with the concept. If you are like me, and you are not willing to retire while still in debt, there are some key things you can do now to ensure that you don’t have to be in the same boat as many of your fellow Canadians.
Some things you can do to ensure that your debts are paid off before you retire include:
1. Proactively pay down your mortgage whenever you come by extra money that is not needed for an emergency fund.
2. Avoid taking on more debt than you can safely afford in any interest rate environment.
3. Pay off your credit card balance every month.
4. Get in the habit of paying yourself first. Don’t spend more than you earn, and don’t acquire debt for things you don’t need.
These tips are pretty basic, but you will discover that if you display these key behaviors you will be much less likely to ever have to consider retiring while you are still deep in debt.
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