Introduction
Debt is a reality for most Canadians, and it’s not always a bad thing. While carrying debt may feel overwhelming at times, understanding how your financial situation compares to others and learning strategies to manage it can provide clarity and control.
Let’s dive into the current debt landscape in Canada and explore actionable steps to reduce your debt burden effectively.
How Much Debt Do Canadians Carry?
According to Equifax, the average Canadian owed $72,950 in non-mortgage debt at the end of 2020. This figure includes:
- Credit card debt (average of $3,929 per person)
- Lines of credit
- Car loans
- Personal loans
The Role of Credit Card Debt
Credit card debt is the most common type of debt in Canada and can be particularly concerning due to high-interest rates. This makes it challenging for individuals to pay off balances, especially as inflation drives up the cost of living. Recent data suggests that increasing consumer debt stems from:
- Rising Inflation: Higher prices for daily necessities have led many Canadians to rely on credit cards to bridge the gap.
- Post-Pandemic Spending: Pent-up demand for travel and entertainment has led to increased spending.
- High-Interest Rates: Credit card balances grow faster when minimum payments aren’t enough to cover the interest.
Other Common Debts
- Student loans: Average of $20,165
- Car loans: Average of $21,717
- Personal loans: Average of $13,986
Debt Across Canada
Debt levels vary significantly by region, often reflecting differences in income levels and cost of living. Generally:
- Highest Debt Levels: British Columbia, Alberta, and Ontario
- Lowest Debt Levels: Atlantic provinces
Average Debt by Age Group
Debt also varies by age and life stage. Here’s how debt breaks down across different demographics:
| Age Group | Average Debt |
| Under 35 | $69,500 |
| 35-44 | $105,100 |
| 45-54 | $130,000 |
| 55-64 | $80,600 |
| 65+ | $49,900 |
This data includes all forms of debt, such as mortgages, credit cards, lines of credit, and loans.
Common Debt Types by Age
- 18–29 years old (Gen Z): Most likely to carry student loans and credit card debt, while some older members of this group are taking on mortgages.
- 30–39 years old: Balances often include mortgages, car loans, and lines of credit alongside credit card debt.
- 40–49 years old: Typically carry the largest mortgage balances but may also have a higher income to manage these obligations.
- 50–59 years old: Begin focusing on paying down debt and saving for retirement.
- 60+ years old: Increasingly common to see retirees carrying mortgages or using lines of credit to remain financially independent.
Is Your Debt Higher Than Average?
If your debt levels exceed the averages listed, don’t panic. There are proactive steps you can take to regain control of your finances.
5 Steps to Manage and Reduce Debt
1. Create a Realistic Budget
- Track your income and expenses to understand where your money is going.
- Identify areas to cut back and allocate extra funds toward debt repayment.
2. Prioritize High-Interest Debt
- Focus on paying off debts with the highest interest rates first (e.g., credit cards).
- Consider debt consolidation to combine multiple payments into one with a lower interest rate.
3. Reduce Expenses
- Cut back on non-essential spending like dining out, streaming services, and entertainment.
- Look for ways to save on recurring bills by negotiating with service providers or switching to more affordable options.
4. Avoid Taking On New Debt
- Resist the urge to use credit to cover short-term expenses.
- Focus on reducing existing debt and building a financial safety net to avoid future reliance on borrowing.
5. Seek Professional Advice
- A financial advisor can provide personalized guidance to help you:
- Develop a debt repayment strategy.
- Build a budget aligned with your long-term goals.
- Navigate emotionally driven decisions about money.
Conclusion
Debt is a part of life for most Canadians, but understanding your financial position and taking steps to manage debt effectively can empower you to achieve financial stability. Whether it’s creating a budget, prioritizing high-interest debt, or seeking professional advice, there are ways to tackle your debt head-on.
Remember, your financial journey is unique—focus on your progress rather than comparing yourself to others. By taking proactive steps today, you can lay the foundation for a stronger financial future.
This article is written for educational purposes.
Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at info@taxpartners.ca, or by visiting our website at www.taxpartners.ca.
Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.
#lifeinsurance #irp #lifeinsurancetax #incometax #cralifeinsurance #shareholderbenefits #GreatwayFinancial #GreatwayIRP #ExperiorIRP #ExperiorLifeInsurance #WFGIRP #WFGIvari #InfiniteBanking #IRPBMO #JimPatterson #WaltDisney #TermInsurance #AccountantLifeInsurance #LifeInsuranceCRA #IndependentLifeInsuranceAdvisor #InsuranceAdvisor #FSRA #FSRAAudit #WholeLife #WholeLifeInsurance #InsuranceHelp #ProtectFamily #JamiePrickett #Marlon #MarlonAntonio #Recruiting