Will You Be in Debt Longer Than You Think?

Many Canadians are optimistic about when they will be out of debt, but the numbers might tell a different story. A poll issued today by CIBC indicates that Canadians carry debt for longer than they expect, in spite of predictions that they will be out of debt by the age of 55.

Carrying Debt Into Your Retirement Years

According to the poll, most Canadians think that they will be out of debt sooner than they are actually likely to be out of debt. The poll found that most Canadians think that they will be completely rid of debt by the age of 55. However, today, only about 1/3 of Canadians aged 55-64 are debt free.

Younger Canadians also think that they will be debt free relatively soon. Those that fall in the age group of 25 to 34 expect to be out of debt by the age of 44. However, only 18% of those who are between the ages of 45 and 54 in Canada are actually debt free. The Globe and Mail points out that this represents a likely disparity in what Canadians think about their finances, and what actually happens:

“A key finding in this poll is that the passage of time alone is not enough to achieve the goal of paying down your debt,” Ms. Kramer said. “Canadians with a goal of being debt-free would benefit from having a realistic plan in place that includes extra payments towards their debt and a strategy to minimize their interest costs.”

We all like to think that we will be debt free sometime, but just hoping to be debt free won't get the job done. You actually have to make a plan, and then keep with it. This is true of every aspect of personal finances, whether you are paying down debt, saving for retirement, or building an income portfolio.

Getting Rid of Debt

You really do need to make a plan to pay down your debt. There are a number of strategies you can use to get rid of your debt. You can make a schedule of debt pay down, using the debt snowball to help you stay on track. You can also consider debt consolidation, allowing you to put your debts together in a format that is easier to pay down. No matter your strategy, though, it is important that you follow a few guidelines to help you actually pay off your debt, rather than just try to wish it away:

• Stop getting into more debt: This might mean that you put the credit cards on ice for a time so that you don't use them.
• Look for ways to spend less money: You can put the money you save toward paying down debt. Consider what you are wasting money on, and change your habits.
• Find ways to earn more money: It doesn't always have to be about cutting your spending. You can also try to earn more money. Look for ways to earn extra income. Combine earning with spending cuts, and you might be surprised at how quickly your debt begins to disappear.

Right now, it's easy to be optimistic about getting rid of debt. However, you need to realize that it doesn't just happen; you need actively look for ways to pay off your debt. Only then will you achieve your financial expectations.

Image source: sxc.hu

This post was included in the Carnival of Personal Finance at Invest It Wisely. Thanks, too, for the inclusion in the round up at Bank Nerd.