2025-09-26
Is some debt good for my company?
Lifestyle Debt Debt Solutions
Whether operating a small business, or large enterprise, there is a lot at stake for Canadian entrepreneurs.
As a consumer finance professional, I field a lot of questions about money. But few do I experience more often than the age old — "Should I invest in my retirement or pay off my debt?"
The obvious answer is, 'yes'.
In a perfect world, I would recommend you contribute toward your retirement and pay down your debt. But I know what you're thinking — and you're absolutely right. I also recognize that more than 40% of households have less than $200 of wiggle room in their monthly budget as it is. And I know you want to make every dollar work as hard and efficiently as possible.
The world of personal finance is, unfortunately, often one of trade-offs and sacrifices. And it's my goal to arm you with the information you need to make the right decisions to create the greatest impact over the short and long term.
If you count yourself among the average Canadian, you have approximately $20,000 worth of non-mortgage consumer debt to contend with — much of it on high interest vehicles such as credit cards. With regular interest costs adding to your outstanding balance every month, it will only become more difficult to pay back in the months and years ahead; especially if you resolve to making minimum payments. So, it's understandable that you'll want to address your debt burden as soon as possible.
However, even if you're just entering the workforce, the timeline toward retirement is not nearly as lengthy as you might think. It's considerably shorter for people in their 40s, 50s and 60s. In most cases government assistance programs like Old Age Security and Canada Pension Plan will not be sufficient to meet your basic living expenses once you leave your job. So, it's critical that you have enough put away so that you can afford to live the lifestyle you want to live for 20 — maybe even 30 years after you're no longer earning a regular wage.
There is no one-size-fits all approach to know which strategy will yield the best results. But as you answer each of the following questions, you will begin to gain clarity as to where your hard-earned dollars need to go now to maximize your benefit over the long run. Remember, your strategy and tactics needn't stay fixed through this process. Revisit these questions frequently to ensure you're staying on track with your goals and your actions stay aligned with your current financial position.
What kinds of debts do you currently have? If you have several high-interest debts such as credit cards or payday loans, you will want to either reduce these as quickly as possible or potentially consolidate them into a more manageable lower-rate payment.
Moreover, if you're worried about rising interest rates impacting variable interest rate debts, you may want to evaluate whether it would be beneficial to negotiate a reasonable fixed interest rate that will not rise with shifting trends.
How long do you have until your expected retirement? The narrower the timeline, the greater urgency you will likely feel to contribute to your retirement savings and benefit from the potential tax savings — which you can either use to reinvest in your RSP plans or pay down your debt.
Do you expect to carry debt into retirement? Debt payments can quickly become unmanageable on a fixed income. You'll need to factor these regular debt costs into your post-employment income needs to know whether it will be feasible given your current savings projections and expected income subsidies.
Do you expect to downsize in retirement? Selling your home and many of your possessions can help generate post-retirement income that you can use both to pay down existing debts and supplement your existing retirement savings. However, you'll need to know what you can expect to earn from your existing property and what a newer, smaller property may cost to know whether your expectations are realistic.
Have you factored the cost of aging into your retirement? Medication, supportive housing, specialists and long-term illnesses are all a part of getting older. They are also expensive. If you expect to carry debt into retirement, you'll want to be sure you can still afford to manage your long-term health.
You don't have to choose between paying off your debt and enjoying a comfortable retirement. During a Free Confidential Consultation, a Licenced Insolvency Trustee will review your entire financial situation and help you find the Life-Changing Debt Solution that's right for you. Whether you qualify for a Consumer Proposal, bankruptcy or are better suited to one of several other options, they'll help you get on the path toward a financial fresh start, so you can focus on investing in what matters most.
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