Who Among Us Are Debt-Free?

I have debt, as do most of the people I know. In fact, those I know who are actually debt-free, all seem to be a lot older than I am. Wiser? Quite possibly in some cases; undoubtedly in others.

The big part of their debt-free status, though, seems to come from this one fact: They've all been in the game for a lot longer than I have.

There have been several polls and surveys published recently about how much debt Canadians are carrying, on average. One comes from the Royal Bank: It found that 26 per cent of the 2,000+ people surveyed for the bank's annual debt poll, have no personal (non-mortgage) debt, up from 22 per cent in 2011.

Richard Goyder, RBC's vice president of personal lending, confirmed a few of my suspicions: Although the number of those who live debt-free is spread across the population, he says those who are older are more likely to be debt free. Where 26 per cent is the national average, broken down, about 35 per cent of those over age 55 are debt-free, compared to only 18 per cent of those in younger age brackets who claim the same thing.

Children are another deciding factor: 27 per cent of households without kids are debt-free, compared to 15 per cent of households with children.

All that said, Goyder points out that debt "is a very personal and individual." To become debt-free, as with most things, he says it's necessary to have a plan. "You don't get debt-free by accident."

One thing that I am slowly, very slowly, coming to realize as well, is that money is a long-term game. As much as I would really love it to happen, there isn't going to be any magical lottery win that will bail us out and set us up for life. Think your situation might be different? I'm sorry to be a wet blanket, I really am, but I looked it up: The odds of winning LottoMax, for example, even one of the lesser $1-million draws, is one in 28-million. (One in 28,633,528, to be exact.)

With that sobering bit of information in hand, I asked Goyder about those who are debt-free, and about how they managed to get themselves into this enviable position.

His advice:

• Make sure you are making the minimum payment on all of your loans, then
• know what your debts are, and know which you need to pay down first. (Those with the highest rates of interest.)
• Each time you pay off one debt, use the additional cash flow to pay down the next even more quickly.

"Sometimes people feel discouraged," he says. "They may feel that it's going to take a long time, and therefore it's not worth starting. When that happens, I think it's important to remember there will be some rewards along the way. You're going to improve your credit rating and remove all that anxiety along the way."

Personally, I'm trying hard to keep the long-term nature of this money game in the forefront as well during this exercise – we won't reach our goals this year, but it will shave time off this financial purgatory in the future if we keep at the effort today.

"Whether you can do it at the moment or not, you still need to have that plan. It is a long-term game. It's about having a plan and sticking to it."


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Kate McCaffery is a freelance writer, editor and former urbanite, now living somewhere in between the lake, the ski hill and some farmer's cow path. Visit mccaffery.ca/kate2.0/ for more information.