Now, living in Canada, are you burdened with debt, and have you ever considered living a debt-free life?
According to a report by Equifax, Canadians already owed more than $2.4 trillion in consumer debt at the end of 2023. These debts may include: home loans, student loans, credit card debt, car loans, personal loans, and installment retail debt (e.g., installment payments).
Statistics Canada recently reported that Canadian households owe an average of $1.79 per $1 of disposable income, indicating that people are increasingly reliant on debt to pay for their living expenses.
Debtlessness is not just a way of life, but a choice, mixed with sacrifice and "going against the current", and even a different kind of value behind it.
The benefits of living debt-free
Reduce stress
The pressure of debt is not to be underestimated, monthly payments, credit card bills... But living debt-free does not have these responsibilities. Whether you have savings in your hand or not not not only affects your actual purchasing power, but also affects your mentality and confidence in making life decisions.
Financial security and savings
A recent Angus Reid survey revealed that most tenants and landlords could not even face the $1,000 emergency funding due to a lack of reserves.
By living a debt-free life, you will spend less and be able to save and invest more, leading to greater financial security.
Do what you love
There are a lot of people who don't actually like their current jobs, but stay where they are because of the salary to support them to continue driving a nice car and shoes.
If the source of stress is cut off – people may be able to find another job with a modest salary but genuine enjoyment, rather than sacrificing their love for a high salary and purchasing power.
Improve your credit score
One of the quickest ways to improve your credit score is to reduce your debt-to-income ratio. Credit reports and scores improve when credit cards, personal loans, auto loans, and retail debt are paid off.
The better your credit score, the less you need to worry about borrowing money later on for life's important things, such as buying a house or applying for a small business loan (people's thoughts are not set in stone).
Healthier relationships
Many people's relationships with their lovers and family members have deteriorated due to economic conditions. Financial difficulties can ruin an otherwise good relationship, and they may be pressured by each other, from blaming each other to parting ways.
A more conservative approach to financial management and "consumption downgrading" can make it easier for both sides to respond to emergencies.
A mortgage-free life
Recently, the federal government announced changes to the loan limits for the RRSP First-Time Home Buyer Program, introducing a 30-year amortized mortgage for first-time homebuyers buying a new home. This may be good news for people who want to buy a home, but it also means that the loan may stay with them for a longer time.
The other group of people tend to choose a "debt-free" lifestyle, making different choices when it comes to major issues in life, such as renting a house for the rest of their lives. Abandon the perspective of asset appreciation, just look at the life happiness index, life without a mortgage is indeed very exciting.
Geographic flexibility
You can consider changing jobs without being tied down by property and local job opportunities. For tenants, you can end the lease at any time, pack your bags, and put down roots elsewhere.
"Hands-off shopkeeper"
Life can be simpler. You don't have to spend time, money, and energy fixing leaky roofs, cabinets, or worrying about changes in your neighborhood. Imagine how much extra time you'll have to spend to boost your income or spend time with your family if you don't have a property to take care of.
More free cash flow
The total cost of renting a home (rent, utilities, and tenant insurance) is much lower than the total cost of buying a home (mortgage, utilities, taxes, maintenance, repairs, insurance, etc.). Tenants have more cash flow than landlords. This money can be used for adventure, travel, savings, and diversification of investment activities.