You've recently graduated and have started your first and second job. You might be carrying student loans or other types of debt while you were in school. Do you know if the level of debt you are in are higher or lower compared to your peers? Regardless of how much debt you owe, it's important to come up with a game plan to pay it down. Learn how by continue reading below.
What Is The Average Debt For 18-25 Year-Olds In Canada
18 to 25 is the age when you really begin to feel the pressure of adulthood. Understandably, the debt profile of this age bracket is low but may rise with time if care is not taken. The average debt for people between the age of 18 to 25 in Canada is $8,345.
How Much Debt Is The Average Canadian In?
The inflation rate and the cost of living are on the increase worldwide and Canada is not left out. Most people are taking credit card loans and borrowing cash just to get by with the hope that they will be able to repay over time. Most people are walking around in debt and may never get to pay it off completely. The average individual debt has risen significantly in 2022.
A report by Equifax explains that credit card owners in Canada have spent 17.5% more in the first quarter of 2022 than they did in the same period in 2021. The report puts Ontarians at the top of the list. They spent 20.4% more than the first quarter of 2021. More credit card accounts have been opened in the first quarter of 2022 at a rate of 31.2%more than that of the first quarter of 2021. This has been described as some of the highest credit card spendings ever seen.
Canada is divided into provinces and the cost of living varies between provinces. The average debt of every Canadian will depend on the province they live. Residents in Ontario have an average debt of $22,671. This is a 5.1% year-on-year increase. In Alberta, the average debt is $28,240 with a 1.8% year-on-year increase. For residents of Saskatchewan, the average debt is $24,690 with a 1.7% year-on-year increase. Manitoba is known to have the lowest average debt which stands at $18,536. Overall, in all the provinces in Canada, the average debt stands between $20,000 to $25,000
What Are 5 Ways An 18-25 Year-Old Can Get Out Of Debt?
Debt is an undesirable position that most people would rather wish they are not in. unfortunately, most people have found themselves in debt, some as early as in their early 20s. you may say that is too early to already be in debt. Understandably, the rising cost of living and inflation has made it inevitable for many young adults to take out loans. For people in this age bracket, student loans form a larger percentage of the total debt, followed by credit card debts.
If you are in the age bracket of 18 to 25 years old and you are in debt, it is advisable to clear up the debt before you clock 30. This is because there are other likely debts that you may still have to take up in your 30s. An example is a mortgage. Clearing up your current debts will go a long way by giving you enough breathing space to take up other loans as you grow older. Below are some tips that can help you get out of your debts.
- Have A Plan/Budge
Debt, while a burden is not necessarily a bad thing if managed well. One of the very first steps to take if you want to get out of debt early is to have a plan. If you have taken student loans and credit card loans, to avoid the interest rates piling up and making it more difficult to pay. When you have a budget, you are able to plan your income and set aside a specific amount to service your debts. When it comes to having a budget, discipline is very important because this is what will ensure that you service the loan on time.
Asides from having a budget, it is important to have a repayment strategy that will ensure that you get out of debt on time. There are different strategies that you can try. One common strategy is the snowball strategy. In this strategy, you will focus on you repay your debts from the smallest to the highest. Although it is one debt at a time, it allows you to focus mainly on one debt by clearing it and saving money on the interest that you would have paid if you settled part of it. It is also motivating if you see your debts disappearing one after the other.
- Be Disciplined
This is an important tip when trying to clear your debt if you are in your early 20s. At that age, there is always the temptation to spend money on luxurious things and live your life to the fullest as they say. By all means, avoid entering more debt while trying to get out of one. It is not the time to shop for luxury items or take more loans to go on a vacation. It will be good to clarify what is on the ground before getting into another debt.
Whatever it takes, try and ensure that you keep to your budget and strategy. The worst thing to do when trying to get out of debt is to get into more debt. You can try dropping your credit card at home so you don’t get tempted to swipe when you are out. You can also try going cash only. There may be a few embarrassing moments, it is the price you have to pay in order to settle your debt.
This is also a time to avoid lifestyle inflation. At your age, you are most likely fresh out of college and maybe in an entry-level job. Trying to finish paying your debt with a minimum payment plan is all that you can muster. It is best you stick to this and avoid any lifestyle that will require you to take out more loans or sacrifice paying your debt to keep up with that lifestyle. It is not the time to move into a bigger apartment, only eat out or buy that fancy clothes.
- Make More Money
People between 18 and 25 are young and vibrant. You naturally have the strength to take on as many jobs as possible. You need the cash, especially if you are trying to get out of debt. In addition to that your entry-level job, take onside gigs and night jobs that will give you the extra cash that can help you settle the debt on time. It is not all about keeping your spending in check. You should also look for ways to maximize your youthfulness and make more money. embrace the suck and take on as many freelance projects as possible. It may not be fun but you will have yourself to thank later when you are able to get out of debt as early as possible.
- Consolidate Your Debts
This is usually more suitable for credit card debts. If you have high-interest credit cards, you should consider trying to consolidate all the debt. This makes it easier to settle your debt. You can try getting a balance transfer credit card. A balance transfer credit card is useful when you have existing credit card debt and you want to take advantage of a low-interest rate. A balance transfer credit card can have a promotional interest rate as low as 0%. This low-interest rate can range between 180 days and 1 year. This allows you to avoid high-interest rate charges. You can use this promotional period to payoff your debt faster. However, this may not apply to your new purchases. This means that you have to cut your expenses during this period so you can conveniently take advantage of the balance credit card transfer promotional offer.
Many Canadians struggle to payoff credit card debt due to high-interest rates and it is all because they are not aware that balance transfer credit cards can help. Now that you know, you should take advantage of this. If you have many credit card debts that you have to pay off, a balance transfer credit card might help you consolidate them all onto one card. You'll simply have to deal with one card bill payment per month instead of several. Balance transfer cards include this as one of their main selling points. You should try it if you want to get out of debt early.
- Track Your Progress –Getting out of debt is not an easy task. It is a long and arduous journey. This is why keeping track of your progress is very important. It is easy to lose motivation when trying to service your debt. Keeping track of your progress will keep you motivated by showing how far you have gone in servicing your debt. You can do this at regular intervals. It could be weekly or monthly, depending on how often you pay your debts. The motivation along the way goes along way in encouraging you in finishing up the debt payment. You can keep a spreadsheet or a visual chart that shows how much you have paid and how far is left for you to go.
