For some wealthy Canadians, mortgage debt is a choice. A new survey by Investors Group found that many rich people get into debt by carrying mortgage debt even though they have the means to pay it off.
Over 1,000 Canadians with over $500,000 in investable assets were asked about their housing situation and one fifth reported that they had mortgage debt. Surprisingly, 2/3rds of those with mortgage debt say they could write a cheque and eliminate their debt tomorrow but choose not to.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, warns that debt can become a burden if there is a sudden loss of income or net worth –
“Although carrying mortgage debt may seem like a good investment strategy for the wealthy, any debt can become a problem if your financial situation changes,” says Schwartz. “At Consolidated Credit, we deal with a lot of people whose debts became a crushing burden when they experienced a reduction in income. Debt does not discriminate, even the wealthy need to make wise financial decisions.”
Consolidated Credit reminds Canadians that debt affects everyone, regardless of your income bracket, and suggests the following strategies to ensure financial stability well into the future –
- Debt management – Understand what your debts are and where the money will come from to make payments each month. Don’t neglect to make a plan in case of a reduction in income or the loss of a job. How will you fulfil your debt obligations during the tough times – not just when things are going well?
- Avoid credit card debt – High interest rates from credit card can turn a reasonable purchase into an expensive burden for years to come. If you use credit cards out of convenience, try to pay off the balance in full as soon as possible. Making only the minimum payments month after month will ensure that you continue paying for your purchases, long after their useful life.
- It’s better to buy too little than too much – When it comes to home purchases, many Canadians dig themselves a deep financial hole when they buy too much house. Buying with restraint, and only taking on a mortgage that you can comfortably afford, even in the down times, can save you tens of thousands of dollars and shave years off of your mortgage payments.
If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at 1-888-294-3130 for a free debt analysis.