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Canadians with a lot of debt on their plate may not have the best of things in 2022. Interest rates continue to rise as the Bank of Canada looks to cut inflation. However this led to higher loan rates, which created a problem that seemed impossible to get out of.
However, there are definitely ways to not only pay off debt and get on top of it, but get rich in the process! Here are the main recommendations to do that.
Meet with your counselor
Before you start hacking away at your debt unwillingly, it’s important to meet with your financial advisor to set some clear goals. An advisor can help you see what you’re making, what you’re spending, and what you need to save.
A counselor can also help you with some of the basics. This will include reviewing your spending and seeing where you can cut costs. It may also include creating a budget. Many institutions actually have online tools to help you quickly create a budget!
If your loans are through a bank and you are meeting with a counselor, this can also be beneficial. A counselor can help consolidate your debt, rolling all of your major debts into one for a potentially lower rate. So stop visiting your counselor as a first priority.
Start cutting
Now is the time to start cutting back, and the first method I recommend here is to line up your debts from the highest interest payments to the lowest. Focusing on paying off higher-interest debts like credit cards and personal loans means saving potentially thousands in accrued interest. You will, therefore, save a ton of interest payments first and foremost.
Then, continue from there to your next high interest loan. Put everything you can into it, which should be a solid amount known in your budget. From there, throw all the extra cash you can into it. This will include windfalls and bonuses, but also salary increases. If you can live on the old salary, consider the salary increase as a bonus and put it towards your mortgage. Do it and you’ll pay for it in no time.
Invest!
Now comes the big part. If you are persistent and dedicated, you can pay off all your debts (minus maybe one loan) within about three years in many cases. Even if you have tens of thousands of loans! But don’t hold back on your newfound ways to save money. Instead, put the
cash to investment.
Putting your investments into a Tax-Free Savings Account (TFSA) is probably the best way to achieve wealth in 20 years. But to really make it work for you, invest in a safe, high-yielding dividend stock like Canadian Utilities (TSX:CU).
This utility stock is a solid choice for those who want dividend increases, as well as protection during downturns. Canadian Utilities stock has more than 50 years of dividend increases behind it, and utilities remain resilient even in the biggest downturns.
As of writing, the stock offers a dividend yield of 5.23%. Shares fell 14% last year when utility stocks fell, but this is due to a strong rebound. So this is definitely one to consider TSX today.
Bottom line
If you pay off your mortgage now, and put aside $10,000 to invest over the next year, here’s an investment in Canadian Utilities stock that could give you passive income.
COMPANY | NEW PRICES | NUMBER OF PARTS | DIVIDEND | TOTAL PAYOUT | FOR the most part |
CU | $34 | 294 | $1.79 | $526.26 | quarterly |
These funds can also be used to reinvest, making more and more money as you continue to put in savings. In 20 years, you’ll have more money than you know what to do with, and can kiss debt goodbye forever.