How to Pay Off Debt and Get Rich in 20 Years

Canadians with a lot of debt on their plate are likely not having the best go of things in 2022. Interest rates continue to rise as the Bank of Canada looks to cut back inflation. Yet this has led to higher loan rates, creating a problem that it can seem impossible to get out of.

However, there are certainly viable methods of not only paying off debt and getting on top of it, but also getting rich in the process! Here are the top recommendations for doing just that.

Meet with your advisor

Before you start hacking away at your debt willy nilly, it’s important to meet with your financial advisor to come up with some clear goals. An advisor can help look at what you’re making, what you’re spending, and what you need to save.

An advisor can also help you with some of the basics. This would include going over your spending and seeing where you can cut expenses. It can also include creating a budget. Many institutions actually have online tools to help you easily create a budget !

If your loans are through a bank and you’re meeting with an advisor, this can also be beneficial. An advisor could help to consolidate your debt, rolling all your major debts into one for one potentially lower rate. So definitely make a stop to visit your advisor a first priority.

Start cutting

Now it’s time to start cutting, and the first method I would recommend here is to line up your debts from the highest interest payment to the lowest. Focusing on paying debts with higher interest such as credit cards and personal loans means saving potentially thousands in racked up interest. You’ll, therefore, save a ton of interest charges first and foremost.

Then, continue from there to your next high interest loan. Put everything you can at it, which should already be a stable amount identified in your budget. From there, throw all the extra cash you can at it. This would include windfalls and bonuses, but also salary increases. If you can live off the old salary, consider an increase in pay as a bonus and put it towards your debt. Do this and you’ll pay it off in no time.

Invest!

Now comes the great part. If you’re consistent and dedicated, you could pay off all your debts (minus perhaps a mortgage) within about three years in many cases. Even if you have tens of thousands in loans! But don’t stop your newly found cash-saving methods. Instead, put the

cash towards investing.

Placing your investments in a Tax-Free Savings Account (TFSA) is likely the best way to achieve riches in 20 years. But to really make it work for you, invest in a safe, high-yield dividend stock like Canadian Utilities (TSX:CU).

This utility stock is a solid choice for those wanting dividend increases, as well as protection during downturns. Canadian Utilities stock has over 50 years of dividend increases behind it, and utilities will remain stable even during the largest downturns.

As of writing, the stock offers a dividend yield at 5.23%. Shares are down 14% in the last year when utility stocks dropped, but it’s due for a stable rebound. So it’s certainly one to consider on the TSX today.

Bottom line

If you were to pay off your debt now, and put aside $10,000 to invest in the next year, here is what an investment in Canadian Utilities stock could bring you in passive income.

These funds can also be used to reinvest, creating more and more cash as you continue to put savings aside. By the time 20 years rolls around, you’ll have more money than you know what to do with, and can kiss debt goodbye forever.