Mark from North Carolina is 65 — but he’s not retiring any time soon because he’s made “absolutely horrible decisions with money all my life.”
He told The Ramsey Show (1) that he has “no nest egg.” His wife has about US$10,000 in a 401(k) — the American equivalent of a RRSP — and he has “maybe a couple thousand.” Their total debt, including a mortgage, is US$137,000. Of that, about US$22,000 is credit card balances and a car loan.
While retirement may seem impossible, Dave Ramsey says Mark can still enter into retirement debt-free with savings — but it will take some sacrifices, and he’ll need to axe this one thing first. And it “should be a warning” for younger Canadians who may be heading down a similar path.
Paying off consumer debt
Ramsey told Mark to start making fixed payments on his consumer debt, including his credit cards and car loan, to get them out of the way in the next year.
Canadians have an increasing amount of consumer debt. Consumer credit balances in Canada were up 4.4% year-over-year in Q2 2025, reaching $2.52 trillion, according to TransUnion’s Q2 2025 Credit Industry Insights Report.(2) The average consumer balance on a credit card was $4,609, an increase of 2.43% from Q2 2024.
Both Mark and his wife are still working and together bring in about US$105,000. Ramsey said they should leave their bi-weekly mortgage alone (they’re eight months into a 15-year mortgage, with a balance of US$115,000) and tackle their unsecured debt first.
To do this, they’ll need to pay at least US$2,000 a month on their debt (not including the mortgage) to get rid of it in the next year. From there, they can focus on paying off the house and building a nest egg. If they work until they’re 72, Ramsey said they could have about US$200,000 in their nest egg, the house will be paid off and they’ll be debt-free.
Depending on your age, income level and financial goals, the amount you put toward paying off your consumer debt may be different.
To determine this amount, you could follow the 50/30/20 rule, in which you spend 50% of your budget on household expenses, including your mortgage or rent, utilities, bills, transportation and groceries. Another 30% goes toward ‘wants’ and the remaining 20% goes toward debt, savings or investments.
A general rule of thumb is that your monthly mortgage shouldn’t be more than 28% of your gross monthly income; once it surpasses that amount, you risk becoming house poor. But you’ll also want to keep your debt-to-income (DTI) ratio in mind.
Understanding your debt-to-income ratio
There’s another ‘rule’ widely used in Canada and the U.S.—the 28/36 rule — which stipulates that while your mortgage should be no more than 28%, your total debt payments (including car loans, student loans and credit card debt) stays below 36%.
But that’s not always realistic. In Canada, a general rule of thumb when applying for a mortgage is that your total debt load (which includes monthly housing costs and all other debts) shouldn’t exceed more than 44% of your gross monthly income (before taxes).
To keep your debt-to-income (DTI) ratio in check — which is important if you want to get a mortgage or personal loan — then try to keep it at less than 44% of your gross income.
While lenders prefer a lower DTI, there are exceptions. Every lender is different and certain types of loans may accept higher DTI ratios.
In Canada, some credit unions, trust companies and alternative lenders may accept a higher DTI ratio than those set by the big banks. For example, they may offer you a mortgage even if you exceed the 44% total debt service limit.
If you don’t know your DTI, add up all your monthly debt payments and subtract them from your gross monthly income. You can use a debt-to-income online calculator or just tally up the numbers yourself and multiple by 100 to get a percentage.
How to manage consumer debt
Ideally you’ll want to pay off your credit card balance in full each month (which is good for your credit score, too). If that’s not possible, make at least the minimum payment each month.
You may have to adjust the 50/30/20 rule to suit your circumstances — maybe 50/20/30, where you spend less on ‘wants’ and use the extra 10% to pay down your consumer debt.
That’s because interest on credit cards can add up fast. The standard annual percentage rate (APR) ranges from 19.99% to 25.99% in Canada. Plus, there could be penalty fees for missed payments.
If your DTI ratio is higher than 44%, there are options to help you manage and pay down debt. If you have multiple credit cards, consider a balance transfer option that may provide 0% APR for a limited time. You could also take out a debt consolidation loan or refinance other loans.
Longer term, you could look to increase your income, such as taking on a side hustle or negotiate a higher-paying salary at your current job if possible. You could also reduce your housing expenses, which could involve downsizing, moving to a cheaper neighborhood, renting out the basement or getting a roommate.
In the case of Mark and his wife, paying off their debt and saving for retirement means working into their 70s. But it also means when they do officially retire, they’ll be debt-free.
“The best time to plant a tree was 20 years ago. The next best time is today,” said Ramsey Show co-host George Kamel.
If you plough through debt and start investing with “focused intensity,” he said, “you’re going to get through it faster, make more progress, and then when you do get to building that nest egg, you’ll make serious progress, fast.”
Article sources
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The Ramsey Show Highlights (1); TransUnion (2)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.