Household debt growing at an alarming rate in Canada
Canadians are hooked on debt. Unless you’ve been living under a rock, you’ve seen the headlines – “soaring household debt” seems to be taking up permanent residency in the finance section.
RBC recently came out with new findings, and while the message is old (surprise, surprise, we’re piling on debt), there’s a scary twist – we’re actually picking up the pace.
Household debt grew by 4.6 per cent in January, among the fastest pace of household credit expansion in the past two years.
This is scary news to many financial experts. Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, shares in the concern.
“It’s incredible, it’s like we’re driving towards a brick wall, and we see it coming, and we’re actually speeding up,” says Schwartz. “We’re living well beyond our means and it is setting us up for trouble down the road.”
Schwartz says that our heavy debt loads are even more concerning due to the fact that our household budgets are largely maxed out. A 2014 report from the Canadian Payroll Association shows that half (51 per cent) of Canadians are living paycheque-to-paycheque.
“Sure you might be able to afford your monthly payments now, but what happens in the event of sudden unemployment or decrease in income?” asks Schwartz. “We might not be able to service our debts, and that would put us in a world of trouble.”
There was a bit of silver lining in RBC’s report though – we seem to be “pumping the breaks” in some areas of debt. Credit card debt fell by 22 per cent in January compared to the month before, and personal loans fell more than 16 per cent in the past three months.
These are good steps, but Consolidated Credit has a few more tips to help Canadians slow down and avoid debt-driven financial trouble:
Freeze your debt load. Instead of slowing down your borrowing, stop it altogether and switch to cash. This will allow you to define your repayment goals – it’s much harder to hit a moving target.
Reassess your budget. Take a hard look at money going out and money coming in. Sometimes all it takes is a solid look at your debit and credit records – you might be surprised with how much you are spending in certain areas. Consolidated Credit’s free budgeting app is also an easy option.
Build an emergency fund. Take the uncertainty out of your financial future. Save a little bit each month so that you can weather any financial storms that may come your way. Pick a manageable amount to set aside – a little bit is better than nothing – and try to increase it over time.
Seek help if you need it. If you’ve tried your best to grab ahold of your budget but are still struggling, seek professional help. Consolidated Credit’s trained counsellors can help with expert advice, and the call is free. You can reach them at 1-888-287-8506.