Despite a number of interest rate hikes over the last several months taking a bite out of debt-carrying Canadians’ household budgets, a recent study shows that our appetite for debt is increasing.
According to Equifax Canada’s 2017 Q4 National Consumer Credit Trends Report:
• Average Canadian debt went up by 3.3 percent and is now $22,837 per person
• While 46 percent of respondents actually decreased their debt levels, the 37 percent that increased their debt did so with substantial dollar amounts, which is why the overall average debt went up
• Year-over-year, the average debt is trending up, steadily climbing over the last three years
• Breaking the debt down, installment loans increased by 10.3 percent, auto loans went up by 6.5 percent and mortgages went up by 6.2 percent, year-over-year
• Despite the climb in average Canadian debt, Canadians are managing to meet their debt obligations, with both bankruptcies and delinquencies trending downwards
“These figures show a bit of a good-news/bad-news scenario. Thankfully, more Canadians are able to make their debt payments and stay out of financial trouble. Unfortunately, as long as Canadians continue to pile on more debt, they will continue to make themselves financially vulnerable,” says Jeff Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada.
“Even though many Canadians are able to make their debt obligations today, they may not be able to tomorrow. In the event of a job loss or other life event, along with increasing interest rates, there is a real possibility that debt-laden people could find themselves quickly in over their heads. The only way to protect yourself from this is to commit to reducing your personal household debt levels,” says Schwartz.
Here are some tips on how you can reduce your financial vulnerability:
Stop accumulating debt
While “buy-now-pay-later” may seem like a reasonable way to manage your money, remember that as you accumulate goods, you are accumulating debt as well. As you carry debt, the interest grows and you end up paying a lot more to purchase the same item than if you paid for it in cash.
Shift your attitude towards spending so that you abide by a cash-only lifestyle and stop accumulating debt. Put your cards away and only use them to make purchases that fall within your budget and that you’ll pay off in full each month.
If you’ve been neglecting your savings, it is time to make up for lost time. Having a healthy savings account to draw on in the case of an emergency can make the difference between you sinking or swimming, financially speaking.
Take advantage of automatic savings programs, either through your employer or your financial institution, so that your savings strategy is seamless and consistent.
Pay down existing debt
To reduce your financial vulnerability, you need to create as much wiggle room as you can in your household budget, which means paying down your existing debt as much as you can. Set up a budget that lets you direct as much extra money as you can every month to paying down the debt that you’ve got.
In time, you’ll be debt-free and better able to protect yourself and your family from financial hardship.
Is it time to reverse the direction of your debt cycle? We can help. Call us at 1-888-294-3130 or get started with our free online debt analysis.