Recently, the Governor of the Bank of Canada delivered a speech in which he addressed some of the concerns around rising consumer debt. He said that, despite the fact that the Bank of Canada keeps lowering interest rates making it easier for more people to borrow more money, that it wasn’t really their fault that debt is at record levels.
Rather he suggested that responsibility for the high levels of consumer debt, rests squarely on, well, the consumer. He said that it wasn’t their role to “protect individuals from making bad choices” when it comes to taking on debt. While this isn’t entirely a fair judgement, he does have a point.
While many consumers have to rely on debt because of unexpected life events, like a job loss, death or divorce, there are many instances in which credit use is simply a choice. There is a moment in which you decide to take out that credit card instead of saving up or finding cash in your budget.
“Credit use and overspending is a behaviour, which means that there is an element of choice behind it. When you combine low interest rates, easy access to credit and buy-now-pay-later mentality, you create a situation where it is hard to always make responsible decisions around credit use,” says Jeff Schwartz, executive director at the Consolidated Credit Counseling Services of Canada.
“You can take control of your financial future by committing to your budget and to spending within your means. Making these kinds of good decisions will directly impact the financial success of your household.”
How can you set yourself up for financial success? Here are some tips:
Control your spending
If you don’t have one already, set up a detailed monthly budget to acknowledge what you can reasonably spend within the month. Recognize that once the money is gone, it’s gone; it doesn’t mean that it is time for the credit card.
Empty your wallet
Impulse shopping is your budget’s greatest threat. Remove the temptation right at the source, by taking the cards out of your wallet, and carrying cash only.
Make an iron clad list
When you are shopping for groceries or running errands, make your list with an iron fist. Do not waver from what you’ve planned. Don’t go shopping when you are hungry or pressed for time, which can make impulse shopping seem like a good idea at the time.
Celebrate your success
The best part of taking control of your credit use and making good decisions? You get to reap the benefits. Make sure you’ve clearly stated some financial goals (short, medium and long term) and that you check on your progress regularly. There is no greater satisfaction than making good choices that set you on the path to your goals.
Is it time that you evaluated your spending and your credit use so that you can take charge of your finances? Are bad credit decisions being made because you’re spending money that you don’t have? We can help. Call one of our trained credit counsellors at 1-888-826-5898 or check out our free online debt analysis tool to get started.