(TORONTO, ON) – Canadians are making an effort to silence the fears of the Bank of Canada. Despite the central bank’s worries about rising household debt and poor job numbers, Canadians are making moves to lower the risk of default.
And they’re doing it at a “pace not seen before,” according to a new report from CIBC World Markets.
“Despite a lethargic labour market and an unemployment rate that is still too high for the Bank of Canada’s liking, debt service performance in Canada has almost never been better.” comments Benjamin Tal, Deputy Chief Economist, CIBC.
The mortgage report also pointed out:
- Canadians are paying back an extra $11 billion a year in principal that isn’t being recognized by the Bank of Canada.
- Bigger payments pushed the average amortization period down to an estimated 20 years rather than the assumed 25 years the Bank of Canada uses in calculations.
- The average credit score has trended upward over the past five years, in all regions and age groups across the country.
This is encouraging news for Jeffrey Schwartz, Executive Director of Consolidated Credit Counseling Services of Canada.
“There can be a lot of doom-and-gloom in the financial section of your newspaper,” says Schwartz. “But this is fantastic – Canadians are putting their disposable income toward paying down their mortgage and it’s an incredible display of restraint and willpower.”
Consolidated Credit always encourages Canadians to pay down their debts as quickly as possible, even if they can only put a little extra toward their payments each month. More focus on paying down debt will mean they are in debt for a shorter period and pay less interest over the long run. And it can also help protect Canadians against unexpected shifts, such as increased interest rates or a weakened housing market.
Consolidated Credit offers the following tips on how Canadians can stay the course and continue shrinking their debt:
- Know the good you’re doing – Mental toughness is a big part of personal finance and in your weaker moments, a new TV or a winter vacation might look a lot better than making a drop in the mortgage bucket. Keep your eye on the prize and realize the overall success that you’re achieving with each extra payment.
- Make a budget and stick to it – Keeping track of every dollar you spend might sound about as exciting as counting calories. But budgeting and dieting share another thing in common besides dullness – they both help you achieve your goals over the long term. Keep track of your money with a budgeting app and make sure you stick to the plan.
- Focus on wants vs needs – Don’t get sucked in by impulse purchases and please forget about keeping up with the Joneses. This is a perfect time in life to be selfish – think about your finances, not what other people think about you. If you’re shopping and you fall in love with a “must-have,” follow the 30-minute rule. Come back in a half hour and see if you really need it.
- Reward yourself – Many diet and fitness programs have a “cheat day,” where you can indulge in your favourite comfort food. Budgeting should be the same way. Factor in an “indulgence fund” and treat yourself every now and then to something that’s frivolous. It’ll scratch your spending itch and help keep you motivated.
- If it’s harder than it sounds, seek help – Sound money management is not easy, and there are a lot of resources out there to help you keep debt under control. Getting in touch with a non-profit credit counselling service such as Consolidated Credit can help you figure out the best way to tackle your debt.
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Jacob MacDonald, Public Relations Coordinator, Consolidated Credit Counseling Services of Canada, Inc., T: 416-915-7283 ext.1041, C: 647-390-5253, F: 416-915-5200, E: [email protected]