It looks like Canadians might need to make some New Year’s debt resolutions.
According to Stats Canada, the average household debt ratio – which includes mortgages, consumer credit and non-mortgage loans – climbed to 162.6 per cent of their disposable income in the third quarter of 2014.
But there is a silver lining says Pedro Antunes, executive director and deputy chief economist at The Conference Board of Canada. “We’re essentially looking at debt levels that have stabilized over the last two years, (after) growing very quickly through most of the 2000s,” he says. Once again, not the best news – but cause for a positive outlook headed into 2015.
Canadians Getting Savvier About Savings
Although it’s a slightly different economic indicator, Antunes points out that between household spending and saving rates, Canadians are looking stable in the saving category.
“In other words, less indebtedness and a little bit more savings from households in Canada,” he adds, noting that a rise in interest rates in 2016 will help to entice more Canadians to save their cash. “The Bank of Canada has been offering very, very low interest rates. (Given that) interest rates are essentially the benefit of saving your money it’s no wonder people are taking on more debt.”
Push Back Against Spending Pressure
That aside, Antunes says it’d be wise to start etching away that debt a little bit to take advantage when interest rates do see a spike.
We know, we know. It’s easier said than done, especially in the midst of holidays.
A recent survey by DollarsDirect.ca – an online payday loan service – shows that 46 per cent of celebrating Canadians feel pressured to overspend during the holiday season.
“As a father, I know that creating a great experience for my family and close friends during the holidays feels important. It’s tempting to spend a little more than planned for a special gift,” says Thomas Kousgaard, head of operations for DollarsDirect.ca. “That’s why setting – and sticking to – a holiday budget is extremely important when it comes to keeping your finances in order.”
4 Money Pledges to Make in 2015
For those who’ve coasted through the holidays on card-swiping-autopilot – here are a few suggestions for resolutions.
Pledge to make a yearly budget
“Resolve to create an annual budget – and stick to it,” says Kousgaard. “While not the most revolutionary suggestion, it works. Budgets are for anyone, regardless of age, income, or life stage.”
January is a great month to do it, especially while you’re in the midst of that holiday spending hangover.
“Map out your expected income, and project your spending throughout the upcoming year,” he adds. “Regularly revisit the plan to make any necessary adjustments and to keep it top of mind. Each time you resist a splurge, you can feel good about sticking to your plan and celebrate the savings.”
Pledge to set a debt deadline
While staring up at a mile-high pile of debt, it can be really difficult to forecast the end but set a goal and write it down. Make it a date. Or even just the amount you’d ideally like to put towards your debt in 2015.
There’s no penalty for not reaching that goal but knowing it’s there and committed to paper can inspire you to push towards it.
Pledge to get help when needed
“Consumers concerned about debt should consider speaking to a professional advisor,” says Kousgaard. “They can help develop a realistic financial plan that includes debt management.”
Sometimes it’s hard to really hash out a plan, especially with something as personal as debt. Enlisting a financial advisor can help you look at it objectively and make the necessary cutbacks on your spending to ensure you’re staying on top of your debt.
Pledge to anticipate the little things
While there’s always going to be unexpected expenses like flat tires or leaky roofs, there are plenty of expenses we seem to have amnesia about like the holidays (wink wink nudge nudge) which roll up each year at the same, yet we’re still unprepared.
Kousgaard plans to not let holiday expenses get the best of him in 2015.
“My financial new year’s resolution is to set aside money for the holidays each month,” he says. “That way, I know I have the money I’ll need to buy gifts when December rolls around, rather than scrambling to find extra cash or racking up a credit card balance.”