By Laurie Campbell
The struggle is real. According to Statistics Canada, the average Canadian owes $1.77 (including mortgages and consumer debt such as credit cards) for every dollar of disposable income.
Meanwhile, the spending season is fast approaching, starting with the dual temptation of Black Friday and Cyber Monday, and leading us through an assortment of winter holidays and New Year’s.
Financial Literacy Month and upcoming Credit Education Week Canada (Nov. 12-15) provide an opportunity for Canadians to level out, sharpen their focus and create a vision for what their financial future will look like.
A new national poll released by Credit Canada and Capital One Canada surveyed Canadians on their views about money. Right on cue for the holidays, six-in-10 respondents admit to feeling overwhelmed and stuck – the daily impact of debt is clearly taking a toll.
Called #MyMoneyVision, the survey found half of Canadians dread opening their bills while 49 per cent have felt isolated and alone due to debt.
The survey also asked those with consumer debt (outside their mortgage) about the biggest obstacles standing in their way of being debt-free. The top three answers were: a lack of discipline in sticking to a monthly budget; the need to make daily ends meet (e.g. gas, grocery and general bills); and covering for family members' expenses, costs and debt.
Of note, half of Canadians feel ashamed discussing their struggle of sticking to a monthly budget.
Fear and shame together only exacerbate the situation. The truth can seem overwhelming, and as a result, people turn a blind eye to how they’re really spending their money. Most don’t learn about credit until they absolutely have to, and by then it’s often too late, with the damage already being done.
Can we learn from past mistakes?
One in three Canadians reported that their overall financial situation has worsened year-over-year (2018 versus 2019). Of those with ballooning debt, one-in-three increased their debt by more than 20 per cent. A small but significant number of that population (8 per cent) increased it by more than 50 per cent.
Interestingly, while the majority of Canadians are earning the same or less than last year, and 48 per cent are spending more, nearly half of those surveyed felt their financial situation had improved in the same timeframe. This begs the question: are Canadians natural optimists or do we have a naïve sense of security?
Perhaps one of the biggest obstacles is the discrepancy between what Canadians envision for their financial future and what is really happening in their lives.
Outside of a mortgage, when it comes to loans and credit card debt, 44 per cent of Canadians believe they can be debt-free in one-to-two years.
To that end, more than half report they’re meeting their debt-reduction goals this year, and 56 per cent say they’ve developed a money vision for the year. People’s top financial goals also indicate good intentions, with 26 per cent intending to pay off credit card debt and 19 per cent committed to saving.
Establishing a vision for the financial future bridges the gap from optimism to realism. Setting a money goal is important to help motivate people to budget, improve their money management skills, build (or rebuild) their credit, and take a more active approach to organizing their finances.
Scientific studies have shown both physical and mental-health benefits of goal setting and mindfulness. The proper way to deal with financial worries is to take a pause and resolve it through education, sound money management and using the free financial tools that are readily available.
It is evident Canadians have the desire and the motivation to reduce and eliminate their debt. With the right support, tools and resources, they can.
Credit Education Week Canada now in its 13th year, is part of a national effort to raise financial literacy awareness on the importance of proper credit education. It takes place in communities with free events across the country from Nov. 12-15.
Laurie Campbell is the CEO of Credit Canada, a national credit counselling agency.
