This year’s New Year’s resolution: Tackle my personal finances in the face of Canadian debt. This should be what many Canadians are planning for 2013 but are they really? Just about everybody goes to the doctor or walk-in clinic if there’s something wrong with their health, and they take their car to the mechanic if it breaks down. If you ignored these problems your health would deteriorate and your vehicle wouldn’t run, so why would you ignore your personal finances?
Statistics Paint A Picture…..
In a recent study initiated by Sun Life, 55% of 1,277 people surveyed ranging in age from 18-55+ stated they weren’t happy with their personal finances for the year 2012. Of those 1,277 people, only 30% wanted to do something about it- and yet 68% stay strangely optimistic. How can you be so optimistic for the forthcoming year and have financial woes at the same time without ignorance?
Are people in denial over the amount of their debt or the fact they have debt altogether? Statistics from various sources including top Canadian banks suggest that the average household Canadian debt is somewhere in the region of $114,000, though most of that will be mortgage. I can’t see how the current economy is to blame for debt problems of Canadian households as the debt was already present before the economy tanked way back in 2008. True, the majority of debt was accumulated from a lucrative housing market that has only recently started to slow down, but there’s also a startling amount of consumer debt.
The Answers Are In Front Of Our Eyes…..
The problem lies in the uncontrollable spending habits of Canadians and the fact they are spending other people’s money for the things they want and forgetting that sooner or later those people are going to want it back. New cars, electronics, clothes, furniture and an enormous house to put it all in all build up to a pile of debt some people are finding hard to deal with. Daily advertising for consumer goods and services and peer pressure all contribute to an ever-increasing problem. Saying you “need” the latest iPhone 5 is great if you can justify it, but I can guarantee 75% of the people who own them could live their lives with a much simpler mobile phone at a quarter of the price. We’re not like our parents or grandparents; we don’t want to make do, we want the biggest and the best and we want it all right now.
No More Buy Now Pay Later…..
I’ve always prided myself on the fact that I’ve gotten as far as I have with hard work and determination. Sure I’ve bought things in my life that I wanted more than I needed but I had the cash to pay for them. I’m a strong believer in “don’t buy it unless you can afford it”, leaving me with no payments to make, because I didn’t buy it on credit. Maintaining what you’ve got is also a strong belief of mine. I see it everyday people throwing perfectly good stuff away when all it requires is a little love and attention. Laziness also contributes to bad finances due to the added costs of convenience, usually at premium rates.
The “Snow blower” to some people is the all-important winter item, but nothing that a shovel can’t handle. Agreed, when you get to a certain age or you’ve got health concerns, shovelling probably isn’t going to do you much good. A vast proportion of people in their 20s, 30s and 40s could manage shovelling the drive, but instead choose to spend between $600-$1600+ on a machine.
Just about every single company that sells products is going to advertise and these days consumer advertising is everywhere. It covers a multitude of products and it will probably let you know that you can’t live your life without what it’s selling. The trick is ignoring the hard sell and only buying what you need.
Optimistic or Pessimistic?
Through analyzing the data you can also see that there’s a generational gap. The results for the 18-34 age range suggests less than half enjoyed a good year as far as their finances went, yet 73% remain optimistic. The older generations seem a little more conservative with their opinions and probably remain a little more true to their future and how they see themselves later in life and into retirement. The older generation should also have less debt due to paid-off mortgages, cars, senior-level employment, etc.
There’s also another worrying trend associated with the sheer amount of household debt and that is retirement. If Canadians are struggling with such high debt loads, how are they going to fund their retirements? I was probably no different from a lot of people in my early 20’s; I didn’t really think about retirement although I did take advantage of my employers pension scheme. The Canadian Pension Plan will currently pay out a maximum of $986.67 a month upon your retirement, but do you want to try and live on that? If you’re renting your home, what are you going to use to pay for bills and groceries? Old Age Security may provide additional benefits to lower-income seniors if they are eligible.
At Canadian Budget Binder my goal is to inform you that with forethought, planning, research and a bit of hard work you, too, can get your finances back in order. Budgets define boundaries for your finances within which you can make realistic decisions that affect how your life will run. It’s not rocket science, nor is it a quick fix or a get-rich-quick scheme. Budgeting is more of a lifestyle choice based on the simple premise of spending less than you make.
For more information on the Sun Life 2012-2013 survey with a detailed infographic click here.
So, try this New Year’s resolution: Put your spending on a diet and tackle your personal finances by giving them a budget workout.
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