New Year’s Resolution:Canadian Debt and Tackling Personal Finances

Tackling Personal Finance 2013

Tackling Personal Finance 2013

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?

Canadian Priorities 2013 Sun Life

Canadian Priorities 2013 Sun Life

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 New Years 2013

Optimistic or Pessimistic New Years 2013

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.

It's Not About How Much Money You Make It's How You Spend It

Mr.CBB’s Quote

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Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
Mr. CBB
Mr. CBB

Comments

  1. the farmgirl files says:

    I love it when you spell it out in black and red!
    My folks retired with a ton of money in investments. Blew me away when I became their power of attorney. I was worried about their elderly age, life, housing etc and found out they were millionaires.All invested for us when they pass on!!!! Wonderful but it got me thinking really hard about our future in retirement. Not as pretty a picture I’m afraid. Your guest writers tell me 75% should go into retirement savings, my goal is 50% for 2013. Its going to be tough! Life is good but we can’t always live for today.

    • Good point, we can’t always live for today because we don’t know what tomorrow will bring. Sure we could die but we might not so we have to balance it out … today and tomorrow. Those that prepare will be well ahead of the only live for today and worry about tomorrow later folks.

  2. Mary F Campbell says:

    I think we can explain those statistics with the fact that many are exhibiting an ostrich mentality…bury your head in the sand and the bad stuff will go away.

    • Good Point… that’s true. Another point is consolidation of debt is getting easier for folks and they forget just because it’s consolidated doesn’t mean it’s gone away so they continue to rack up more debt. It can be a vicious cycle for some.

  3. You’re too right that we’ll go to the doctor when we’re sick and our immune system is out of whack, but often have trouble asking for help and guidance when our finances are out of whack. We need to get past that as a society.

  4. Love your straight-to-the-point style. Too bad our bankers don’t take the same approach (I know, I know, why would they when Canadian debt is what is paying their income!) This generation of heavy consumerism and heavy debt are setting a bad role model for the next wave.

  5. This is some solid advice for Canadians and just anyone in general! I’m glad we at least have control our *personal* finances because 2013 isn’t looking too good for government finances in the US! Fiscal Cliff here we come…

  6. Great post Mr. CBB! I could not agree more. The power to rationalize a purchase can be a powerful one if you’re not disciplined with your spending and budgeting. It also can become very easy to blame others for our poor financial decisions, when the key thing to do is to look in the mirror. Thanks by the way for the mention yesterday!

  7. iheartbudgets says:

    I’m all about the FY13 budget at the iHB household! This year’s big goal: kill the student loans! I want to kill them with extra income from side hustles, and get rid of consumer debt forever!

    After that, I want to have some fun in the sun :)

    • That sounds like a good plan. Once those are out of the way, anything is possible. I’m sure you will knock it off fast enough. Our budget will go up but we will be sticking to it even more this year.

  8. Christine Weadick says:

    I agree with you and Mary on this…….. I’m trying to work out a budget and the one thing we’ve done the last few days is to replace the downstairs toilet (13l flush!!) with a 1.6 l flush one. This is the one that sees the most use due to being on the main level. Our water bill has been crazy and I’m looking forward to seeing how much of a change this makes. I don’t know what was up with the old one but it didn’t flush worth a damn. It has never been much good for that. I know it sounds like a small thing and not exactly something for a financial blog but our water bill for Oct was $260.38!!!!!! That is for two months but still….. Dec. was a little better…$230.26……This and Hydro are the only two bills that difficult to budget for as they can be all over the place….If I can get a handle on these two bills it will help things. Pretty much everything else is either a set monthly amount, or I can average things out for the year.

    • Hi Christine,
      We just found out our water rates will be going up as per usual and like you our bills are all over the shop. What I did was go back 6 months and avg out the amount and save for it as a projected expense every month as our water/hydro bill comes every 2 months. It worked out perfect this year doing it that way so maybe that’s an idea for you. If you need any help email me. Cheers mate! Mr.CBB

  9. Mr CBB, I know you and my other new blogger friends are watching, so I am going to make everyone proud in 2013, the first year without credit card debt in over 10 years! There is truly power in numbers. I used to be ashamed of debt, but there are so many others in the same boat. If we all share our doubts, fears, and solutions, it makes us that much stronger.

    • Wow, that’s awesome Kim, good for you. We are going to pack it down in 2013 as we really need to hit our budget targets. We noticed the budget went up but our salaries haven’t moved yet. I’m sure the New Year will bring challenges for all of us but if we are prepared we can battle through anything. Mr. CBB

  10. I am all about DEBT ELIMINATION this year. This is the first year that I am not dreading the arrival of my Visa bill because I did not use 1 cent of credit for Christmas gifts. I feel really good about that. I am going to implement the cash envelope system to save money for purchases I wish to make this year and will enjoy knowing that my financial picture will be better at the end of this year.

  11. Wonderful post! I really like the bit about (No More Buy Now Pay Later). So many people get trapped by these schemes and build up such a huge amount of debt. I also come from the same school of thought that if you don’t have the money to buy it now, you can’t afford it (ergo you don’t get it.)

  12. We have the exact same uncontrollable spending problems in the U.S. Sadly, no one sees it as a priority for some reason!

  13. great resolutions, now is the time to start, you can’t hide forever from your finances.

  14. I think people want to avoid dealing with their finances because it’s just downright painful. It’s like people who are overweight but don’t want to step on a scale. You HAVE to know where you’re starting from, otherwise you have no idea where you’re going. I had a bad December as far as spending. I even stopped tracking in my budget this month. Yikes! And yes I will be going on a debt diet starting January!

  15. Sometimes it’s easier to stay in denial and pretend that nothing is wrong. In the long run, it’s probably the worst thing you can do, but short term it’s all some people can do to get by.

  16. I saw a documentary a few years ago, whose subject was the poverty in Jamaica. It talked about how the country was offered a loan, by the IMF, to develop infrastructure – infrastructure which didn’t help the country, ultimately. It also left them with debt which they cannot possibly repay. They have become financial slaves to the IMF. This scene replays itself over and over again, all over the world on both the national and individual level. There are no chains involved, but we are slaves to the money lenders of the world….and we walk into that situation with our eyes wide open and staring at the new toys we think we can’t live without. What fools we are! Maybe a tad off topic but speaks to the basic situation of all indebted people.

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