It’s Time for Canadians to Focus on Reducing DebtDec 20, 2016
Building a nest egg? Saving for house renovations? Adding to an emergency fund? What should you include in your list of financial goals and priorities for the year ahead? While these are all worthwhile intentions, for many Canadians, the top financial priority will be a focus on reducing debt in 2017.
Why focus on debt? Throughout the past year, there have been countless articles and news reports focusing on the fact that consumer debt in Canada is higher than ever before. The average household debt in Ontario is at almost $21,000, representing a 2 per cent increase from the previous year.
In addition to the average amount, the impact of consumer debt also indicates a need for families to focus on reducing and managing the debts they owe. A recent study shows that 39 per cent of Canadians report feeling inundated by their debt, with one in 10 believing that they will never be debt-free. Furthermore, 54 per cent of Canadians feel that the debt they carry is preventing them from focusing on other important financial priorities like saving for an emergency, contributing to their retirement savings fund or saving for their children’s education. In fact, in order to cope financially, an increasing number of Canadians are choosing to use payday loan services.
In addition to consumer debt itself, there are other factors that suggest the time to focus on reducing and controlling personal debt is now. Increasing mortgage rates, for example, have many homeowners feeling financially strained. Similarly, increasing living costs, such as skyrocketing hydro rates in Ontario, have many families wondering how they will make ends meet and afford to repay their loans.
While these statistics make it clear that it’s important to focus on debt control, it may not be clear the best way to do so, particularly when you’re feeling overwhelmed. In order to make real progress in paying down your debt in 2017, start by setting goals that address two priorities: reduce the amount you owe and avoid adding additional debt.
Start with a focus on creating goals that are SMART — an acronym for specific, measurable, achievable, realistic and time-framed. Goals created using a SMART approach are typically more detailed and provide greater direction and motivation, which increases the likelihood that you will stick to your intentions.
If you are feeling especially overwhelmed by the amount of debt you owe, it’s a good idea to learn more about debt counselling and debt relief professionals. The Financial Consumer Agency of Canada website offers good information on how to get help for your debt. You can also visit the “You Owe Money” page on the Government of Canada website to learn more about available debt options.
A new year is a time to focus on what’s important. For Canadians, that should include a focus on finding ways to reduce and control your debt in order to ensure a financially balanced and stable year ahead. Take time this month to consider your debt reduction goals and make a plan to implement them.
IWhat are your financial goals for reducing debt in the new year? Going the conversation and share your thoughts with BDO Lindsay using the hashtag #BDODebtRelief.