The daily financial decisions Canadians are forced to make have significant impact on their lives. Knowing the right answers when addressing personal debt and finance would be nice, but that’s not always the case.
People don’t know what they don’t know
A recent study conducted by Loans Canada showed that many Canadians, including those in Barrie, are not saving regularly. The survey also revealed that nearly 70 per cent of the 1665 respondents said they felt confident about their financial know-how, but when questioned about their financial habits, their performance told a completely different story.
Close to 50 per cent of who said they felt good about their financial literacy also claimed to not track their expenses or spending habits or pay their credit card bills in full every month.
And the most surprising survey finding? Canadians who claim to be financially knowledgeable typically have larger debt compared to people who admit their financial literacy is lacking.
Read all of LoansCanada.ca’s findings here.
Why are Canadians in Debt?
Canadians enjoy spending money – it’s easy to do. Data shows that the average Canadian consumer is drowning in $8,500 in consumer debt, not including their mortgage. While approximately 12 per cent have consumer debt over $25,000.
Combine bad spending habits with not tracking expenses and not paying credit card bills in full each month, Barrie residents can accumulate debt very quickly, which can feel overwhelming.
Without improving financial literacy and learning basic financial management skills, Canadians can be more easily lured into debt, which makes it challenging for credit-constrained Canadians to climb out of a personal financial crisis.
Almost half of credit-constrained Canadians have taken out multiple loans, with 44 per cent doing so just to make ends meet.
The devastating effects of financial illiteracy and the consequences of debt
Unmanageable debt levels, poor credit ratings and derailed savings plans can create barriers, making future goals and aspirations hard to meet.
How can Canadians get control of debt problems?
Debt tracking: Take note of all debts to see exactly what’s owed. This will help form the best strategy to reduce or eliminate debt.
Monthly budgeting is crucial: Creating a budget is key to eliminating debt. A monthly budget should include both fixed expenses like car and mortgage payments, variable costs and debt repayment. Come up with ways to reduce spending each month.
Pay on time, pay in full (if possible): Interest is accumulated each month when only the minimum credit card payment is made. To avoid this, pay on time and in full.
Lower the cost of debt: Refinancing or consolidating high-cost loans may lead to a lower payment. Choose to pay down the highest interest loan first.
By increasing financial literacy, Canadians can improve their financial well-being. Loans Canada’s research shows that over confidence does not protect from the pitfalls of bad financial behaviours.
"There are a lot of free financial literacy resources available to Canadians, both from the government and private institutions,” explains Loans Canada Chief Technology Officer, Cris Ravazzano. “For example, Canada.ca has a whole section dedicated to money and finances with great information that all Canadians can benefit from. And at Loans Canada we're always creating educational content about credit building and debt saving strategies. I think more effort is required to increase awareness about these types of resources."
Gaining and maintaining financial literacy is the foundation of good financial outcomes and greater financial health as a whole.