On January 2, 2013 the CIBC released their annual survey of Canadians’ financial priorities. For the third year in a row, “paying down debt” was the Number One priority, with 17% of Canadians identifying this as a priority in this latest survey. Building savings, managing day-to-day spending/budgeting and retirement rounded out the top four priorities.
It is great to see that debt reduction is the number one priority for Canadians, but it shouldn’t be that big of a surprise. The ratio of debt to income in Canada is 164%, which means that for every $1 we as Canadians earn, we owe $1.64. This is one of the highest of the G8 Nations and is even higher than the current ratio for the U.S. It is about the same as levels seen in the U.S. and the U.K. just before their economies crashed in 2008.
The Bank of Canada and Finance Minister Jim Flaherty have been warning about debt levels for a number of years now. Prime Minister Stephen Harper has indicated that consumer debt levels are the number one domestic threat to the Canadian economy.
We should read CIBC’s survey with a bit of skepticism; stating that paying down debt is a priority is one thing, but actually doing something about it is entirely another thing. Despite the fact that this is the third year in a row that Canadians have felt that debt reduction was a priority, over that same period our debt levels have continued to rise. Despite their best intentions, Canadians have struggled to reduce their debt load. There are many reasons behind this, including the fact that the interest rates on credit cards are so high that people are just not able to make a dent in their debt levels.
I meet with many people who have known they have debt problems for many years, but have not been able (for a variety of reasons) to take the steps needed to deal with their debt. If people had come to see me sooner, many of them would have had more options available to them – and substantially less stress over time.
Many people are afraid to see a Trustee because they assume a Trustee = Bankruptcy. Nothing could be further from the truth. As a Trustee, I have an ethical responsibility to review all options with the people I meet. As a result, I have referred many people to other professionals to help them deal with their debt problems without filing a bankruptcy.
We should all make debt reduction a priority for 2013. One of the best ways to do this is to set up a no cost, no obligation meeting with our firm. We will review your situation and develop a plan that best fits your needs. In most cases, the plan will not result in filing a bankruptcy.