The Need for Canadians to Control Their Spending
Every January, the thought of most Canadians is, “where can we book that last minute vacation,” or “I wish I bought a snow blower to deal with the winter weather”. The next big moment that comes towards the end of January is when we go to our mailbox and that dreaded credit card bill is waiting.
December is a great month of celebrations and family get togethers, but all of that commercialism comes with a price tag and the lavish spending rears its ugly face in January.
Canadians today are taking on more debt than ever before. A CBC news report states that the average Canadian now owes $22,081 of consumer debt and that figure doesn’t include mortgage debt. All told, consumer debt among Canadians has now totaled a whopping $1.7 trillion. Credit cards balances as of the end of June were $2,280 and other debts excluding mortgages totaled just shy of $20,000.
It’s a challenging time for most Canadians! Prices of goods have been rising faster than wages. Mortgage rates on renewal are higher now than they were 5 years ago and most Canadians are finding that there is less money left over after expenses each week. The challenging news is that prices aren’t going down and mortgage rates may be on the rise, so we have to start being disciplined in order to lessen additional debt.
So what do we do? Well, here are a few thoughts that can hopefully ease your sleepless nights when it comes to the debt most of you are creating:
1. Design and live within your budget. This may seem hard and it’s not going to be fun, but it’s the only way to fix the source of the illness: your over-spending.
2. Think twice before you trade in your car for a newer, fancier model and then roll your monthly payments into a longer term. Cars are the worst investment, period.
3. Skip using credit cards at Christmas and try to pay in cash.
4. Avoid keeping up with the Jones’. No one really cares about what you have and in the end, it’s you who is stuck with the debt for playing a big shot.
5. Always pay off your monthly credit card balance. Banks get rich on selling debt, not savings.
Stop allowing the banks to get you to take on more debt via a new credit limit increase. When these options come in the mail, shred them as fast as you can
In the end, as humans, we tend to gravitate to what’s fun and easy. Short-term gain gives over to long-term pain. However, I do know that our wealthiest clients don’t engage in high amounts of consumer debt. The greatest way to create wealth at any income is to get out of debt as fast as possible and maintain discipline on personal credit.