Why You Should Focus on Your Debt Plans NowFeb 24, 2016
Canadians are split down the middle when it comes to debt management, debt relief and their debt plans. In a recent study conducted by Ipsos Reid Canada on behalf of BDO Canada Limited, almost half of Canadians expressed a feeling of optimism regarding their debt, indicating a belief that they would improve their overall debt levels by the end of the 2016. 51 per cent were not that positive, however, with 40 per cent indicating that they thought their personal debt levels would remain unchanged throughout the year and 11 per cent indicating that they thought their debt would actually increase. Whether you’re a debt optimist or a debt pessimist, it’s important to focus on your debt plans this month. Here’s why:
Rising costs of living
The cost of living is increasing. Housing prices remain steady in Orillia, but rising food prices and municipal tax hikes in the Orillia area mean that many families will need to make adjustments to their budgets, which could mean less money towards debt repayment.
While a rise in interest rates is not expected in the immediate future, a recent report states that we’ll see an end to low interest rates in the next few years. This could also cause debt headaches for some, with 29 per cent of Canadians indicating that an increase of as little as $100 would be financially problematic. As such, focusing on debt management now, before these increases occur, is a wise idea to help you stay in control of your money and debt.
Expect the unexpected
No one expects the unexpected, until it happens. Although you may feel confident in your ability to manage your debt now, what if an illness, unexpected job loss or separation were to happen? Would you still be able to cope with the debt you carry? 70 per cent of Canadians felt that an unexpected injury or illness would likely pose a serious challenge to their financial stability and well-being. 63 per cent felt the same way about an unexpected job loss in the family, and almost half of Canadians reported that a divorce or separation would be financially problematic. Focusing on debt relief and paying down debt now, as well as creating an emergency savings fund, is key to protecting yourself against these financial challenges.
Prepare for the future
Focusing on your debt plans now is also key to preparing for the future. Despite the economic implications, many seniors are finding themselves retiring with debt. Many Canadians are also retiring earlier due to circumstances beyond their control. Over half of Canadians indicated that retirement would be financially difficult. Reducing your debt will not only help you now, but also prepare you financially for the future.
If you’re not sure where to start when it comes to your debt plans, you may want to begin by taking stock of your debt and determining how much you really owe, including interest. A debt calculator can help you with this task. Next, consider the various debt reduction strategies, such as debt consolidation or a home equity loan, to help you repay this debt more efficiently and perhaps even save money on interest. If you aren’t sure which strategy is best for you, consider a consultation with a debt relief professional such as a Bankruptcy Trustee or credit counsellor, who can provide you with advice about viable debt relief options.
Are you a debt optimist or a debt pessimist? How does your debt personality affect your debt plans? Share your thoughts and join the conversation with BDO Orillia using the hashtags #BDODebtRelief