Gain and pain - Canadians tell their debt story
Positive result from debt envisioned but sleepless nights a reality for many
Winnipeg, MB – May 25, 2011– According to the latest research from Investors Group, a majority of Canadians who are in debt say they believe it will have a positive future impact on their life.
Of the 75 per cent of Canadians who say they are in debt, more than half (54 per cent) point to purchasing property as the main reason. Another 37 per cent have used debt to invest in home renovations. Nearly one-in-four (28 per cent) have gone into debt to make a financial investment and 18 per cent have taken on debt to invest in themselves for skills upgrading or going back to school.
But there’s also a far less positive side to the Canadian personal debt picture.
While being in debt may be the new ‘norm’, 58 per cent of Canadians with debt feel uncomfortable even though they acknowledge they can live with it. Thirty-per cent are outright embarrassed by it. One-in-three Canadians with debt (33 per cent) admit to losing sleep over their debt load and 25 per cent say debt talk has triggered disagreements with their partners.
“The reality is that almost everyone has consumer debt,” says Jack Courtney, Assistant Vice President, Advanced Financial Planning of Investors Group. “But accumulating debt with purpose and putting thought into how debt will be repaid is very different than spending beyond one’s means and without foresight.”
Canadians trying to cope with debt
The majority of Canadians with debt (73 per cent) say they have some idea about how they will pay what they owe. When asked for details, thirty-five per cent said they simply plan to curb their spending. One in four Canadians with debt (27 per cent) are considering more drastic steps. Fourteen per cent are considering delaying retirement and working to pay down their debt while 13 per cent plan to make more money by working at more than one job.
Paying off consumer debt such as credit cards is the greatest priority for 57 per cent of Canadians with debt. Paying off their mortgage is the primary objective for 25 per cent while 18 per cent are focused on paying off personal loans.
When it comes to making a major purchase, most Canadians say they either pay entirely in cash (33 per cent) or as much as they can in cash (41 per cent). Another 13 per cent check their monthly budget to ensure they can cover the minimum payment required but a similar number (13 per cent) say they just make the purchase without worrying about how they will pay for it.
“While debt financing can be helpful in purchasing a home or funding education, debt can also have very negative impacts on Canadians’ ability to save and invest,” Courtney says. “A financial advisor can help develop a long term financial plan that includes managing, reducing and ultimately eliminating personal debt.”
The pulse of Canadians’ debt
- 58 per cent of all Canadians feel they are in great financial shape and only one-third (31 per cent) would go back and do things differently if they could.
- 54 per cent of Canadians with debt say their personal and household total debt has decreased in the past year; twenty per cent say there’s been no change.
- 66 per cent of Canadians say day-to-day living expenses are contributing to their debt load. Three-in-ten cite travel and vacation costs while nearly a quarter (23 per cent) point to entertainment and recreation.
- 31 per cent say their debt makes them feel as though they have achieved acceptable financial status because they are considered credit worthy.
- 40 per cent of Canadians think they have less debt than their friends while only 19 per cent think they have more.
- 15 per cent of those in debt say it is the result of bad budgeting and overspending and eight per cent say they believe they will never climb out of debt.
Aurele Courcelles, Director, Tax and Estate Planning, gives Canadians some advice and helpful tips on how to manage debt on Youtube.
About the Survey Methodology
These data were collected through an online panel survey between April 27 and May 8, 2011. In total, 1,020 surveys were completed nationally. Online panel surveys are non-probability samples and thus margin of error cannot be calculated. However, stratified sampling and weighting was done to bring the sample in line with Census profile.
About Investors Group
Investors Group, founded in 1926, is a national leader in delivering personalized financial solutions to Canadians through a network of approximately 4,600 Consultants located throughout Canada. In addition to an exclusive family of mutual funds and other investment vehicles, Investors Group offers a wide range of insurance, securities, mortgage and other financial services. Investors Group is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada ’s premier financial services companies with over $134 billion as of April 30, 2011 in total assets under management.