Three-quarters of Canadians risk missing out on 2016 tax savings
A new poll from CIBC finds that paying down debt is once again the top financial priority for Canadians in 2017, the seventh straight year that debt concerns have headlined the annual survey. Coming in at nearly 30 per cent, prioritizing debt repayment is at its highest level since 2010.
“With debt loads continuing to climb, it’s encouraging that repaying debt remains a top priority for Canadians,” says Scott Wambolt, Senior Vice President, Retail and Business Banking, CIBC. “However, with some Canadians saying they are taking on debt just to cover day-to-day expenses and too few actually seeking advice on how to build a repayment plan, it’s clear there is a gap when it comes to taking action on debt reduction.”
Key poll highlights include:
- 28 per cent of Canadians say paying down debt is their top financial priority for 2017.
- Of those prioritizing debt repayment, the vast majority (76 per cent) are most concerned with paying their credit card and line of credit debts. This is consistent with findings from the recent CIBC Holiday Spending poll.
- Encouragingly, 70 per cent of Canadians say they did not take on any new debt in the past 12 months, while 28 per cent did.
- Among those incurring new debt, almost a third (32 per cent) cited managing day-to-day expenses beyond their monthly income as the primary reason for debt accumulation.
According to the latest data from Statistics Canada, household debt, including mortgages, rose to a record 166.9 per cent of after-tax income in the third quarter, with debt loads rising faster than disposable income.
Few will take sufficient steps to reduce debt
The findings also revealed that just over half of Canadians surveyed (52 per cent) plan to reduce their spending on non-essential items to meet their 2017 financial goals. Yet, only a quarter (26 per cent) will actually set a household budget, and fewer still (12 per cent) will meet with a financial advisor to get professional advice on how to reduce their debt and meet their financial goals.
“It makes it difficult to meet your 2017 financial goals if you aren’t taking advantage of advice and tools that can help, which partly explains why debt repayment is consistently the top financial priority for Canadians,” said Mr. Wambolt. “If you want to get in shape, you go to a fitness coach or trainer. Quitting smoking? You speak to your doctor. It’s the same if you want to meet your financial goals – you go to a financial advisor. Working with an expert on a clear action plan can help you make real progress on your goals.”
While debt can be concerning for many, Mr. Wambolt advises to have a balanced approach to debt reduction and savings. “This is where advice can make a real difference, since there is no one-size-fits-all model,” he adds. “It’s important to have a conversation with your advisor early on so you can work together on a unique plan that fits your needs and helps you reach your goals in an achievable timeframe.”
- Talk to an Advisor – put realistic steps in place to reduce interest costs and accelerate debt repayment. Pay off your most expensive debts first and/or consolidate your consumer debts into one loan with one payment at a lower interest rate.
- Create a spending plan and recognize that your finances are all connected – progress on one financial goal can open up opportunities to improve others.
- Focus on longer term – controlling spending and eliminating high-interest debt is vital and will help you build your retirement savings. Even small contributions today can make it easier to grow your wealth or investments.
- Stick to the plan – If you fall off track, get back to your plan as soon as possible and keep making progress towards your goal.