A growing number of Saskatchewan and Manitoba residents are entering 2019 with a dreary financial outlook, according to a quarterly consumer debt index.
The survey released Monday from national insolvency firm MNP Ltd. showed the proportion of those who are $200 or less away from financial insolvency at the end of the month jumped 14 per cent in December to 56 per cent from just 42 in September.
Forty-seven per cent of respondents said they will not be able to cover all living expenses in 2019 without going further into debt, and less than one-third are confident in their ability to cope financially if an unexpected life-changing event occurred.
Those in the two prairie provinces are the most likely to identify with being in this situation compared to residents in other provinces across the country. The number of residents in these jurisdictions who say they are feeling the pinch of rising interest rates also jumped four points since the last wave to 51 per cent.
Around 47 per cent are concerned continued climbs in the Bank of Canada’s benchmark rate could impact their finances, while half believe they could be left on iffy financial ground if rates continue to rise. Around half believe growing rates could hinder their ability to repay debt and more than a third are worried it could send them toward bankruptcy.
Licensed Insolvency Trustee with MNP Pamela Meger pointed to a comfortability with debt and the low cost of borrowing for the past number of years as to why households have reached an impasse with their finances.
The Bank of Canada has taken an aggressive stance with its key interest rate, hiking it five times since the summer of 2017. But with the central bank pausing its upward trend for the time being — most recently opting to maintain the overnight rate at 1.75 per cent in December — Meger is hopeful people will be able to get their books in order.
“The first one people didn’t understand what the impact was fully and now everyone goes I need to get this in check because it is eating up my cash flow,” she said.
Many people, she said, are now scrambling to see what they can to do bring down their debt, but unfortunately, it is coming too late for many. This lead Meger to stress the need to talk to financial advisors sooner rather than later.
Haunting many monthly budgets, Meger said, is unsecured debt, especially home lines of credit. She urged people to lock rates in low where they can and work to pay off floating loans.
“Those can be significant,” she said. “When the interest rate goes up, your payment jumps quite a bit and it eats up that cash flow.”
She said the very private nature of financial struggles can leak well beyond the bank and create added pressure in someone's life. The sense of failure, she said, can have negative impacts on relationships with friends, family and significant others.
A phrase heard all too often from Meger’s clients, she said, is “I wish I would have done this sooner.”
“You don’t realize how stressful it is until you don’t have it anymore. Every day you feel guilty buying a coffee or you feel guilty about going to a movie because you think you don’t have enough money to be doing this,” she said. “It is about your sanity.”
While Meger said it is up to individuals to live healthy financial lives, she said insolvency can happen to anyone.
“It doesn’t matter how much money you make. You have to stay focused on finances and make good choices,” she said.
Though rising interest rates and ballooning inflation have created a “bit of a perfect storm” and pushed people to “crunch time,” she finds more people are focusing on their budgets than ever and are starting to understand what it means when interest rates go up and how it impacts them personally.
The survey found one year from now, 36 per cent of Canadians expect their debt situation to improve, whereas 47 per cent expects their debt situation will improve in five years.
The data was compiled by Ipsos on behalf of MNP between Dec. 7 and 12, using a sample of 2,154 people interviewed online. The poll is accurate to within ± 2.4 percentage points, 19 times out of 20.
On Twitter: @JournoMarr
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