BDO report highlights how people are cutting back on spending amid ongoing affordability challenges
The continuing challenge to balance household budgets is requiring some tough choices for millions of Canadian families.
A new report from debt help firm BDO Canada reveals how households are coping with the cost-of-living crisis and how their debts are impacting their ability to manage.
More than half of survey respondents (56%) are cutting back on non-essential spending to cope with inflation, but three in ten are feeling so overwhelmed with their debt loads that they don’t know what to do to tackle the situation.
Addressing debt is a key consideration for poll participants with one third planning to reduce their debt in the coming year by better budgeting. This rises to 47% among under 35s.
Last week, Canada’s housing agency CMHC warned of a potential rise in mortgage defaults as debts become unmanageable for many homeowners.
For those with a household income below $40,000, 67% of respondents to the BDO poll said they were reducing spending on non-essentials but 58% said they were also cutting back on essentials such as groceries, clothing, and utilities.
As well as lightening their debt burden, respondents were also considering new income streams.
Nearly one third said they would take on extra work to have more financial independence, pay for essentials, and pay down debt. About a quarter of those aged 18-34 have already added to their revenue streams through part-time work to cope with inflation.
Debt management
While many people are struggling with debt, the survey found a knowledge gap in debt management options and – for those in more severe circumstances – consumer proposals as an alternative to bankruptcy.
"Reducing your debt burden is one of the best ways to help cope with the affordability crisis," said Nancy Snedden, national leader of the BDO Debt Solutions practice. "But there's a hitch, most people are unfamiliar with debt management strategies. Debt is still a taboo subject and is often not talked about with friends and family. It's why we strongly encourage people to look into their debt relief options.”
