It's a pessimistic start to the year for personal finances
Millions of Canadians are facing the reality of personal finances that have been further eroded by holiday spending, driving their debt burden higher and weakening their financial outlook for the year.
One of the leading barometers of the state of Canadian household’s money management reveals a negative picture for many as they struggle with the cost of living and borrowing that may be getting out of control.
The MNP Consumer Debt Index, published today (Jan 13.) shows a 10 point drop from the previous quarterly poll with the reading (79) hitting its second-lowest point, while Canadians’ personal debt rating tumbled 12 points to its lowest ever.
“While interest rate cuts last year provided some initial relief from their financial worries, Canadians are starting the New Year with holiday bills arriving and a more pessimistic view of their finances,” says Grant Bazian, president of insolvency firm MNP.
The Ipsos survey also reveals rising negativity about what’s ahead with 27% of respondents expecting their financial situation to improve in the next year (down 4 points from the previous quarter) with 19% expecting it to worsen (up 7 points).
There is also increased anxiety about the prospect of someone in the household losing their job this year with 41% expressing this (up 9 points), the highest level ever.
More than half of respondents said they are concerned about being able to cover all of their household living expenses in the next 12 months without taking on more debt. And half said they are now just $200 from not being able to pay their bills (up 9 points) while a third say they are already insolvent. While 55% of women say they are close to not paying their bills compared to 44% of men, the quarrel increase is larger for men than for women (13% vs. 4%) quarter-over-quarter.
“Many Canadians are already tightening their finances, reassessing budgets, and exploring cost-cutting measures to manage rising living costs or debt repayment. Unfortunately, in some cases, even substantial sacrifices may fall short of providing meaningful financial relief even in the lower interest rate environment,” adds Bazian. “Less wiggle room leaves households vulnerable to unexpected expenses or the impacts of economic changes. For those already living paycheck to paycheck, any financial disruption could quickly escalate into a crisis.”
