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ANALYSIS: It happens every year—the holiday season comes and goes and once January comes around, the bills to start to pile.
This year likely isn’t going to be any different – in fact, it could be a little worse. We have heard from the Bank of Canada Governor Stephen Poloz on many occasions about his concern for Canadians’ debt levels, citing it as a vulnerability to the financial system as the debt levels mount.
It is typically the first few months of the year we see an increase in the number of Canadians struggling to make ends meet. Calls from creditors typically ease off over the holidays, but get ready for it: they will resume in early to mid-January. Once they do, many will realize that holiday financial hangover is worse than expected and recognize they may need some help.
Job losses have also mounted over the past year. To add to that, the dollar is trading at levels we haven’t seen in about 11 years. According to estimates by the Food Institute at the University of Guelph, household spending will increase about four per cent on groceries alone or $345.00 per year. Many Canadians are living close to the margin, and for someone already struggling, these added costs make it even more difficult to manage their debt load.
So what do you do? From MNP Debt, here are a few strategies:
1. Pay off high interest debts: Limit the snowballing of interest owed by paying off debts with the highest rates first.Being strategic about which debts you pay off first can save you a great deal in interest payments in the long term. The fastest way to drastically reduce those payments is to eliminate those high interest credit cards and loans.
2. Consolidate: Consolidating high debts by transferring them to lower interest credit options like a line of credit can also help lower the overall interest payments owed.
Sometimes seeing instant progress helps people get a jump-start. By consolidating debts, the overall debt repayment strategy can be less intimidating.
3. Resolve to create a financial plan for 2016: Make a New Year’s resolution to take control of spending by creating a budget and sticking to it. This will allow you to chip away at your debt more steadily, and prepare for expected and unexpected expenses throughout the year.
Set up an automatic savings plan to set aside some extra cash each month; this can also help build up a rainy day fund, for emergency situations. With the prices of goods such as food set to rise in 2016, saving a little extra each month to account for the increased household expenses is becoming increasingly important.
4. Seek help from debt experts
Those in need of debt expertise often wait too long before reaching out for help. For those that take action early, there are more options to restructure their debt.
Receiving professional help will allow you to resolve your financial difficulties sooner and make the process of getting out of debt less stressful. They can avoid wage garnishes and legal action.As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV