Are You Dangerously in Debt?

Jun 13, 2022

A recent report from ARO, the Montreal-based credit management company, bluntly stated:

At this point, according to Statistics Canada, every Canadian has an average debt of $1.73 for every dollar they have earned. That’s a whopping total of $2.1 trillion for the entire country.

The ARO report adds: “While it’s true that most people have taken on more debt during the past few years of life in a pandemic, the senior population, in particular, has been disproportionately affected. This is after a record-setting pace early in the pandemic, when everyone seemed to be paying off more debt than ever before.”

The evidence suggests that increasing numbers of seniors are carrying debt into retirement in the form of mortgages, credit cards and lines of credit. If you’re like many retirees and are on a fixed income, it could be all the more important to reduce your debt as quickly as possible, for the simple reason that rising interest rates will increase your debt payments and cut into your income.

Do You Have a Problem?

Is a high amount of debt one of your major concerns? According to the Canadian Bankers Association, you have a debt problem if you:

  • Can’t make your minimum monthly payments on your credit cards
  • Need to use credit to pay for basic living expenses
  • Aren’t sure how much you owe
  • Always seem to have unmanageable debt
  • Have financial problems that are affecting your work or family life

What Action Can You Can Take To Help Relieve Your Debt Woes

The Canadian Bankers Association also offers some reassuring, non-alarmist advice about how to reduce your debt. Rather than panic – which all-too-many debt-beleaguered people tend to do – they recommend two very manageable steps:

  1. Talk to your bank and your other creditors to discuss the situation and find out if there are options to help you pay off your debt. Banks are willing to be flexible and help customers make alternative arrangements to repay the money they owe.
  2. Consider help from a not-for-profit credit counselling agency. Such an agency can provide guidance on budgeting and money management. If necessary, they can also assist you with an intervention on repaying debts through structured debt management plans.

The Canadian Bankers Association also suggest the following four solutions designed to help ease your debt load:

  1. Make bigger payments. Don’t just make the minimum payment – pay as much as you can.
  2. Pay off the most expensive debt first: credit cards, department store cards, those with the highest interest rates.
  3. Consider consolidating. Check whether a consolidation loan from your bank or credit union might be less costly. If you can arrange for one, you’ll only need to make one payment each month which can help reduce your stress level as well.
  4. Find extra money. Do you have a budget? Review your monthly expenses and find places where you can cut back to free up cash for paying off your debt faster. For example, by cutting out your takeout coffee you could probably free up $50 a month ($600 a year) to put towards your debt.

A Word to the Wise

The Canadian Bankers Association also encourages you to consult The Financial Consumer Agency of Canada website which urges consumers “to be cautious of debt settlement companies and their high-pressure sales tactics, unrealistic claims about slashing their debt, misleading information about protecting their credit rating, and false claims about government involvement or approval.”

Our credit union partners at Coastal Community Credit Union, Coastal Community Private Wealth Group or Interior Savings are available to help you find solutions to improve your financial health and well-being (and your peace of mind). It’s worth a conversation – after all, they’re the financial experts!

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