A new study has found that while many Canadians are tackling debt head-on, few actually seek the advice they need to make it less of a concern.
A new poll from CIBC found that paying down debt is once again the top financial priority for Canadians in 2017, said a release from CIBC. This is the seventh straight year that debt concerns have headlined the annual survey. Prioritizing debt repayment is crucial for 30 per cent of Canadians.
"With debt loads continuing to climb, it's encouraging that repaying debt remains a top priority for Canadians," says Scott Wambolt, senior vice-president of retail and business banking for CIBC. "However, with some Canadians saying they are taking on debt just to cover day-to-day expenses and too few actually seeking advice on how to build a repayment plan, it's clear there is a gap when it comes to taking action."
According to the pole, 28 per cent of Canadians say paying down debt is their top financial priority for 2017. Of those prioritizing debt repayment, the vast majority (or 76 per cent) are most concerned with paying their credit card and line of credit debts.
Canadians can find encouragement from the fact that 70 per cent of Canadians say they did not take on any new debt in the past 12 months while only 28 per cent did.
Among those incurring new debt, 32 per cent cited managing day-to-day expenses beyond their monthly income as the primary reason for debt accumulation.
According to the latest data from Statistics Canada, household debt, including mortgages, rose to a record 166.9 per cent of after-tax income in the third quarter, with debt loads rising faster than disposable income, the release said.
The findings also revealed that few will take action to reduce the debt, noticing that only 52 per cent plan to reduce their spending on non-essential items to meet their 2017 financial goals. Only 26 per cent of Canadians will actually set a household budget, and 12 per cent will meet with a financial advisor to get professional advice on how to reduce their debt and meet their financial goals.
"It makes it difficult to meet your 2017 financial goals if you aren't taking advantage of advice and tools that can help, which partly explains why debt repayment is consistently the top financial priority for Canadians," said Wambolt. "If you want to get in shape, you go to a fitness coach or trainer. Quitting smoking? You speak to your doctor. It's the same if you want to meet your financial goals - you go to a financial advisor. Working with an expert on a clear action plan can help you make real progress on your goals."
Debt is a concern for many, so Wambolt advises to have a balanced approach to debt reduction and savings.
"This is where advice can make a real difference, since there is no one-size-fits-all model," he adds. "It's important to have a conversation with your advisor early on so you can work together on a unique plan that fits your needs and helps you reach your goals in an achievable timeframe."
To work on reducing debt, try talking to an advisor in order to put realistic steps in place to reduce interest costs and accelerate debt repayment. Those in debt should pay off the most expensive debts first and consolidate consumer debts into one loan with one payment at a lower interest rate.
Creating a spending plan can help people recognize that all finances are connected. Progress on one financial goal can open up opportunities to improve others.
Focus on longer term solutions such as controlling spending and eliminating high-interest debt. This is vital, as even small contributions can make it easier to build retirement savings.
Stick to the plan. If you fall off track, get back to your plan as soon as possible and keep making progress towards your goal.
CIBC is a leading Canadian-based global financial institution with 11 million personal banking and business clients. The bank offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world.
