Households were granted instalment payment holidays or payment relief at the beginning of the pandemic, allowing them to save money and even create a cushion.
In addition to these measures, others decided to refinance their properties to pay for renovations and home improvements (adding a swimming pool, outdoor furniture for the family, etc.) or to pay off debts (lines of credit, personal loans, credit cards). The number of new vehicle purchases also increased in the first year of the pandemic.
Now it is 2022, and studies and news reports show that Canadian household debt has returned to pre-pandemic levels.
However, increases in the cost-of-living outpacing pay hikes are now a major factor into family budgets. In the past, cost-of-living increases did not influence decisions with regard to day-to-day spending on groceries, recreation, vacation, housing, etc.
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When you plan a trip, you set your GPS and follow the directions. Making a budget is as important as entering a trip destination in your GPS. If you turn left instead of right, the GPS will suggest a new itinerary. It’s the same for a budget.
If it isn’t possible to increase income, spending has to be reduced. But on what?
- Groceries
- Sporting activities
- Family vacations
- Clothes
- Debt repayment
- etc.
Our physiological needs haven’t changed. We still need housing, food and clothing.
How can we reduce payments to reimburse debts? Many people turn to credit to reimburse credit. That’s the debt spiral.
If your total debt excluding your mortgage and car loan is more than 33% of your gross income, you are at risk.
Maybe you manage to make the payments and you have a good credit rating but it’s never too early to consult an expert to evaluate your options. The goal would be to get out of the debt spiral in order to avoid repaying your debts for the rest of your life.
We offer virtual and in-person meetings (following all public health measures), at no charge and in complete confidentiality.
We have been offering a friendly ear for more than 40 years.
Our satisfaction rate is outstanding.
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