How Can Exploring Options Help a Debt “Realist”?Feb 18, 2016
With the resolutions of a new year still in the back of our minds, many Canadians are feeling optimistic about their finances in 2016. This according to a recent poll from BDO Canada and Ipsos Reid, which finds that 49 per cent of Canadians forecast their debt levels to decrease by the end of the year. The other half of Canadians, then, are debt “realists” who may have a more pessimistic – or realistic – outlook. These may be people who are struggling with paying bills, in deep enough that a year doesn’t seem like enough time to really make a dent in debt payments. For these individuals, exploring solutions like debt consolidation to reduce debt can be beneficial.
In Canada, household debt has risen consistently and now sits at the highest among G7 nations at 171 percent of disposable income. This can be attributed to many factors, but predominantly it shows that Canadians are taking advantage of an extended period of low borrowing rates.
Throw a correction in the market into the mix, though, and many could be left paying higher monthly debt payments they might not be able to afford. In the BDO/Ipsos Reid poll, 29 per cent of Canadians felt they would experience difficulty if payments went up just $100.
Debt realists in the Northwest Territories are already dealing with higher food prices than most of the country, and if additional debt payments were to make your budget situation more tenuous, it’s important to explore credit and debt solutions ahead of time.
How can exploring debt options help?
A Trustee can assist you in managing money and handling debts. They can explain solutions like consolidation and debt management plans, and provide advice on how to rework your budget with the goal of focusing on debt repayment.
For debt realists, this last point is key. Low interest rates, higher food prices, and falling gas prices will all affect your budget. Currently, the downturn in the oil sector has meant low gas prices, and a weak loonie has resulted in higher prices at the grocery store. If you’re spending less money at the pump, can the savings be put toward debt repayment? Or will you need the extra funds for groceries? Adjusting your budget as expenses fluctuate with the economy, while holding strong with your debt repayment plan (putting a focus on debts with high interest rates), is a great way to reduce your debt load and stress.
Another opportunity could be debt consolidation. This option combines your existing debts in one loan with one monthly payment. These type of loans are not all created equal. The interest rate quoted on the consolidation loan should be lower than what you’re currently paying. Also, be mindful of any management or services fees.
Being realistic, should you expect interest rates to go up?
In the past six months, we’ve heard differing opinions on whether interest rates will go up. While the risk of a housing correction is high in certain markets, the banks have recently committed to keeping interest rates steady.
That said, there are nay-sayers out there. The Royal Bank of Scotland recently advised clients that a “cataclysmic year” was on the way, with a global crisis similar to 2008 ahead.
Even with forecasts like these, debt realists don’t have to resign themselves to accumulating additional debt this year. They can put in place debt options that will help them pay down their debt, and achieve financial stability, regardless of the rocky economic waters around them.
Seeking debt help in Yellowknife? Feeling more realistic than optimistic about 2016? Join the conversation on social media by using the hashtag #BDODebtRelief.