Canadians are struggling with debt, from credit card bills to mortgages and loans — recent studies from TransUnion Canada and Equifax have found millions of people dealing with trillions of dollars in debt. As we pass the midway point of 2024, there are things that can be done to try and manage your money.
Last month, Equifax Canada found consumer debt had risen to $2.46 trillion at the end of this year’s first quarter.
Rubina Ahmed-Haq, a personal finance expert and host of For What It’s Worth on the Corus Entertainment radio network, told Global News a good way to tackle debt is to “do the basic work.”
That can include:
- Cutting back on extra purchases
- Shopping with savings in mind
- Don’t buy things you don’t need
- Take a road trip instead of paying airfare for a holiday
“Making these real decisions that actually save you money for the meantime,” she said. “They’re going to get you through this moment in time.”
Earlier this week, TransUnion found some Canadians are changing their saving habits, with 17 per cent even putting more away for a rainy day.
Barry Choi, personal finance expert at Money We Have, told Global News that while it’s good to still be able to put money away, be careful how much if you’re still dealing with debt.
Financial news and insights
delivered to your email every Saturday.
“If you’ve got credit card bills or any other kind of debt that has a high interest, you should definitely be focusing on that,” he said.
Not all Canadians can avoid missing a payment.
According to Canada’s Office of the Superintendent of Bankruptcy, the total number of consumer insolvencies — those who could not pay their debt on time — for the 12-month period ending May 31 rose by 17.9 per cent compared to a year ago.
Canadians have two options when facing insolvency:
- A consumer proposal, in which a person formally agrees to settle debts with their creditors without filing bankruptcy, by renegotiating what they owe and repaying a portion based on what is affordable with up to five years to pay it off
- Filing bankruptcy, which sees you legally sign over your assets; those are then liquidated with the money distributed to your creditors
Rob Kilner, a licensed insolvency trustee with MSI Spergel, says either is often the “last resort,” when they’ve exhausted all other options to pay off the debt, but he adds it’s not the “end of the world.”
“It’s rehabilitative, the process,” he said. “It’s not that dark cloud that hangs over you, so you can come back from it.”
It can help with easing debt, but there are some pitfalls, including the impact to your credit score, which can make it more difficult to borrow money for things like a car loan, opening a new credit card or even getting a mortgage.
Choi says it can be a way to eliminate debt when other methods have been exhausted, but if you consider going this route talk to a licensed trustee who can give advice on what the best choice is and potentially assist in avoiding such a choice.
If you do file a proposal or bankruptcy, he adds, you should take steps to prevent it from happening again by not repeating the same mistakes.
“(Canadians) don’t educate themselves about how to use credit successfully the second time around,” he said. “Once you either get a consumer proposal or declare bankruptcy, you’re moving forward with your life and you want to repair things and just admit to your mistakes.”
© 2024 Global News, a division of Corus Entertainment Inc.
