Debt can be crippling if you don’t get it under control

I love how Canadians are being smart about their debt and trying to lower the amount of interest they’re paying, but it’s still rather concerning that so many of us have debt.

It’s not like I expect everyone to be debt free, but when looking at the survey results, some of the findings are a bit alarming.

  • 33% of Canadians say their spending growth outpaces their income growth.
  • Nearly 40% of Canadians who went into debt cite doing so because they live beyond their means; 19% cite not being able to break the debt habit.
  • 9% of Canadians admit to being clueless about how much they are spending, every month, on average.

Read those three stats again. Are you surprised? Unfortunately, it really doesn’t surprise me.

I try not to judge anyone, but it’s really not hard to tell when people are spending well beyond their means. I’ve worked with people in the past who would constantly take vacations because they found a deal on flights. Nevermind that they would still have to pay for food, accommodations and attractions. These same people would then complain about how they’re constantly in debt.

Then there are people who always seem to be spending money like it’s no big deal. They’ll brag about eating at the nicest restaurants, they’ll buy a new phone every year (even at a cost of $1,000+), and they’re always wearing the nicest clothes even though they’ve got an entry-level job.

For some of these people, it’s clearly a fear of missing out which leads them to overspend, but for others, it may simply be a lack of education.

Money or credit rather has never been easier to access. You can quickly get into debt and still not feel the effects of it since we’ve become a minimum payment society.

Empower Your Investments with Q Trade

Discover Q Trade's award-winning platform and take control of your financial future. With user-friendly tools, expert insights, and low fees, investing has never been easier.

Start Trading Today

How to get your debt under control

Debt graffiti in Lisbon, Portugal
Ehud Neuhaus / Unsplash

I personally haven’t had any debt issues, but I’ve also always lived by three personal finance rules:

  • Spend less than you make.
  • Pay yourself first.
  • If someone offers you free money, take it!

It’s crazy to think that people these days don’t spend less than they make. If your expenses are more than what you’re bringing in, then there’s clearly a problem.

The issue is that credit makes it so easy to spend more money than you have. If you want to get out of debt, you need to create a budget to ensure that you’re spending less than you make. If you already have debt, come up with a debt repayment plan so you can get out of the red.

When it comes to paying yourself first, build it right into your budget. Make sure you’re setting aside money for things such as vacations, retirement savings and any long term saving goals you may have.

Many people make the mistake of waiting until the end of the month to see how much they have left before they start saving, in most cases, they have nothing left.

As for free money, what I’m referring to is pension plans or RRSP matching that your company may offer. This is becoming increasingly rare so if you do have this an employee benefit, make sure you take advantage of it.

Final word

Giving yourself a financial foundation early will help ensure you’re set up to meet your money goals. However, if you’re currently in debt, there’s no need to panic. Come up with a plan to eliminate your debt and then start saving for your future by using a high interest savings account.

Sponsored

Trade Smarter, Today

With CIBC Investor's Edge, kick-start your portfolio with 100 free trades and up to $4,500 cash back.

Barry Choi Moneywise Contributor

Barry Choi is a Toronto-based personal finance and travel expert who makes frequent media appearances. When he's not educating people on how to be smarter with money, he's earning and burning miles and points for luxury travel.

Explore the latest articles

Can you pay the CRA with a credit card?

Can you pay your taxes using a credit card? Yes, but that doesn’t mean you should. Here’s what to consider before swiping for the taxman

Leanne Armstrong Contributor

Disclaimer

The content provided on Money.ca is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.