Canadians used pandemic savings to pay down debt

The desire to pay down debt could be spurred in part by the rising inflation weighing on people’s minds and pocketbooks, Ms. Lucreziano points out.

“We see it everywhere from the grocery store to the gas pump,” she says. “Food costs have gone up by more than 8%. It means a $200 grocery bill has increased more than $16.”

Gas prices are another cost that has risen about 40% over the past year, she says. What was a $70 tank of gas now costs about $98.

“This is a big adjustment, especially for those who commute or who plan to travel,” she adds.

Those rising costs continue to weigh on the minds of Canadians with debt.

Forty-four per cent of Canadians with debt would be concerned about their ability to make regular debt payments if interest rates rise and continue to rise this year, according to the poll findings.

With the cost of living on the rise, Ms. Lucreziano advises that Canadians “make sure that they have the right strategies in place to help them address the impact of inflation on their spending.”

It’s important to revisit your budget frequently, but especially now as rising inflation and rates impact spending and debt servicing costs. The past 2 years has taught us to prepare for managing our debt loads if the unexpected happens, such as a loss of income, Ms. Lucreziano adds.

Everyone needs to take the pulse of their debt-to-income ratio, or how much they owe in relation to how much they earn. A good strategy is to aim for 35%  or less.

An advisor can help assess that ratio and create a personalized debt management plan. “It’s also a good opportunity to look for ways to save or scale back on non-essential costs,” she says.

With pandemic restrictions easing throughout Canada and the world, 42% of Canadians expect they will spend more money this summer than the previous 2 summers, but very few are willing to take on further debt to do so.

Paying down debt and saving remain top priorities in these tumultuous times, Ms. Lucreziano adds.

“Focusing on managing finances with an eye to preparation and planning can support Canadians so they feel prepared and confident.”

Source:  The Consumer Price Index, March 2022 Opens in a new window.

From March 3 to March 4, 2022 an online survey was conducted of 1,520 randomly selected Canadian adults who are panelists of Maru Voice Canada Opens in a new window.. This survey was executed by Maru/Blue Opens in a new window.. For comparison purposes, a probability sample of this size has an estimated margin of error which measures sampling variability of +/- 2.5%, 19 times out of 20. The results have been weighted by education, age, gender and region. In Quebec, results were also weighted by language to match the population, according to Census data. This is to ensure the sample is representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.

Originally published in The Globe and Mail, May 2022.