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Date

May 23, 2023

How are Canadians getting out of debt in 2023?

The BDO Affordability Index finds out how Canadians are tackling the affordability crisis and managing debt.

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How are Canadians getting out of debt in 2023?

Young parents looking at finances at home with baby

It’s hard to get out of debt in 2023.

Housing, groceries, and borrowing costs have all increased with inflation and rising interest rates.

We asked Canadians how they’re managing debt and what they’re doing to weather the affordability crisis.

Here’s what they told us.

How are Canadians coping with debt in 2023? 

Affordability Index 2023 - Graph #1

View accessible results
56% - are cutting back on non-essentials like vacations or eating out to make debt payments
43% - are sacrificing some essentials like food, clothing and utilities to make debt payments
26% - would consider taking on extra work to pay down debt
30% - are overwhelmed by debt and don’t know what to do about it

How are people responding to inflation?

Managing debt becomes even more difficult when expenses are at an all-time high. Affordability has reached a crisis point and Canadians are trying different things to cope.

Affordability Index 2023 - Graph #2

View accessible results
Reducing living expenses - 50%
Reducing savings - 27%
Adding extra revenue (through part-time work) - 13%
Relying more on credit or getting a loan - 11%
Selling assets - 8%
Finding a new full-time job - 6%
Relocating - 4%
Watching my spending - 3%
Other - 1%
No need to make any changes - 24%
Woman looking at receipt after grocery shopping

How are different people across the country coping?

Quebecers are the most likely to say they are reducing their living expenses (62%) to cope with inflation, and those in BC are the least likely (40%). But the reverse can be said about reducing savings. Fewer Quebecers (20%) are reducing savings to cope with rising costs compared to residents of BC (40%).

Canadians aged 18-34 and residents of BC are the most likely (16%) to take on more credit to get by.

Nancy Snedden portrait

"One of the best ways to cope with inflation is to downsize expenses. Reduce non-essential spending and adapt to the current climate. Taking on debt or reducing savings to keep the status quo can have long-lasting consequences."

Nancy Snedden, Licensed Insolvency Trustee & President of BDO Debt Solutions

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What is the best approach to getting out of debt?

To get out of debt, you need to look at your whole financial picture, explore ALL your options, and choose the right set of solutions for you. This looks different for every household. Not everyone has the ability to take on extra work, and sometimes many people have already cut back as much as they can.

The key is to face your full financial reality, be realistic and focus on moving forward.

Take a coordinated approach to get out of debt

budgeting icon

1. Budgeting

Every good financial decision starts with a budget. A budget will help you to:

  • Reduce non-essential spending as much as you can so you can put more towards debt repayment.
  • Move money around. If you need to overspend in one area, you can adjust somewhere else to cover the extra costs.
  • Treat savings as a necessary expense.

Learn more about budgeting

2. Managing debt

Improving the way you manage your debt can help you make ends meet, free up extra resources, and help you start planning for the future.

  • Start by understanding your debt-to-income ratio.  

  • Explore all your available options.  

  • Giving yourself a plan. Look at our calculator.

Visit our tools section

3. Increasing revenue streams

Can you earn more money? Can you diversify your revenue streams? Every little bit helps, and it can help bolster your savings and debt repayment plans.

  • Think short-term. Can you declutter and sell some of your belongings to free up some extra cash?
  • Think mid-term. Can you find extra income through gig work? Renting out space in your home? Your vehicle? There are lots of ways to start a side hustle to help cope with the cost of living.
  • Think long-term. What are your career aspirations? Working towards growing your career will lead to increase in salary.

Learn more about side hustles

How do I get out of debt when I don’t have any money?

When you can only afford to make your minimum payments, it’s almost impossible to get out of debt. In this situation, you may need to explore debt management strategies that freeze or reduce interest payments or that reduce or erase the debt that you owe.

"Reducing your debt burden is one of the best ways to cope with the affordability crisis. But there’s a hitch, most people are unfamiliar with debt management strategies. Debt is still a taboo subject for many people and is often not talked about with friends and family. It’s why we strongly encourage people to explore their debt relief options. Many households have already cut back as much as they can on their expenses, and not everyone has the time, ability or capacity to take on extra work."

Nancy Snedden, Licensed Insolvency Trustee & President of BDO Debt Solutions

How much do Canadians know about debt management?

It’s no secret that Canadians carry a lot of debt. The average Canadian owes around $1.80 for every dollar of disposable income.

But how much do they know about the help that is available to them if they are struggling?

Debt can be a huge drain on a household’s income. And when it comes to downsizing expenses, there are similar strategies that can be applied to debt.

Did you know that many Canadians are simply not familiar with the debt solutions that are available to them.

How familiar are people with debt solutions?

Affordability Index 2023 - Graph #3


View accessible results
Debt consolidation loan
  • Not at all familiar - 29%
  • Somewhat familiar - 53%
  • Familiar - 18%
Debt management plan
  • Not at all familiar - 32%
  • Somewhat familiar - 53%
  • Familiar - 15%
Consumer proposal
  • Not at all familiar - 51%
  • Somewhat familiar - 37%
  • Familiar - 12%
Bankruptcy
  • Not at all familiar - 25%
  • Somewhat familiar - 55%
  • Familiar - 20%

Need a debt solution cheat sheet?

idea icon

Debt consolidation loan
  • Simplifies financial obligations
  • Reduces interest charges

Learn more

Debt management plan
  • You repay 100% of debt on reduced interest
  • Note on credit report

Learn more

Consumer proposal
  • Renegotiates & reduces debt, from 30%-80%
  • 7-year note on credit report

Learn more

Bankruptcy
  • Erases unsecured debts
  • 7-year note on credit report

Learn more

What are the consequences of not knowing what debt solutions are available to you?

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1. Your debt problems can get worse.

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2. You end up paying more money than you need to.

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3. You may be denying yourself important financial relief.

Are you unsure about what to do about your finances? Talking to a Licensed Insolvency Trustee can be a big source of comfort. Book a free, no obligation consultation to learn more about your options.

Canadians helped across Canada

We'll find solutions to your debt problems

Talking about money can be uncomfortable & intimidating, which is often enough to prevent you from getting the help you need.

At BDO, we believe that judgement-free, compassionate support goes a long way to making that first step just a little bit easier. We know that debt problems can happen to anyone and there's no shame in seeking help.

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About the BDO Affordability Index

In partnership with BDO Canada, Leger conducted an online survey from April 14 to April 16, 2023, among a representative randomized sample of 1,549 Canadians age 18+. Significance testing is done at a 95% confidence level.

Date

May 23, 2023

How are Canadians getting out of debt in 2023?

The BDO Affordability Index finds out how Canadians are tackling the affordability crisis and managing debt.

Share
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