Affordability Index: What Should You Do When Affordability is a Problem?

Is debt affecting your ability to meet your basic needs? The results of our first BDO Canada Affordability Index reveal that a significant number of Canadians are not only struggling to meet their long-term needs, they’re also finding it difficult to meet their basic living needs.

What are a few of the biggest affordability roadblocks?

  1. Personal Debt – Three out of four Canadians (74 per cent) are carrying non-mortgage debt — to the tune of just under $20,000, on average. Some demographics are battling even higher debt loads, which can make it more difficult to afford everyday essentials and meet financial goals.

What’s even more worrisome…one-in-four Canadians told us that they’re overwhelmed by their debt load and don’t know how to cope with it.

  1. Everyday living costs – Half of poll respondents report that their income just isn’t enough to allow them to live debt-free. Unfortunately, higher debt loads are more common among Canadians who struggle to afford basics like groceries, utilities, transportation and housing.
  2. Raising a family – Canadians with children are more likely than households without children to struggle to afford basics like groceries, utilities, clothing and transportation costs. For parents, childcare costs and/or the costs of raising a family while trying to balance mortgage and debt payments is challenging to say the least.

And, with big expenses comes the potential for high consumer debt which is why parents (34 per cent) were one of the groups that we found most likely to say they’re overwhelmed by debt.

  1. Saving for the future – An alarming number of Canadians aren’t financially ready for significant life events and milestones. At least half of the Canadians we spoke to are unprepared to purchase a home, deal with unexpected costs or retire at the age they want.

Who’s most affected?

It’s true that lack of affordability is affecting all Canadians — only 20 per cent agree that they have enough money to afford their needs. But, some groups are really struggling.

Millennials – Precarious work, student debt and unaffordable housing can all play a role in adding to financial stress. 18-34 year olds are more likely than older generations to say they’re overwhelmed by their debt load and don’t know what to do. One-third of millennials also admit that they’re struggling at times to feed themselves and/or their families. All of these factors make it more difficult to meet milestones and prepare for the next chapter.

One-in-five millennials say they’ve delayed having children or moving out of their parents’ house because they simply couldn’t afford it.

Gen Xers – It can be difficult to stay on top of consumer debt while paying down a mortgage and raising a family. Eight-in-10 Gen-Xers carry personal debt, making them the generation most likely to have debt, with the majority carrying a credit card balance. It’s equally hard to save for the future.

Seven-in-10 Gen Xers say they have too little or no retirement savings; and 73 per cent believe they’ll need to spend more years in the workforce to afford retirement.

Women – Women, in contrast to men, are more likely to be carrying a higher debt load and have a harder time affording their basic needs. Poll results show that 74 per cent of women vs 64 per cent of men have difficulty saving for a major purchase. Women also find it tougher to save for the future.

73 per cent of women (vs 65 per cent of men) find it challenging to  save for retirement.

What can be done about it?

There is good news. Even when facing financial roadblocks, the majority of Canadians with personal debt tell us they’re actively trying to pay it off. They’re reworking their budgets, reducing expenses and avoiding non-essential spending.

Here are some ways you can reduce your debt and the financial stress that goes with it:

  1. Calculate your debts. First things first. Yes, it can be scary to see those numbers on paper, but tallying up all of your debts is a necessary first step toward taking control. Use this debt calculator to make the task easier.
  2. Rework your budget. A budget is a surefire way to track your spending and save money each month. But, if your bills or income have changed recently, it’s time to update your budget to reflect that. And, if your budget is tight, look for areas that can be trimmed, even temporarily.
  3. Use available resources. Only you know what motivates you. When it comes to money, everyone is different so it’s a good idea to find something that works for you. That might mean using a budgeting app that follows you wherever you go, tuning into a financial podcast that inspires you, or, using a variety of financial literacy tools at your fingertips.
  4. Speak to a professional. Seeking help is a big step. A debt professional, such as a Licensed Insolvency Trustee (LIT) can help you navigate the process and answer all your questions. You can even compare your options online beforehand so you have a sense of what might work for you.

Are affordability challenges affecting your household?

Looking at the poll results highlighted in our Affordability Index, it’s pretty clear that debt is affecting Canadians’ financial well-being.

70 per cent of Canadians who are carrying personal debt have zero retirement savings.

If you find yourself pushing back important financial goals due to debt and expenses, it’s important to speak with a professional to discuss your repayment options. An LIT can help you navigate the debt repayment process by finding a debt solution that fits your individual situation.

Dealing with debt sooner rather than later can help you save more money each month and start meeting more goals. Use this debt repayment calculator to see which options might work for you.

Is debt affecting your affordability? Do you find yourself pushing back important goals? Learn more about your debt relief options by joining the conversation with us on Twitter #DebtSolutions #PaychequeToPaycheque