Many Canadians ignored economic warning signs, increased debt this summerSep 02, 2015
Although Canadians certainly can’t be faulted for seeking some rest and relaxation after our seemingly endless winter, it’s still important to keep track of your spending in the summer. Whether going away on vacation or taking advantage of warmer weather for a much-needed home renovation, you should still stick to your budget when July or August comes around.
But this doesn’t appear to be the case for all Canadians. A new poll conducted on behalf of BDO Canada Limited found that 29 per cent of Canadians have increased their debt since May, while 32 per cent of them didn’t set a summer budget to begin with.
Summer spending on housing is putting strain on budgets
It’s not just summer getaways that are costing Canadians in the debt department. Although Canadians spent an average of $701 on summer vacations and day trips, that was less than half of the $1,422 spent on renovations and home improvement by the average Canadian. And those numbers varied by province; in British Columbia, residents that are already dealing with the high cost of housing spent a whopping $2,961 on summer home renovations. This only compounds the problem of Canadians becoming “house-poor,” often putting them in a precarious position should they suffer a significant financial setback.
This is especially concerning considering the economic aftermath of last week’s Black Monday and significant drop in oil prices. As a matter of fact, Alberta has lost 35,000 jobs in the oil patch this year, and there is concern that more cuts could be coming. This had led to an upsurge in applications for school-bus drivers in Calgary, for one thing, as recently laid-off workers are looking for ways to make up for lost income. But it should also serve as a warning for all Canadians that find themselves deeper in debt as the result of a spending spree spurred by rock-bottom interest rates.
Can your budget survive an unexpected life event?
Here’s hoping that you won’t hit any roadblocks, like a job loss or health scare, anytime soon. But it’s always best to be prepared, and “stress test” your budget to see if it holds up under any adverse scenario. Ask yourself these questions to determine how prepared you are to deal with debt:
- Can you afford to miss a paycheque?
- Do you have savings in an emergency fund?
- Are you afraid to open your bills?
- Are you only making minimum payments on your bills?
If the answer is “No” to the first two and/or “Yes” to the last two questions, it might be time to reign in your spending, regardless of the season. While 22 per cent of Canadians exceeded their summer budget, those numbers were higher among millennials (28 per cent) and parents (34 per cent), who might be facing other debt concerns such as upcoming tuition fees or the increasing cost of school supplies. For these cohorts, the summer hangover might not just come from spending $770 on food, drink and entertainment.
While financial literacy especially needs to be taught in schools, Canadians of all ages could benefit by increasing their financial knowledge—as the poll illustrates. The Financial Consumer Agency of Canada (FCAC) is counting on a national financial literacy strategy that will help Canadians manage money and debt wisely, plan and save for the future and prevent and protect against fraud and financial abuse. BDO fully supports this initiative. We believe that better budgeting and money management will provide Canadians with financial stability in these uncertain economic times.
How did you spend (during) your summer vacation? Share your thoughts with BDO by joining the conversation on Twitter using #LetsTalkDebt