Keep your budget in mind and think about whether a purchase is a want or a need when making financial decisions this holiday season, say credit counsellors.
The B.C.-based Credit Counselling Society typically experiences a spike in requests for help once bills from Christmas and Boxing Day shopping start to arrive, said Scott Hannah, president and chief executive officer.
He urged people to track what they have spent during the month, including any shopping and expenses such as taxis, babysitters and food. That information can provide a reference point for those wanting a fresh financial start.
While the holiday season’s biggest purchases might have already been made, Boxing Day sales can significantly add to debt loads — especially if you’ve already overspent.
Before adding an item to your cart, ask yourself if something is a need or a want, Hannah said.
And if you’re buying on credit, know that the total cost of an item can increase substantially if it is not paid off right away.
The society recommends that those using credit set their spending limit at an amount that can be paid off in three months. Figuring out how much you can afford to pay back each month and what you will need to cut back on to meet that goal can help you set a limit ahead of time, Hannah said.
Although there appears to be increased awareness about the importance of managing money, “our debt levels keep going up,” Hannah said.
Canadian households borrowed $27.3 billion — including $18.4 billion in mortgages — in the quarter of July to September, as consumer-credit levels climbed $7 billion to $474 billion.
Household debt reached 164.6 per cent of annual disposable income, compared with 163.3 per cent the previous quarter, Statistics Canada said this month.
The federal government has been hammering at the message of consumer debt and tightened mortgage rules, while Bank of Canada governor Mark Carney has said rising household debt is a risk to Canada’s economy.
Canadians had a savings level of 3.6 per cent of earnings in the second quarter of the year, Hannah said.
“Most financial planners would say you need to set aside at least 10 per cent of your annual earnings,” he said, adding that he recommends saving 15 per cent due to low rates of returns.
When savings levels are low and consumer debt is high, “it makes it really difficult for the average person to say, ‘;How can I save?’ They can’t,” he said. “They find themselves in a position where the money that is coming in is going out and then some.”
On the bright side, Hannah said, more people are seeking help at an earlier stage of financial difficulty. “That’s encouraging.”
Last month, the society — which has 16 offices between Ottawa and Victoria — had close to 1,300 new clients, making it the busiest month of the year.
The success rate of clients who establish a repayment program was just shy of 88 per cent this year, up from 85 per cent last year.
A new program offered by the society teaches clients money skills through a combination of online learning and meetings with counsellors.
Those who enrol in a debt-management program pay a one-time administration fee of $75 and a monthly fee that is typically $25, he said. Those costs can be cut if necessary.
DEBT WARNING SIGNS
Warning signs that you could be facing debt problems:
• Difficulty paying bills on time
• Receiving collection calls or past-due notices
• Living on an overdraft or line of credit
• Losing sleep worrying about debts
• Spending more than your income allows
• Not paying credit cards in full each month
• Impulsive spending due to financial worries
• No budget or spending plan
• Hiding spending or debts from a partner
• Bills begin to stack up because you can’t pay them
• Your financial institution declines to consolidate your debts
• Feelings of hopelessness that you’ll never get out of debt
The Credit Counselling Society offers plenty of advice on its two websites: nomoredebts.org and
The non-profit group can be contacted by calling toll free 1-888-527-8999 or emailing firstname.lastname@example.org.
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