It has never been easier to have access to credit, especially in a country like Canada. Even if that accessibility is linked to many benefits, it also carries a lot of disadvantages for Canadians.
Did you know that the average debt held by Canadians is $23,035? And that number is even higher when you are paying a mortgage, because then you can be owning $73,532 per person.
Most of us are unable to earn that amount of money, let alone pay it! So, why are the top three reasons Canadians are paying so much for things they may or may not need?
We have done our research, finding the causes, but most importantly: At 4 Pillars we always find a solution.
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Not implementing a budget, spending more than you can afford
Canada offers a lot of cool places to visit, nice things to purchase, and great restaurants. For this reason, It is not unusual to hear coworkers, friends or family complaining about how fast their payments are gone even before they can pay for essential needs. It has happened to everyone at least once…or more realistically every time you get your check, if you are not budgeting.
We all love the finest things in life, but when it comes to money, moderation is key. Credit card debts, loans with high interest rates and even bankruptcy can be avoided by spending less and being more conscious of where we put our money. Never underestimate the peace of mind you get once you realize all your essentials are covered, believe us your future you would be grateful forever.
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Think that savings are only for people with a certain income
No, everyone can start saving, even if you put a toonie in your “savings jar” every week, that’s a start. Unexpected expenses can always happen, and it’s better to rely on your savings rather than credit cards you are aware would be difficult to pay, or even worse, apply for loans with doubtful benefits because you find yourself in an unfortunate situation.
As we mentioned, you need to start with a budget and make sure your savings are a must rather than an option. If you are struggling on how much you should be saving, we recommend the 50-30-20 rule.
- The 50% of your income is for your needs: rent or mortgage, groceries, monthly bills (phone, heating, or any loan you need to pay).
- The 30% stands for your wants: the beautiful things in life you want to enjoy or services that are not a necessity but you like (Netflix or Disney + belong to this category because they are NOT needs).
- The 20% belongs to your savings: send the money to your “savings account” and pretend it doesn’t exist until you REALLY need it.
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Believe your credit card is your best friend
Yes, credit cards are essential If you want to start building your credit, plus some of them offer great benefits like cash back, free movie tickets, or miles points. However, they are also the main reason most Canadians are in debt.
If you overuse and abuse them, you will be in a tough financial situation sooner than later. Considering interest rates can be as high as 20% and a minimum payment requirement of just $10, it is not difficult to imagine some people living in credit card debt forever. The excessive use of credit cards comes from the lack of budgeting and the desire to spend more than you can actually afford.
At 4 Pillars we truly understand these situations can happen and how easily they can get out of our hands. We are here to help you overcome any kind of financial burden you may have. Contact us now and get a FREE Consultation with one of our experts.
Take advantage of our FREE consultation and live debt free