Personal finances continue to be a major source of stress for Canadians and half anticipate that the situation will continue to deteriorate, according to the latest MNP Consumer Debt Index conducted quarterly by Ipsos.
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When asked about the impact of the current economic conditions in Canada on their personal finances, half (50%) say they believe that the worst is yet to come, while one-third (35%) feel that we are currently experiencing the worst part of the economic cycle.
Fewer are optimistic about the future with only 15 percent stating that the worst is behind us.
“Facing inflation as well as sharply higher interest rates on their outstanding debts, deeply indebted Canadians may be rightfully feeling that the worst is yet to come,†says Grant Bazian, president of MNP LTD., the country’s largest insolvency firm.
“There isn’t much financial wiggle-room in many household budgets, illustrating the toll of higher interest rates, especially for those who can least afford it.â€
One-third (33%) of Canadians feel that the economic conditions over the last six months were worse than they expected.
Nearly half (46%, +1pt) of Canadians report that they are $200 away or less from not being able to meet all of their financial obligations, including three in ten (30%, unchanged) who say they already don’t make enough to cover their bills and debt payments.
While the number of insolvent Canadians remains consistent, the average amount of money households have left over at the end of the month has dropped slightly to $787, down $64 from the previous quarter.
Half (57%, -2pts) of Canadians still say that if interest rates go up much more, they will be in financial trouble. Three in five (61%, -1pt) agree they are concerned about the impact of rising interest rates on their financial situation.
With interest rates stabilizing after last year’s successive increases, Bazian notes that Canadians are feeling some reprieve. Compared to last quarter, the Index rebounded to 89 points, up 12 points from the all-time low recorded that quarter.
Fewer Canadians are concerned about their ability to pay their debts as interest rates rise, although six in ten (60%, -4pts) are still concerned.
More than half say they are confident with their ability to cover all living / family expenses in the next year without going further into debt (55%, +4pts) and less than half are concerned about their current level of debt (46%, -1pt).
The majority of Canadians continue to be more careful with how they spend their money (83%, -4pts).
“The results reveal a more positive financial outlook among Canadians, although confidence remains lower than levels recorded in 2021 and earlier: a reflection of the lingering concerns many have surrounding inflation and interest rates. For lower-income Canadians many cannot find a financial comfort zone,†Bazian explains.
Canadians with less than $40K household income and those ages 18-34 and 35-54 are most likely to feel the effects of interest rate increases, be concerned with their ability to repay their debts, say they will be in financial trouble, and fear that rising interest rates are moving them closer towards bankruptcy.
“Whether expecting the worst or hoping for the best, Canadians should be proactive about managing their debt,†advises Bazian.
“Keep a close eye on your budget, and build your emergency fund for any unexpected expenses, whether that be a car repair or an increase in debt servicing costs. If you receive a tax return this year, put it aside for a rainy day or use it to pay down debt.â€
Bazian says that Canadians struggling to pay their bills are advised to seek professional help right away to avoid a cycle of increasing debt and interest payments, which often lead to longer-term financial hardship.
“Many are hesitant to reach out for help due to the stigma of bankruptcy, which only prolongs the financial stress and can lead to more serious problems like wage garnishments and harassment by collection agencies,†he says. ■