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Ontario in Debt: How to Manage Consumer Spending

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Nearly half of Canadians say they are  $200 away from financial insolvency  and are falling further into debt to pay for their living expenses. These rising debt levels are a growing concern for Ontario’s economy and will affect its stability in the coming months. By reflecting on your own habits as a consumer, you can help to ease the financial strain on both you and the province. 

Ontario’s Financial Climate

While Ontario is home to the largest economy in the country, it also has the highest level of debt:  $350 billion . The province’s financial deficit has prompted two of the four credit rating agencies to downgrade their rating outlook  from stable to negative - a sign that Ontario could be headed into difficult economic times. A poor credit rating will impact the province’s borrowing rates and have the potential to hurt future spending budgets.

Ontario’s rising debt levels are mirrored by its population, as people’s consumer debt has steadily increased over the last decade. In 2016, the average Ontario household owed $154,000, which is $35,000 more than they owed in 2010. 

Findings from Statistics Canada are even more troubling: for every dollar of disposable income, Canadians are in debt for $1.72. Households with the least disposable income are struggling the most, with their income to debt ratio almost doubling at $3.33.

Additionally, younger Ontario households carry more debt than older generations. Factors such as increasing post-secondary tuition costs, lower wages, and higher living expenses have placed additional financial stress on young generations. In comparison, older generations are more likely to have paid off debts such as mortgages and are often more established in their careers. 

But across the spectrum of wealthy to low-income, there is a common trend: debt is steadily increasing for everyone. And these troublesome levels mean more people are heading towards financial downturn. This past March Equifax Canada reported that  consumer delinquencies rose  by the end of 2018, and will likely continue into this year.

Review Your Spending Habits

With Ontario’s financial state heading into uncertainty, it’s a good time to evaluate your current spending habits. When thinking about your finances, what is the relationship between the money you make and the money you owe? Does your debt-to-income ratio appear manageable, or do you find yourself struggling to make payments from week to week? 

When looking at your financial situation, it’s important to be honest about your consumer habits and how they impact your personal finances. Ask yourself the tough questions, as this will help to give you a fair picture of your debt load. For example, how common is it for you to put purchases on your credit card, rather than saving up money for them? In a world where quick convenience is the norm, it’s common to have the urge to purchase things we can’t afford because it’s just a swipe of our credit card. 

Here are some more tips to improve your spending habits moving forward:

  • Track Your Expenses. Some people find it helpful to create a spreadsheet on their computer where they can follow their expenses based on their income. For others, money tracking phone apps may be a more convenient way to track spending habits. These apps often create reports that break down your expenses - both necessary and unnecessary. They can be a great tool for helping you to adjust where you put your hard-earned money. This information can also help you to create a budget based on your spending activities.
  • Use “Real” Money. When using credit cards, an interesting thing can happen: we lose our awareness about the money we own versus the money we owe. To avoid spending money that you don’t have, try paying for items using cash only. By using money that’s tangible in your hands rather than pulling out a credit card, you will be able to avoid that dreaded feeling of overspending money you don’t have.
  • Consolidate Your Debt.If you have multiple loans and credit cards to repay, you may want to consider debt consolidation. Paying interest for multiple outstanding balances can prevent you from making headway in debt repayment. Consolidating, or merging what you owe, can bring debt relief and help you pay down debt faster. In this process, your debts will merge into a new loan that requires a single monthly payment.

Having an honest look at your consumer debt is the first step to achieving a more stable financial future - for both you and our province.

Are you looking for help in managing your consumer debt?  Get in touch  with our Licensed Insolvency Trustees who can help you explore your best debt solutions.

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