More Canadians relying on debt to get by, report says

Canada’s debt problem isn’t getting any better, a recent report shows.

BDO Canada released its second annual Affordability index Monday which looks to examine how affordable life is in Canada.

This year’s results indicate that over half (53 per cent) of Canadians continue to live paycheque-to-paycheque and that one-quarter of Canadians are overwhelmed with debt. More than a quarter — 27 per cent — of Canadians don’t have enough for their needs and only 42 per cent have enough to spend on their wants.

The results are from a poll of 2,047 Canadians conducted by Angus Reid in partnership with BDO Canada through an online survey on its portal conducted from Aug. 7-13. The randomized sample of the members would compare to a probability sample with a margin of error of plus or minus 2.2 percentage point, 19 times out of 20. BDO Canada is one of Canada’s oldest debt help firms.

The growing worry over debt is no different in Saskatchewan.

One-third of Saskatchewanians feel their debt load is overwhelming, the highest percentage compared to the other Canadian provinces. Saskatchewan residents surveyed carry the highest amount of debt in the country, with 56 per cent having a non-mortgage debt of over $20,000.

Seven in 10 residents of the province say they are not at all financially ready for retirement, and 80 per cent find it hard to afford to save for a major purchase or take a vacation.

Nation-wide, more than one-third of Canadians admit to having no retirement savings. Just under one-third of boomers and seniors surveyed have no retirement savings at all.

For Gen Xers aged 35-54, the situation is even worse. Among the 38 per cent who have no retirement savings, almost half (47 per cent) say they can’t afford to save for retirement, and 19 per cent say they need to pay debts off first.”

According to the report, Gen Xers are the most indebted generation. Six in 10 carry a credit card balance and over half have a mortgage. More than two-fifths indebted Gen Xers owe more than $20,000.

‘The results of our affordability index show us that the cost of living is rising and Canadian and Saskatchewan residents’ reliance on debt is increasing,” said Jasmin Calyniuk, senior vice president at BDO.

“We are seeing increases in terms of reliance on debt and the index is showing us that Saskatchewan residents and Canadians in general are struggling, n some cases, to even meet their basic needs.”

Those problems are exacerbated among women, lower-income individuals and Gen Xers, the report found.

Women are more likely to have growing debt due to a lack of income, more likely to struggle to save for a major purchase, afford grocery bills and take a vacation.

The affordability index also showed that women’s affordability challenges have increased compared with last year. Almost 60 per cent of women are living paycheque to paycheque, up to 59 per cent from 54 per cent last year, and the percentage admitting to having no retirement savings increased by eight percentage points.

“Compared to average Canadians, women along with lower-income individuals (income less than $50,000), millennials and Gen Xers are also particularly vulnerable to affordability and debt challenges, rating their financial readiness as “poor” or “terrible” for … significant life events,” BDO wrote.

That includes unexpected costs, retirement, purchasing a home and having children.

“Recent years have been challenging for Canadians. As reduced affordability and debt obligations continue to weigh, the BDO Canada Affordability Index points to more challenges ahead,” BDO Canada said in a press release.

“ In order to change course, Canadians should be actively seeking ways to improve how they balance their debt obligations and future financial goals.”

Calyniuk said the findings are worrying.

“If you ask me what’s alarming is a lot of Canadian families are unprepared for unexpected costs,” she said. “Those are things we see with clients every day when 53 per cent of the population lives paycheque to paycheque, if there’s an illness, a marital breakdown, a job loss, a necessary home repair, people are ill-equipped to deal with those types of things and that can also lead to an increase of a reliance on credit.”

Calyniuk said Canadians have the power to improve their own financial situations.

‘We recommend that you take an honest look at what your particular situation is,” she said.

“How much do you owe? Do you have a household budget in place? We are well aware that there is a lot of stress that can come along with debt, especially if people are feeling they have an unmanageable debt load.”

Calyniuk said that when debt becomes unmanageable, people are encouraged to seek professional advice, such as from licensed insolvency trustees. They can help people to identify options to help manage their debt load.

“Take a look at your situation,” she said.

“If you’re overwhelmed, stressed or just need some help, reach out.”