Every day Delta residents are forced to make financial decisions. The outcomes of these decisions can have significant impacts on their lives. And while it would be nice for everyone to know the right answers when addressing personal debt and finance, this isn’t always the case.
People don’t know what they don’t know
A recent study conducted by Loans Canada with 1665 credit-constrained Canadians confirms the saying, people don’t know what they don’t know. Over 60 per cent of the 1665 subjects surveyed showed confidence in their financial know-how, but when asked questions about their spending habits, their performance told a much different story.
The study revealed that close to half of the survey respondents who felt good about their financial literacy are not tracking their spending habits or expenses. Of these Canadians, all are not paying their credit card bills in full every month.
Many are not contributing to their savings.
And the most surprising Loans Canada finding? People who claim to be financially knowledgeable typically have a larger debt load than people who claim their financial literacy is lacking.
Read all of LoansCanada.ca’s findings here.
Why are Canadians in Debt?
Accumulating debt is largely the result of bad spending habits combined with not tracking expenses or not paying credit card bills in full each month.
Loans Canada says the average Canadian consumer debt hovers close to $8,500, not including mortgages. Supporting the notion that spending money is easy, approximately 12 per cent have consumer debt over $25,000.
Canadians who lack basic financial literacy and management skills are more likely to find themselves in debt, making it difficult to climb out of a personal financial crisis.
Almost half of credit-constrained Canadians have taken out multiple loans, with 44 per cent doing so just to make ends meet.
The devastating effects of financial illiteracy and the consequences of debt
The consequences of financial illiteracy can be devastating and overwhelming. When Canadians reach
unmanageable debt levels, have poor credit ratings and derailed savings plans, meeting future goals or aspirations becomes difficult and often unattainable.
How can Canadians get a better grasp of debt problems?
Manage a debt list: Prioritize finances by creating a detailed debt list. This will help identify the best way forward to reduce and eliminate debt.
Maintain a monthly budget: The first step toward financial well-being is to create a monthly budget, which includes car and mortgage payments, variable costs and debt repayment.
Pay bills on time, pay in full (if possible): To avoid interest payments and increase credit score, paying on time and in full is ideal.
Lower the cost of debt: Another effective method of debt elimination is to pay down high-interest rate debts first. Refinancing or consolidating high-cost loans may lead to a lower payment.
By improving financial literacy, Delta residents can achieve financial wellness. Loans Canada reminds Canadians that being confident about financial knowledge does not protect from the pitfalls of bad financial behaviours.
“Thanks to both government and private institutions, Canadians have access to free financial literacy resources,” explains Loans Canada Chief Technology Officer, Cris Ravazzano. “For example, Canada.ca has a whole section dedicated to money and finances with great information that all Canadians can benefit from. And at Loans Canada we’re always creating educational content about credit building and debt saving strategies. I think more effort is required to increase awareness about these types of resources.”
Gaining and maintaining financial literacy is the foundation of good financial outcomes and greater financial health as a whole.