Canadians are struggling with record levels of personal debt. Figures from early 2018 show household debt has topped 170.4 per cent. This means the typical Canadian owes $1.70 for every dollar they earn.
Save With SPP recently asked noted personal finance expert Jamie Golombek, Managing Director, Tax and Estate Planning for CIBC Financial Planning & Advice, for his views on how to avoid the pitfall of debt, how to dig out from under it, and how to make saving part of your overall plan.
“The first thing people need to do is have a written budget,” says Golombek. “The budget needs to show the cash that is coming in, and the monthly expenses that are going out.” This simple step will give people a better handle on their cash flow, he says.
His second tip was to “plan ahead for major expenses.” Setting money aside for big ticket items, as well as emergencies, such as layoffs or major home repairs, helps you avoid being “caught by surprise later,” Golombek explains.
His third suggestion is to try and “distinguish between your wants and needs, especially when it comes to major expenditures,” he says. That’s a big issue, because we live in a society where people expect instant gratification, rather than saving up and then buying the things they really want later, he explains.
Golombek speculates that we are in this high-debt situation because of two main factors – housing prices in various Canadian cities and towns have skyrocketed, while interest rates have “plummeted to a near 60-year low.” That’s creating the temptation of buying when debt is relatively cheap, he explains. But credit card interest can still be in the 20 per cent range, he adds.
As well, he says, “there are so many easy ways to spend money these days.” There are apps that hook your phone up to your credit card, so you can pay by tapping the phone, or using a thumbprint. Spending, he says, has never been easier.
How to dig out from under it?
“The best way to go is to have a financial plan, one that looks out to the long term. Take a look at the big picture for the next five, 10 or 20 years,” he explains. Things like time off, education, retirement and also debt reduction should be part of your plan. “This plan will tell you how much you can afford to spend, and how much you need to save,” he says.
We thank Jamie Golombek for talking to us – and remember that if you are planning to save for retirement, a good place to invest is the Saskatchewan Pension Plan.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|