Paying down debt is the No. 1 financial priority for Canadians heading into 2019, followed by keeping up with bills and getting by, growing wealth, saving for a vacation and saving for retirement.
Debt repayment has topped the annual CIBC survey for nine consecutive years. This year’s survey also found 29 per cent of Canadians admit they’ve taken on more debt in the past 12 months, blaming day-to-day expenses, followed by the purchase of a new vehicle and paying for a home repair or renovation.
“Debt weighs heavily on Canadians so it’s no surprise that Canadians continue to put debt concerns at the top of their list of priorities each year,” says Jamie Golombek, Managing Director, CIBC Financial Planning and Advice. “Debt can be a useful tool for achieving long-term goals such as home ownership or funding education but if you’re turning to debt to make ends meet, it may be time for cash-flow planning instead.”
While two-in-five Canadians worry they’re forsaking their savings by focusing too much on their debt, the vast majority still believe that it’s better to pay down debt than build savings. This poll finding comes as Statistics Canada recently reported the average Canadian household owes $1.78 for every dollar of disposable income.
Golombek’s tips for making your money go further include writing down your income and expenses for a three-month period to determine if your cash flow is positive (money left over), neutral (no extra or shortage) or negative (short on income to cover expenses). If you’re cash-flow positive, use the extra cash to pay off high-interest debt – not your mortgage – first.
Next, use the surplus to build long term savings in a Registered Retirement Savings Plan or Tax Free Savings Account for yourself and put something in a Registered Education Savings Plan. Lastly, if your long-term savings are on track, consider increasing your mortgage payments. If you’re cash-flow neutral or negative, look for ways to cut expenses or lower interest by consolidating debt at a lower rate.
Finally, automate your savings or debt-repayment plan by putting money from your paycheques directly to your goals. Review and prioritize your goals and meet with an advisor to build a financial plan.