Summer Spending Might Hurt Albertans In The Long-TermOct 13, 2015
It may be a tough year for Alberta’s economy, but that didn’t slow dining and entertainment spending in the province this summer. That’s according to a recent poll from Ipsos Reid on behalf of BDO Canada Limited, which found that just 39 per cent of Albertans stuck to their summer budget, seven points below the average Canadian. Specifically, dining and entertainment was the draw, as the average Albertan spent $1,466 on these pursuits during the summer months – which turned out to be the highest figure among all provinces and twice as much as the average Canadian. In the face of Alberta’s recent troubles – 35,000 oilpatch jobs lost, a weak dollar, high average debt loads – these statistics stand out as concerning. Now more than ever, it’s important for Albertans to increase their knowledge about debt options such as debt consolidation, consumer proposals and bankruptcy.
It could be that Canadians in general are becoming more comfortable paying for a certain lifestyle by adding to their debt – especially considering the current rate of borrowing. The BDO poll indicates 29 per cent of Canadians admit to having more debt now than they did in May. Household debt has continued to rise, as it recently made its biggest increase since 2011, from $1.63 in debt for every dollar of disposable income at the end of March to almost $1.65 today.
So, what can Albertans do to buck the trend and avoid financial problems? The first step is to avoid taking on debt to pay for dining and entertainment, something that qualifies as bad debt on the “good vs. bad debt” spectrum.
Bad debts are disposable, and immediately depreciate for the consumer. Put simply, it’s the type of debt that should be avoided. Credit card debt is a good example; and the credit card is often what’s grabbed out of your wallet when paying at the restaurant. That’s not necessarily a bad thing, but if you are only paying the minimum amount on your credit card bill, interest charges quickly add up.
Good debt, on the other hand, is investment debt that holds value. Student loans are an investment in your future and allow you to get a higher-paying job down the road. Mortgage loans are an investment in the housing market, allowing you the opportunity to sell down the road or build financial assets.
The lesson that debt isn’t necessarily always a bad word is a basic financial literacy lesson. As money and debt management becomes more complicated, these lessons become increasing important to the average Canadian. The Financial Consumer Agency of Canada (FCAC) has recently introduced their National Strategy for Financial Literacy to help boost Canadians’ understanding of their finances, including debt and how to use it constructively. The goal is to help Canadians manage money wisely, plan for the future, and prevent against fraud and financial abuse. The strategy also makes it easier for people to access government benefits to help savings. Coupled with financial know-how, these tools can be a strong tool when managing your debt and planning a path to debt relief in the future.
If you are an Albertan who saw your summer budget fall by the wayside and your debt accumulate to a place where your stress levels are rising, it’s important to get help early on. The FCAC website has a number of tools and resources that will help you deal with your debt – from strategies to tackle your debt on your own to information about options like debt consolidation or consumer proposals. Finding your starting point is key to your eventual debt freedom.
Are you an Albertan struggling with debt after your summer spending? Share your thoughts on social media using the hashtag #BDOdebtrelief and #CountMeInCA.