Canadians start the year worried about cost of living, low Canadian dollar and rising interest rates
TORONTO, Dec. 27, 2018 /CNW/ - A new CIBC poll finds paying down debt is the No. 1 financial priority for Canadians heading into 2019, the ninth consecutive year debt repayment has topped the annual survey. Further, almost a third (29 per cent) say they've taken on more debt in the past 12 months citing day-to-day expenses as the top reason for piling up debt.
"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. 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," says Jamie Golombek, Managing Director, CIBC Financial Planning and Advice who shares tips in a new video. "Reviewing your income and expenses with an expert can uncover ways to cut back, lower interest payments and reveal tax efficiencies to stretch your money further so you can reach your goals."
Key poll findings:
- Paying down debt (26 per cent) is Canadians' top financial priority in 2019, followed by keeping up with bills and getting by (14 per cent), growing wealth (12 per cent), saving for a vacation (7 per cent), and saving for retirement (6 percent)
- Among the 29 per cent of Canadians who have taken on more debt in the past 12 months, top reasons cited are to cover day-to-day items (34 per cent), purchase a new vehicle (24 per cent) and pay for a home repair or renovation (20 per cent)
- Little changed from last year, Canadians say their top sources of debt are: credit card (45 per cent), mortgage (31 per cent), car loan (23 per cent), line of credit (22 per cent), personal loan (11 per cent)
- 28 per cent say they have no debt
- Top concerns for Canadians in 2019 are the rising cost of goods/inflation (64 per cent), low Canadian dollar (34 per cent), and rising interest rates (31 per cent)
- 63 per cent worry that the extended period of higher returns in the stock market are coming to an end
While two-in-five (39 per cent) Canadians worry that they're forsaking their savings by focusing too much on their debt, the vast majority still (84 per cent) believe that it's better to pay down debt than build savings. This poll finding comes as Statistics Canada recently reported that the average Canadian household owes $1.78 for every dollar of disposable income, even as the pace of borrowing continues to slow. Not surprisingly, with many (63 per cent) fearing that the stock market has already reached a peak, Canadians may be tempted to pull back on savings to buckle down on their debt – a decision motivated by emotions, not fact, finds an earlier CIBC report.
"There's rarely enough money to do everything, so it's critical to make the most of the money you earn by prioritizing both sides of your balance sheet – not debt or savings, but both," says Mr. Golombek. "It boils down to tradeoffs, and balancing your priorities both now and down the road. The idea of being debt-free may help you sleep better at night now, but it may cost you more in the long run when you consider the missed savings and tax sheltered growth."
Downturns are often temporary, and nothing new, says Mr. Golombek. The real risk for investors is that they'll make knee-jerk reactions that they're likely to regret when the market rallies up again and they've missed out on those gains.
"Ups and downs can be distracting, but it's important to stay invested and not let short-term market noise knock you off course," says Mr. Golombek. "This is where having a trusted advisor can help."
"Remember, your portfolio is built to achieve your long-term goals and takes into account any volatility over that time. The key is to have a financial plan in place with a balance of investments that can both weather any downturns and benefit from them as well," he adds.
Mr. Golombek shares tips to making your money go further in 2019:
- Write 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).
- Make a plan - If you're cash-flow positive, use the extra cash to pay off high-interest debt -- not your mortgage -- first. Next, you'll want to use the surplus to build long term savings in an RRSP or TFSA for yourself, and put away a little extra for the kids in an RESP. 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.
- Automate your plan – Time your savings or debt-repayment plan with your payroll. Putting money directly to your goals right off the top can help you both achieve your goals and get by with less.
- Review and prioritize your goals – You likely have many goals competing for your wallet. Meet with an advisor to build a financial plan that gets you on track to achieving what's important to you today and the many years ahead.
About the 2019 Financial Priorities poll: On December 3, 2018 an online survey of 1519 randomly selected Canadian adults who are members of Maru/Blue's online panel Maru Voice Canada. For comparison purposes, a probability sample of this size has an estimated margin of error (which measures sampling variability) of +/- 2.5%, 19 times out of 20. The results have been weighted by education, age, gender and region (and in Quebec, language) to match the population, according to Census data. This is to ensure the sample is representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.
CIBC is a leading North American financial institution with 10 million personal banking, business, public sector and institutional clients. Across Personal and Small Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at www.cibc.com/ca/media-centre or by following on LinkedIn (www.linkedin.com/company/cibc), Twitter @CIBC, Facebook (www.facebook.com/CIBC) and Instagram @CIBCNow.
SOURCE CIBC - Consumer Research and Advice