Trying to make ends meet, juggling financial obligations, and now holiday expenses, could leave consumers 'buried' in debt come 2023
NEW WESTMINSTER, BC, Dec. 8, 2022 /CNW/ - For many people, the past year has been hard on household budgets. Between the soaring costs of goods and services, ever-increasing interest rates, and recession fears, 2022 has been anything but "jolly" for Canadians' budgets. And anxiety about holiday spending is top of mind.
The 2022 Holiday Spending study from CPA Canada found that two-in-three Canadians (67 percent) believe inflation will make it harder to buy gifts this upcoming holiday season. However, the same study also found that they still expect to spend $589 on gifts – an amount similar to the average CPA Canada has found in previous years from its annual study.
"It can be difficult to cut back spending during the holidays," explains Scott Hannah, President & CEO of the Credit Counselling Society. For many of us, this is typically a time of sharing and enjoyment, but if there was ever a year to slow down on spending and borrowing –this is it."
Rather than slowing down, credit card usage continues to trend upwards. The latest Equifax Canada Market Pulse Quarterly Credit Trends Report shows that consumer debt has climbed to $2.36 trillion, with non-mortgage debt per consumer reaching $21,183, the highest level since the second quarter of 2020. Similarly, a recent report from TransUnion found that credit participation reached a record-high, with almost 28 million Canadians having active credit products. This is an increase of almost eight percent from last year. Mark Kalinowski, a financial educator with the Credit Counselling Society, says it's indicative of the times we're living in – credit is no longer just a convenience, it's become a necessity. "Last year, we were counselling clients on finding ways to tighten their budgets, and now many need their credit cards just to buy the basics."
Unfortunately, little relief is in sight. 2023 is predicted to be another year of financial challenges and rising costs, including a whopping five to seven percent increase in food costs, according to the latest Canada's Food Price Report. This could make paying off those holiday bills more difficult than ever. One way to get prepared, Kalinowski adds, is to be in the best possible financial situation to try to meet these challenges. "Give yourself the gift of peace-of-mind this year by avoiding the January debt trap; the holidays last only a few weeks, don't let their costs follow you throughout 2023."
The consequences of this "holiday hangover debt" can be far more damaging than we think. "This is not simply a matter of a little holiday overspending," warns Hannah. "The added costs of the holidays, especially if you're relying on credit to cover the costs, could push many households to the tipping point next year." This seems to be particularly true for younger adults (18-34), as a recent Equifax Canada report found that three-in-ten (37 percent) said they carried most of their credit card debt during the holiday season, and 41 percent needed a month or more to pay for those purchases.
"When it comes to that 'special occasion' spending, especially around the holidays, many of us tend to take a break from worrying about our debts," explains Kalinowski. "There's so much going on with events, parties, and shopping, that it's all too easy to distract ourselves from our financial problems." For those who are struggling with their finances this season, he recommends getting help as soon as possible. "There is no rule that you need to wait until the new year to get down to business. If you need help, reach out sooner rather than later. It will help you enjoy the holidays that much more."
About the Credit Counselling Society (CCS)
The Credit Counselling Society is a non-profit organization dedicated to helping consumers manage their money and debt better. CCS provides free, confidential credit counselling, debt repayment options, budgeting assistance and financial education. Visit www.nomoredebts.org
SOURCE Credit Counselling Society
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