A new poll has found that Canadians are feeling more confident than ever about covering their bills for the next 12 months without going further into debt. The latest MNP Consumer Debt Index, which measures attitudes toward debt and vulnerability to insolvency, has climbed three points to 96.
A Glimmer of Hope
After reaching a record low in early March at the start of the pandemic, Canadians are feeling more optimistic about their finances. Compared to pre-pandemic levels, significantly more Canadians (43%) rate their current debt situation as excellent. This is a welcome change from the uncertainty and anxiety that many Canadians faced during the early days of the pandemic.
The Role of Government Support
One reason for this increase in optimism may be the government support measures put in place to help households cope with the financial burden of the pandemic. The survey found that 40% of respondents said they are less concerned about their debt, and 27% believe their debt is better now than it was a year ago.
The Impact of Staying Home
Another factor contributing to this increase in optimism may be the fact that many Canadians have been required to stay home, which has meant less opportunity to spend and save on gas and travel costs. On average, respondents said they had $148 more left over at the end of the month than they did in early March.
A Warning from Insolvency Experts
While this news may be encouraging, experts warn that it won’t take much to push debtors back into danger territory. Grant Bazian, president of insolvency accountancy firm MNP LTD, says: "It’s difficult to predict how many Canadians will require some form of debt-relief as a result of COVID, but it’s not too much of a leap to say it will likely be as unprecedented as the scope of the pandemic itself."
The Danger Ahead
Bazian warns that once the economy reopens, creditors are likely to turn up the heat by increasing monthly payments or extending the term of loans. This could push households deeper into debt and make it harder for them to pay their bills.
What This Means for Canadians
While this news may be encouraging, it’s essential to remember that many Canadians still face significant financial challenges. The survey found that 43% of respondents said they are $200 or less away from financial insolvency at month-end, which is a concerning trend.
A Call to Action
So what can Canadians do to stay on top of their debt and avoid falling into financial difficulty? Experts recommend the following:
- Create a budget: Make a plan for how you’ll manage your finances and stick to it.
- Pay off high-interest debt: Focus on paying off debts with high interest rates first, such as credit card balances.
- Build an emergency fund: Set aside money in case of unexpected expenses or income disruptions.
By taking control of their finances and making smart decisions, Canadians can reduce their risk of falling into financial difficulty and stay on the path to financial stability.
Conclusion
While there are reasons to be optimistic about Canadians’ finances, it’s essential to remember that many still face significant challenges. By staying informed, creating a budget, paying off high-interest debt, and building an emergency fund, Canadians can take control of their finances and avoid falling into financial difficulty.