For some, the New Year will be greeted with a financial hangover.
“Pressure mounts right before the holidays and that’s when people are most tempted to borrow money from a payday lender or really over-extend themselves on credit cards,” says Donna Carlson, a Red Deer insolvency trustee with MNP Ltd.
“The extremely high interest rates on these types of credit can trap them in a cycle of debt that will be impossible to get out of.
“We’re bombarded by a flurry of sales and ‘buy now, pay later’ offers but what might seem like a small purchase or look like a great deal on Boxing Day isn’t really a bargain if you end up carrying them on credit.”
A recent poll conducted by Ipsos for MNP found half of respondents admitted feeling anxiety over the pending arrival of holiday bills. About the same number already had buyer’s remorse and regretted how much they forked out over the holidays.
Perhaps not surprisingly, half of poll respondents had getting their finances back on track topping New Year’s resolutions lists.
The survey of 2,154 Canadians interviewed online uncovered some numbers that ring alarm bells for those dealing with people struggling with debt.
As many as 27 per cent admitted to paying only the minimum balance on their credit card. For lines of credit, the number is 20 per cent.
Fifteen per cent said they borrowed money they cannot afford to pay back quickly and 16 per cent put a major purchase on their credit card without paying it off right away.
One in five respondents admitted to being lured by Black Friday and Boxing Day sales. Just over one in 10 said they bought something on credit that allows delayed payments.
For those who are concerned about their household finances, the best advice is to get on it right away, said Carlson.
“There’s no time like the present — new year, new ideas, new budget,” she said.
She advises those looking to straighten out their finances to put it down on paper to get a clear view of where you stand and how to deal with future expenses.
“One of the bigger things I hear from people is that ‘I didn’t realize how much it added up to. I didn’t realize what my budget was.’”
Building a solid financial footing means planning ahead for life’s financial curve balls — the unexpected car repairs or the property tax bill that may have slipped one’s mind.
“Budgeting for those ahead of time on a monthly basis if you can is a lot easier than trying to budget for it all out of one month.”
For those who feel they are drowning in debt, declaring bankruptcy should not be the first option. It is often better to put together a debt repayment proposal with help from a professional.
Times have been hard across Canada. The Superintendent of Bankruptcy, which keeps bankruptcy statistics, has detected an increase Canada-wide.
“Normally, over the last three years you see the spikes in Alberta, Saskatchewan and Newfoundland — the oil provinces — but in October this year it was right across the country,” said Carlson.
Canada has the highest debt levels of the G-7 countries, and Alberta usually leads the nation in debt levels and insolvencies have increased in this province over the past three years.