A new report by Canadian accountancy and business advisory firm MNP LLP indicates that more Canadians may be pushing the limits of their budgets than previously thought.
In a poll conducted by MNP and Ipsos conducted between December 8 and December 13, 2017, 33% of respondents said they could no longer cover standing monthly bills and debt payments in their current financial situation. Meanwhile, almost half (48 per cent) of respondents said they only have a $200 buffer to cover their obligations. A further 42% would be in danger of not meeting their monthly financial obligations if interest rates were to rise. Lastly, nearly one-third said they could be forced into bankruptcy because of rising interest rates.
These figures represent a roughly 8% jump in the number of Canadians unable to cover their debt and/or fixed expenses. The greatest proportion of people who would be unable to cover current expenses without adding existing debt reside in British Columbia (51%), Quebec (50%) and Alberta (48%).
Since interest rates first rose in July of last year, households across the country have noticed their budgets tightening as they struggle to keep up with expenses and manage other rising costs. British Columbians remain the most concerned about interest rates, with 49% of poll respondents indicating this concern. Saskatchewan, Manitoba and Ontario trail in this metric by only a few percentage points each.
Interestingly, the MNP poll also measured the number of respondents who regretted the amount of debt they had taken on in the past. The most regretful sentiments were felt in Saskatchewan and Manitoba, where 45% of respondents said they had misgivings about their past use of debt. This attitude is telling: many Canadians on average have clearly become accustomed to a lifestyle funded on the use of debt instruments.
Canadians need more than ever to evaluate their personal financial plans and make concrete steps to reduce their overall reliance on debt. Quelling the uncertainty and negative effects of debt needs to become a key priority for individuals at any net worth level in order to avoid fallout from unexpected financial shocks.