Temperance for spending

Opinion

Hey there, time traveller!
This article was published 11/01/2025 (274 days ago), so information in it may no longer be current.

“Dry January” is popular for those whose past December involved perhaps too much imbibing.

Going dry regarding spending might be a good thing for many this month, too.

Even before the holidays, a lot of households were probably feeling the burden of bad debt.

In November, Fig Financial — a new Canadian fintech lender — reported in its Financial Challenges Barometer more than 2.5 million Canadians were making only minimum payments on credit cards.

That’s a strong sign for a more sober approach to spending to start the year.

“Just paying the minimum means it will take a very long time to pay off a balance,” says Monisha Sharma, chief revenue officer of Fig Financial in Toronto.

Often, it can be a path to near-endless indebtedness, she notes.

The study by Fig, which provides loans online including for credit card debt consolidation, also revealed 82 per cent of Canadians feel “burdened by debt,” with about one in five uncertain they can pay it off.

If many consumers felt burdened in November, their debt may feel even heavier today, given holiday spending probably exacerbated financial difficulties.

One upside for 2025 is the likelihood of easing interest rates, which will help those with mortgages and home equity lines of credit (HELOCs), says Andy Hill, co-founder of Everyrate.ca, an online marketplace for mortgages.

“The general trend is down — at least for a bit.”

Homeowners refinancing today may end up paying more than they have for the last five years. But with fixed-rate mortgages dipping below four per cent, and variable rates just under five per cent, it’s a much more friendly environment than even just a year ago, when mortgage rates were at least one percentage point higher, if not more.

It’s likely rates will move lower, Hill adds. The Canadian economy continues to show signs of weakness, especially now that it is facing potential U.S. tariffs.

That is likely to keep the Bank of Canada dovish, open to further rate cuts in the months ahead.

Although good news for your HELOC and potentially your mortgage, it also points to more economic upheaval and likely job losses.

At the same time, prices may move higher. Even without tariffs, a hotter U.S. economy will likely lead the Federal Reserve to hold off cutting rates, Hill says.

If the Bank of Canada cuts rates more, “and the U.S. doesn’t, then our dollar suffers, and that’s like importing inflation,” he says.

Storm clouds on the horizon is a strong call for action sooner than later.

If you’re facing money challenges now, it’s time to put pencil to paper and figure out just how bad the situation is. That can be easier said than done, especially for couples who may not see eye-to-eye on money, says Craig Bannon, director of regional financial planning support at RBC.

“We definitely find with clients that one partner has more experience with money than the other,” he says. “It’s one of the reasons it’s important for people to sit down as couples to talk about what’s coming in and what’s coming out.”

RBC released its Relationships and Money Poll in December, finding three in five respondents in Manitoba and Saskatchewan see their relationship as essential to their ability to afford their lifestyle.

The survey also revealed more than half couldn’t afford to pay their bills without a partner. A little more than one in five also indicated they are frustrated by their partner’s financial habits.

Yet, before counting score — spending versus income — Bannon suggests taking stock of what makes cutting back worth it. That goes beyond the obvious of getting out of debt trouble.

“One of the important things that’s often overlooked is asking what your goals are?”

Bannon adds most people don’t start with that, and often begin with asking where they can cut costs.

“It takes that budgeting exercise and makes it more engaging,” he says. “You’re saving toward something and not just cutting back.”

No doubt getting out of debt is going to be a priority for many. But the ideal budget often addresses multiple goals like debt repayment, saving for retirement, a home, post-secondary education and even vacation.

Consumers have many online tools to help set goals and build a budget to achieve them.

RBC has its Monthly Cash Flow Calculator, free to anyone, and its omni-advice channel MyAdvisor provides multiple ways for its clients to connect with an advisor (i.e. online, in-person, virtually or by phone).

Enlisting an adviser is often a good move, especially if you’re uncertain how to start. They can help you overcome the inertia of indecision and start on a better path in 2025.

“That’s one thing we’re trying to help people understand,” Bannon says. “If households are having a hard time, they may not think their financial institution can help, but we have experience working with many Canadians who have coped with similar circumstances and eventually got to a better place.”

All you need is to reach out for help.

Joel Schlesinger is a Winnipeg-based freelance journalist.

joelschles@gmail.com