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This article was published 22/3/2016 (1683 days ago), so information in it may no longer be current.
(Special) - The news was not what financial professionals probably wanted to hear. According to the most recent report from the Parliamentary Budget Officer Canadian households are carrying the biggest debt-to-income levels of the Group of Seven nations.
The increase is the largest since 2000, with household debt in the third quarter of 2015 reaching 171 per cent of disposable income. In other words, households have debt obligations of $171 for every $100 of disposable income.
Other recent studies have shown that almost 30 per cent of Canadians would have trouble meeting their monthly financial obligations if their monthly costs rose by just $100 and 49 per cent would have trouble if their monthly costs rose by just $200.
The Canadian Payroll Association has found that 48 per cent of Canadians would have trouble paying their bills if their paycheque was delayed by just one week and 76 per cent say they are saving less than one quarter of what they think they will need in retirement.
In spite of these facts, a recent study by BDO Canada has found that many Canadians still are optimistic about their financial situation in spite of a falling Canadian dollar, stock market and oil prices and believe their net worth will actually increase this year.
"What all of the above things say is that there is a distinct 'disconnect' between people's perceptions and the indicators about the economy and their finances," says Doug Jones, a licensed insolvency trustee with BDO Canada. "Canadians are living very close to the edge of their financial resources and this gap between perception and reality is very disturbing."
Jones says the current period of historic low interest rates will end and by 2020 rates should be back to more normal levels. As well, the lower Canadian dollar is increasing food and other costs which will put more pressure on Canadians' already tight finances.
"It's important to get Canadians on a budget and paying down their debt," Jones says. "Now is a good time with very low interest rates to get people to pay off their debt because there are going to be shocks to the financial system in the future and rates eventually are going to rise."
BDO has come up with what it calls a five-step SMART plan to help people budget and fight the battle against debt.
The first is to be Specific and define clearly exactly what it is you want to accomplish in your financial plan.
The second is to Measure. That is, define when you will know you have accomplished your goal or goals.
The third is to be Action-oriented. Define the steps you will need to take to be successful.
Be Realistic. Be sure you set realistic and achievable targets given your strengths and abilities.
And set realistic Timelines and deadlines to meet your goals.
There are many sources where people can go to help them develop a budget, including BDO and most banks and major financial institutions.
Many Canadians will try and handle their debt situation themselves. Polls show that only 49 per cent say they will seek the advice of professional to help them with their problem.
"It's really important to get see a professional and get the right advice and a plan that works for you and your particular circumstances," Jones adds. "People have to get on track to budget, reduce debt and formulate a plan to save for their retirement."
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2016 Talbot Boggs