Last Christmas, 33% of Albertans went over budget on their holiday spending, adding $800 in credit card debt, according to a recent FP Canada survey.
According to Jeremy Clark, president of CH Financial, a Calgary-based financial planning company, the percentage of Canadians is equal to the course, however, he warns of accumulated debt, which not only strains wallets but also people. psyches.
“The first time people have gone over budget is with credit cards, lines of credit, etc., being paid off over a long period of time, if at all,” he said. “The problem is twofold because it overwhelms you. There is a financial implication, but also a psychological implication. The more debt you have and if you do not repay that debt, it is less likely that you will take on another credit. the future.”
Clark said the average Canadian spends between $1,500 and $1,600, however, he said not all credit card purchases are luxuries. Since the beginning of the COVID-19 pandemic, more and more people are using their credit card for the necessities of life.
“People going into more debt, a lot of which isn’t vacation spending. It’s everyday spending. It also has a lot to do with rising inflation,” Clark said. “There’s a really weird dichotomy in Canada right now, where you have some people going into debt and another equal part of people doing really well. That’s the impact of COVID.”
So what if your credit card purchases are already piling up?
“I think it’s good to use credit cards wisely and that means paying them off every month. Interest rates tend to be quite high on credit cards, compared to a margin of credit.”
Clark said credit card interest can range from 15 to 20 percent, and even if you make minimum payments, it can take years for your credit card to be paid off.
“When you look at credit cards, and you see how easy it is to get them and how easy it was to get a lot of them, that’s really tough debt to pay off,” he said. he declares. “If you look at those credit card statements, and they say at the current rate of payments, if you make the minimum payments, it’s going to take you about 28 years to pay that off.”
There are also ways to couple certain spending habits. Clark mentioned the story of one of his clients who went out for coffee several times a day and spent between $35 and $50 on her lattes and snacks. When asked if she enjoyed her frequent trips for coffee, she admitted it was more of a habit. These types of habits, whether it’s making coffee or ordering takeout several times a week, if minimized, can have a lasting positive impact.
“If you look at what you would spend on groceries and meal prep and then what you spend on even moderately priced takeout, there is definitely a difference and those expenses really add up.”
But if you’re still struggling to avoid SkiptheDishes or DoorDash, you can also tap into the advice and expertise of a financial planner. According to FP Canada, “69% of Canadians who work with a financial planner expect to start 2022 with $0 credit card debt.”
“I want to be clear, that doesn’t mean we intimidate people or force them into our way of thinking. We try to look at their situation realistically and say, ‘What are the trends? What can do we? about it?’ And let’s move on,” Clark said.
In Alberta, the average credit card debt is $4,568 per borrower, while the average consumer (non-mortgage) debt is $40,619.