November was Financial Literacy Month, and it couldn’t be more relevant given today’s economy. For many of us, 2023 has not been kind to us, financially. Between inflation and high-interest rates, many Canadians are feeling unsettled about their day-to-day spending and saving options, as well as their financial security. Let’s take a closer look at how polled Canadians are feeling about their financial future and expert suggestions that may help weather the storm.

“A financial storm”

A survey conducted by The National Payroll Institute (NPI) finds Canadians are continuing to feel the pinch on their wallets. Inflation, interest rates, and cost of living are creating an “intensifying financial stress storm”. The NPI surveyed 1,500 working Canadians, including 81 percent who are full-time. The number who consider themselves financially-stressed has jumped by 20 percent in the past year to 37 percent overall. It also suggests that saving money is more difficult now than at any point in the past 10 years. In fact, 63 percent surveyed say they are spending their entire net pay to “keep their heads above rising waters,” with another 30 percent spending even more than that. This means they’re taking on debt or dipping into savings each pay cycle.

NPI survey findings: 66 percent of those who consider themselves “financially stressed” are living paycheck to paycheck. 50 percent are feeling “overwhelmed” by their debt.

Homeowners concerned over mortgage payments

Similarly, a Leger survey conducted on behalf of RATESDOTCA finds that 35% of homeowners are concerned about making their mortgage payments over the next three years. Although inflation has declined 3.1% from the same time last year, analysts aren’t hopeful that things will be getting any easier for Canadians. Residents are doling out more for day-to-day expenses, and many are spiraling into household debt. Unprecedented interest rate hikes have hit Canadians hardest under the age of 55 years of age.

Financial futures seem less bright for the younger demographic and new immigrants

The younger demographic and new immigrants to Canada polled, in many instances, are making less and/or have fewer savings accrued. Those new to the housing market over the past few years are seeing their mortgage double or triple. Homeowners over the age of 55, not surprisingly, are not concerned about paying their mortgage over the next three years, as they have had longer to save and are in a higher income bracket. “It ends up being a cycle of making less, having less money left over to service debt, and being more vulnerable to failing to keep up with payments, and eventually, bankruptcy,” says Jacqueline Porter, an Ontario-based financial planner.

Other relevant findings of the survey:

  • Half of homeowners say they can afford $500 or less in extra monthly costs
  • Almost one-third (31%) of respondents do not feel confident about their economic future
  • 11% of homeowners are unable to cover their monthly expenses and are dipping into their savings accounts or using credit to do so.
Earlier this year, Equifax Canada reported that consumers are spending more on their credit cards. They also note that delinquency rates are rising as some consumers struggle with affordability. Younger and lower-income individuals are having a harder time making payments.
  • Visible minorities are more likely to be concerned about making their mortgage payments (53%) in comparison to their white counterparts (32%).
  • Additionally, 61% of white respondents reported feeling not concerned about being able to pay their mortgages over the next three years, while only 45% of visible minorities said the same.

RBC report finds financial instability the ‘new normal’

The Royal Bank of Canada (RBC) conducted a poll in the fall and found that Canadians feel financial flexibility is disappearing, as costs continue to hammer savings. According to the RBC 2023 Financial Flexibility Poll, Canadians feel unsettled about their day-to-day spending and saving options. Three of the harsh financial realities called out by poll respondents are the following:

  1. Three-quarters (77%) would like to save more but can’t because of rising costs.
  2. Almost two-thirds (64%) are concerned about falling behind financially this year.
  3. Almost half (48%) reported they have never been more stressed out about money.
The RBC poll also found that Canadians are worried about a potential recession, with the majority saying it will be tougher for everyone to weather an economic downturn today than it was in 2008. 

Craig Bannon, Director of Regional Financial Planning support at RBC, says more than one-third of Canadians don’t have an emergency fund, further weakening their financial flexibility. In addition, the RBC poll also found many respondents expressed serious concerns about the effects inflation can have on their financial future. If inflation continues into 2024:

  • Almost three-quarters (72%) of those with debt are worried about taking on even more.
  • The majority are concerned they won’t have enough money to cover unexpected costs (67%) or ongoing expenses (62%).
  • 39% worry it will take longer to retire.
  • 21% expect they will need to come out of retirement.

4 ways to take back control over your financial future

While Canadians can do little to affect a big shift in inflation or climbing mortgage payments, it is possible to educate yourself to help make better financial decisions. According to Jacqueline Porter, an Ontario-based financial planner, there are small steps Canadians can take to help regain control of their financial futures:

1. Pay off your credit card debt

Many people are hesitant to look at their finances because of a lack of knowledge. Taking a hard look at finances will help to make a strategic plan going forward. Paying off credit cards or consolidating your consumer debt to a balance transfer card are two options. Balance transfer cards offer an interest-free grace period, but be sure to compare credit cards to make sure that you’re getting the best terms according to your individual situation.

Credit card debt, student loans, and other forms of debt can get in the way of you making your mortgage payments. It is always best to get them out of the way so that you can focus on paying off your mortgage for the time being.

2. Lifestyle change challenge

Getting used to living with less is also a way to take control of your finances. Comparison price shopping, second-hand purchases, as well as simple restraints can help with basics and will assist you in meeting your weekly target goals.

3. Start saving; start small

Porter suggests even creating a small nest egg is worth doing, even if it is only $50 each paycheck towards savings. Just $50 (rather than $0) can make a big difference when an unanticipated expense, like a car repair or appliance breakdown, pops up.

4. Subsidies for eco-friendly home improvements

Many home updates can increase your home insurance rates, but did you know that specific types can lower them? Energy-efficient homes, bought or built after June 20, 2022, can apply for a 25% partial refund on your insurance premium. However, you must have CMHC mortgage loan insurance. Additionally, your home needs to meet the Eco Plus energy efficiency requirements.

To learn more about home improvements that can reduce your overall mortgage rate, please click here.

So, thoughts on your financial future?

While navigating your financial future may seem daunting, there are many ways to help weather the financial storm. Speak with your financial institution to discuss a debt management plan to help pay down what you owe, as well as put some away for that rainy day. In addition, if you own or rent your home, you can speak with one of our isure representatives to help you find all available savings, discounts, and rebates available. These options can help ease the burden of keeping yourself and your loved ones protected. Call us today to gain some financial peace of mind!

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