Canadians are facing a number of financial struggles in the face of the recent challenges and difficulties presented by the worldwide pandemic. The reality is that many households in Canada are living with substantial debt to their name. Day in-and day-out, Canadian households continue along with no plan or strategy for reducing their overall debt.
Unfortunately, many consumers wait until they are overwhelmed with debt and have reached a breaking point to seek help or solutions. When people have the cash flow to sustain their monthly bills and payments, it is easy to turn a blind eye to their increasing debt problem. However, the moment there is a hiccup in their finances through the loss of income, loss of a job, or unexpected expenses, their looming debt can quickly turn into a financial crisis requiring immediate attention.
Why is Debt Constant?
Debt is no stranger to Canadian households. In fact, it is estimated that Canadian households most recently average a debt load of 158% of their after-tax income. This may seem like a surprising decline from the alarming numbers reported in June 2020. However, the numbers can be deceiving. They are likely attributed to government assistance in response to the pandemic. This forces many to defer payments or apply for refinancing with their lenders. The harsh truth is that this is a short-lived reprieve with many indicators showing debt is once again rising with possibly dangerous implications for Canadian households and the economy.
The psychological impacts of accrued debt over time have been well established and studied. Debt not only causes the obvious stress and anxiety, but has also been shown to affect our ability to make decisions. When consumers reduce and eliminate their debts the positive impacts on their daily life and decisions regarding their future are overwhelmingly positive.
However, reaching the point where consumer decides to tackle their debt is an intriguing and complex process. Oftentimes, individuals become stuck in their habits, failing to confront their accumulating debt until it has become a dire situation.
Common Reasons Canadians Do Not Seek Preemptive Solutions to Their Debt
Each consumer has his or her own personal journey with their finances that ultimately shapes how they approach and deal with their debts. However, there are some common themes present in many individuals that prevent them from taking action sooner rather than later.
Accepting Debt as a Part of Life
Acceptance of debt is a dangerous proposition that leads many consumers to lose a significant amount of money to interest and penalties over time. Many Canadian consumers consider debt an inevitable part of their day-to-day life and monthly responsibilities. They will budget for monthly minimum payments, but accept that they will likely be paying some form of debt at each stage of their life.
Limited Knowledge of Available Options
A common reason some consumers don’t tackle their debt is their lack of knowledge regarding available options. Many erroneously believe their only option for debt relief is bankruptcy, which can wreak havoc on your finances and credit for many years down the line. They are often not aware of their debtor rights and the possibility of solutions through debt restructuring plans.
Waiting to Hit the Jackpot
“If I sell the house… When I retire… When I get a promotion…” These are all common sentiments and hopes by many consumers with mounting debts. They might be aware of the debts they have accumulated. However, they may be awaiting an influx of cash to take care of it all at once. Unfortunately, people cannot predict their future. As they wait for these momentous life events, they also continue to accrue debt and exacerbate their financial problems.
This is also a common sentiment involving individuals who are awaiting an upcoming inheritance due to the passing of a loved one. Rather than being able to use that money to build upon their future and financial security, they are sadly resorting to transferring it over to their creditors.
Outright Denial of Debt Accrued
For some, the notion of “out-of-sight out-of-mind” is their approach to debt. This is a potentially catastrophic mindset that can leave you with a trail of debts for a lifetime. Ignoring debts outright while failing to make payments can cause great harm to finances and future.
Tackle Debt Before It Overwhelms You
Debt is not a life sentence. There is no reason to surrender to debt when there are viable options. These options can assist you to successfully tackle your debt and help you begin focusing on your financial future. Ideally, it is best to tackle your debt before it becomes a bigger problem and burden on your life. It is not uncommon for many consumers to attempt to manage their financial debts. However, over a period of time they may become overwhelmed and feel trapped. Consulting with a debt restructuring specialist can help you reduce your stress and regain control of your finances. The sooner you make the choice to seek out help to tackle your debt, the sooner you will be on your way to financial freedom.
There is no better time to deal with your debt than yesterday. However, if you didn’t, the next best time is today. Waiting until tomorrow is not a solution. Start today. So often our clients say to us, “I wish I had called you guys sooner!”
Contact us at 4Pillars for a free no-obligation consultation to discuss your current financial situation and the options available to you.