Trying to make ends meet, juggling financial obligations, and now holiday expenses, could leave many consumers ‘buried’ in debt come 2023
NEW WESTMINSTER, BC, Dec. 8, 2022 /CNW/ – For a lot of people, the past year has been hard on their household budget. Between the ever-increasing interest rates, soaring costs of goods and services, and recession fears, 2022 has been anything but “jolly” for Canadians’ budgets. And anxiety about holiday spending is now top of mind.
The 2022 Holiday Spending study from CPA Canada found that two-in-three Canadians (67 percent) are concerned that inflation will make it harder to buy gifts this holiday season. However, the same study also learned that they still expect to spend $589 on gifts – an amount similar to the average CPA Canada has found in previous years from its annual study.
“It can be difficult to cut back spending during the holidays,” explains Scott Hannah, President & CEO of the Credit Counselling Society. For many of us, this is typically a time of sharing and enjoyment, but if there was ever a year to slow down on spending and borrowing –this is it.”
Instead of slowing down, credit card usage continues to increase and trend upwards. The latest Equifax Canada Market Pulse Quarterly Credit Trends Report shows that consumer debt has climbed to $2.36 trillion, with non-mortgage debt reaching $21,183 per consumer, the highest level since the second quarter of 2020. Similarly, a recent report from TransUnion found that credit participation reached a record-high, with almost 28 million Canadians having active credit products. Compared to last year, this is an increase of almost eight percent. Mark Kalinowski, a Financial Educator with the Credit Counselling Society, says it reflects the times we’re living in – credit is no longer just a convenience. For many, it’s become a necessity. “Last year, we were counselling clients on finding ways to tighten their budgets, and now many need their credit cards just to buy the basics.”
Unfortunately, there is little relief is in sight. 2023 is expected to be another year of rising costs and financial challenges, including a big five to seven percent increase in food costs, according to the latest Canada’s Food Price Report. This could make it more difficult than ever to pay off those holiday bills. One way to prepare yourself, Kalinowski adds, is to be in the best possible financial situation to try to meet these challenges. “Give yourself the gift of peace-of-mind this year by avoiding the January debt trap. The holidays last only a few weeks, don’t let their costs follow you throughout 2023.”
The fallout from this “holiday hangover debt” can be far greater than we think. “This is not simply a matter of a little holiday overspending,” warns Hannah. “The added costs of the holidays, especially if you’re relying on credit to cover the costs, could push many households to the tipping point next year.” This seems to be especially true for younger adults (18-34), as a recent Equifax Canada report discovered that three out of ten (37 percent) said they carried most of their credit card debt during the holiday season, and 41 percent needed a month or more to pay off their purchases.
“When it comes to that ‘special occasion’ spending, especially around the holidays, many of us tend to take a break from worrying about our debts,” explains Kalinowski. “There’s so much going on with events, parties, and shopping, that it’s all too easy to distract ourselves from our financial problems.” For those who are struggling this season with their finances, he recommends getting help sooner than later. “There is no rule that you need to wait until the new year to get down to business. If you need help, reach out sooner rather than later. It will help you enjoy the holidays that much more.”