Get­ting our fi­nan­cial house in or­der

The Hamilton Spectator - - OPINION - Barry Gray

It prob­a­bly comes as no sur­prise that many Cana­di­ans have a spend­ing prob­lem.

But a re­cent sur­vey by ac­count­ing man­age­ment firm MNP shows how close we live to fis­cal chaos. Among the telling stats:

Over half of Cana­di­ans say they are less than $200 a month away from not be­ing able to pay their bills or meet debt obli­ga­tions;

60 per cent doesn’t fully un­der­stand the im­pact of ris­ing in­ter­est rates on debt re­pay­ment;

Al­most half say they are con­cerned about debt;

Four in 10 re­gret the amount of debt they have ac­cu­mu­lated in their lives. How did we get here? Why is it get­ting worse? Spend­ing has be­come alarm­ingly easy. You can shop in store, or from the com­fort of your couch. Tap a debit or credit card, and the money mag­i­cally flows. You can even pass your smart­phone over a ter­mi­nal and make a pur­chase.

In­ter­est rates con­tinue to hover at near his­toric lows, which lessens our fear of bor­row­ing and the need to pay it back quickly.

Con­sumers are in­un­dated with re­quests for credit cards, which can be ac­quired with lit­tle ef­fort. Once those cards are in hand, com­pa­nies are more than happy to in­crease your spend­ing limit, and we are often just as happy to oblige.

To be fair, us­ing credit to pay when there are no other funds avail­able may be the only op­tion for get­ting your car back on the road or fix­ing that leaky roof.

The prob­lem, or course, is that even a tiny gust of fi­nan­cial dif­fi­culty can send this whole shaky house of cards crash­ing down. With so much debt, and lit­tle cash in hand, a sud­den un­fore­seen ex­pense or job loss can leave one reel­ing. Use more credit, or higher in­ter­est loans, and the cy­cle con­tin­ues with no end in sight.

So why not just tap sav­ings? With so lit­tle left over each month, it fol­lows that sav­ing is a lux­ury for many. And for those with the means, there is often lit­tle de­sire to put money away rather than spend­ing it now.

There are other costs as well. Sleep­less nights, stress, mar­i­tal strife, can often be traced back to money — how we make it and how we spend it.

De­spite our spi­ralling debt and lack of fi­nan­cial knowl­edge, very few turn to pro­fes­sional help. We like to be­lieve we can han­dle it. Many of us can’t.

Fi­nan­cial ex­perts will all agree on one thing: we can’t go on like this. It’s time to get our per­sonal fi­nan­cial house in or­der. Be­gin with a monthly bud­get. An ex­am­i­na­tion of what you bring in, and what goes back out, is a great start­ing point.

Per­haps we should look to the past for pru­dent fi­nan­cial wis­dom. In the early 1800s, Thomas Jef­fer­son said: ‘Never spend your money be­fore you have it.’ Two hun­dred years later, that’s still sound ad­vice.

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