Getting our financial house in order

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.