Paying off debt top priority for Canadians — for 8th year

Canadians still seem to recognize that paying down debt is an important goal, even as they rack up more and more of it.

Twenty-five per cent of those surveyed in a new CIBC poll cited debt reduction as their top financial priority for 2018, marking the eighth straight year it has topped the list.

The findings come as household debt rose to record levels in 2017.

“We all know how hard it is to keep New Year’s resolutions. That’s why when it comes to your finances you want to set smart goals that are specific, measurable, achievable, time-bound, and most importantly, realistic,” said Jennifer Hubbard, managing director, financial planning and advice, at CIBC.

“Saving and managing your debt are both essential to your overall financial health.”

While third-quarter data from Statistics Canada showed that Canadians owe $1.71 for every dollar of household disposable income, those surveyed by CIBC seem to be making the necessary adjustments.

In order to meet their financial goals, roughly half of those polled (46 per cent) said they reduced spending on non-essential items in 2017, and almost a third (31 per cent) made a household budget.

However, only 16 per cent reported actually achieving their financial budget, and the $1.3 trillion in Canadian mortgage debt is likely a primary culprit.

With more interest rate hikes expected from the Bank of Canada in 2018, mortgage payments will take up an even bigger chunk of the monthly bills for Canadians. Questions surrounding the economy’s ability to cope with higher borrowing costs has been a big reason why central bank governor Stephen Poloz has been reluctant to move more quickly on rates.

Heading into 2018, more than half of those surveyed (55 per cent) by CIBC plan to cut their non-essential spending.

Compared to a year ago, twice as many Canadians said they plan to set up an emergency fund in 2018. A similar increase was seen for those planning to prioritize savings by setting up automatic transfers into a savings or investment account.

“Regular contributions to an emergency fund are not only a smart way to curb dependency on debt, but also to build up savings that can then be applied to other financial goals in a year or two, or even further down the road,” Hubbard said.

CIBC has several recommendations to help Canadians meet their financial goals. They include writing down both income and expenses to get a clear picture of your financial situation. Paying off high-interest debt, and consolidating debt into one loan at a lower rate, are other ways to improve your personal or family balance sheet.

When it comes to spending, understanding the difference between needs and wants is critical, as is saving — with automated transfers cited by CIBC as a useful tool for those who may have trouble making a commitment.