A report released on Monday by MNP Ltd., Canada’s biggest personal insolvency practice, says 58 per cent of Albertans say they are more concerned about their ability to repay their debts than they used to be.
The report found:
- After paying all their current bills and debt obligations, Albertans say they are, on average, left with $459 at the end of the month. That’s a drop of $209 since June and the lowest level since tracking began in February 2016.
- 49 per cent say they are left with less than $200, including 34 per cent who say they already don’t make enough money to cover all their bills and debt obligations each month.
- 70 per cent are not confident in their ability to cope with life-changing events – such as a divorce, unexpected auto repairs, loss of employment or the death of a family member – without increasing their debt.
- 25 per cent say that their debt situation is better than it was a year ago and 32 per cent say that it’s better than five years ago;
- 44 per cent expect that their debt situation a year from now will be better and 58 per cent believe that it will be better five years from now.
- 48 per cent of Albertans say they don’t think they will be able to cover all their living and family expenses for the next 12 months without going further into debt.
- 49 per cent are confident they won’t have any debt in retirement.
- 53 per cent are concerned about how rising interest rates will impact their financial situation.
- 52 per cent agree that if interest rates go up much more, they are afraid they will be in financial trouble.
- 35 per cent are still concerned that rising interest rates could move them towards bankruptcy.
The report is part of the latest MNP Consumer Debt Index conducted quarterly by Ipsos to track Canadians’ attitudes about their consumer debt and their perception of their ability to meet their monthly payment obligations.
“There has been a marked decline in the amount of wiggle room that households have in Alberta,” said Donna Carson, a Calgary-based licensed insolvency trustee with MNP. “Family budgets are being strained by everyday expenses, which means many aren’t putting anything away for rainy day savings and that puts them at risk. It is most often unexpected expenses that force people to take on more debt they can’t afford and that begins a cycle of increasing servicing costs, and eventual default.
“A job loss or an unexpected expense are most devastating for people who already have a large amount of debt. Our research continues to show just how vulnerable Alberta households are to inevitable life events like a car repair.
“The current holding pattern on interest rates and increasing economic optimism in the province could be giving Albertans a sense of relief about their finances. Still, the fact remains that many Albertans are deeply indebted and most don’t have a clear path to repayment,” says Carson pointing to research saying that many may intend to take on more credit to make ends meet over the next year.
“Some may have resigned themselves to being in debt for life. Interest rates may remain stable but there are many already struggling to make ends meet at the current rate. The single biggest mistake people make is taking on more debt to try to deal with debt. Even if you are swimming in credit card debt, with a line of credit, a mortgage, a car loan or all of the above, you can get help to design a debt relief strategy.”