Category: Finance

The economy is a mess. We have produced plenty of wealth, but more and more of us are not seeing those benefits. Young adults are the ones feeling the brunt of this growing problem. There is an increasing cohort of students, job seekers, and even employed Canadians well into their 20s who are living with their parents. But why? The multiple reasons for this paint a complex image of a progressive country crippled by rampant economic inequality.

In 1995, one in five of Canadians 25 to 29 years of age lived with their parents. In 2016, it was just one in three. Adults aged 25 to 64 living at home more than doubled from 900,000 in the 1990s to 1.9 million in 2017. There is an undeniable trend here. More and more students and adults are living with their parents well into their twenties. Students are facing an uphill battle of escalating student debt, housing prices, and general cost of living. This, coupled with fewer full-time employment opportunities and less job security, has vastly changed how young Canadians venture into adulthood.

Life is getting more expensive compared to previous generations. Debt held by millennials went up more than 12% from 2018 to 2019. The cost of living in a major city like Toronto went up $475 in that same time period, far surpassing inflation. Young people owe most of the $1.88 trillion owed throughout Canada. The non-profit group Generation Squeeze concluded in a study that in order for Canadians aged 25 to 34 to afford the average home, their annual earnings would have to double to about $93,400 – and home prices would have to drop by 50%, or over $200,000. There is an undeniable chasm between earnings and affordability, and it is hitting the youngest the hardest.

Nevertheless, there is another factor at play here. Adults living with their parents may look like a step backward for them, but that has not always been the case. It was once the norm. There was a huge economic boom in the post-World War II era, with each generation seeing a better quality of life than the one before it. This trend of adult students and workers living at home is also a resurgence of a cultural norm evident throughout much of human history. This is especially evident amongst cultures where it is more socially acceptable; while 9% of all adults live with their parents in this country, the same is true for 21% of South Asian adults. Multigenerational households have the advantage of greater financial and emotional support.

It is crucial to challenge the stigma of grown students and adults living with their parents. It is not a weakness or a cause for ridicule. In fact, it is the expectation for many cultures and normal from a historical perspective. What is worrying, however, is the growing economic disparity in this country and globally. With so much wealth held in the hands of so few, the younger generation is left with weaker career opportunities, skyrocketing costs of living, and stagnant wages. This simply cannot continue. It will take a unified effort to dismantle the status quo. Whether you are a student living at home or a young adult living on your own, we all benefit from an economy that is not an unequal mess.

Sources:

Ansari, Sadiya. “The number of adults living with their parents has doubled since 1995. Culture is a driving factor.” Global News. https://globalnews.ca/news/4968136/the-number-of-adults-living-with-their-parents-has-doubled-since-1995-culture-is-a-driving-factor/

Febbrao, Jenny. “Cost of Living, Not Mortgages Are Draining The Pockets of Canadians.” Toronto Storeys. https://torontostoreys.com/cost-of-living-mortgages-canadians/

Forani, Jonathan. “‘Troubling’: Home prices nearly double what Canadian millennials can afford, says report.” CTV News. https://www.ctvnews.ca/canada/troubling-home-prices-nearly-double-what-canadian-millennials-can-afford-says-report-1.4464569

The Global and Mail. “Statistics Canada says adults living with parents are employed and single.” https://www.theglobeandmail.com/canada/article-statistics-canada-says-adults-living-with-parents-are-employed-and-2/

A 2019 survey conducted by Qualtrics on behalf of Credit Karma revealed that Canadians’ second-biggest fear (after death) is debt. Forty-three per cent of Canadians said that they lose sleep thinking about their finances, including debt and lack of savings. Furthermore, 26 per cent revealed they’re zeroed out at the end of the month.

It can be overwhelming to have financial struggles, especially when you’re juggling to pay balances not just from one credit card but from multiple credit cards. In times like these, it’s inviting to resort to quick solutions that can lead to more harmful consequences like taking a pay day loan or pawning a valuable and sentimental item. The good news is there are ways to combat your debt without having to make yourself vulnerable to loans with unbelievably high interest rates or giving up something that’s meaningful to you for extra cash.

Let’s look at 5 great tips below on how to face your debt issues head-on and come out on top:

1. Get organized.

Army troops don’t go to battles without a plan, and it should be the same when you’re tackling your debts. Gather all your credit card statements and make a note of the amounts you owe, plus the payment due dates, interest rates, etc. This will give you a clear picture of your liabilities so you know where you stand. Knowing your exact situation will help you draw out a workable solution.

2. Consider debt consolidation.

Consider applying for a debt consolidation loan at your bank. A debt consolidation loan is a type of personal loan that has a lower interest rate than what credit cards normally charge. This loan can pay off your credit cards or other debts, then you’ll only have one payment to take care of instead of four or five credit card payments.

3. Look into zero per cent balance transfer.

An alternative to debt consolidation is a balance transfer. It does sound like a trick move since your goal is to pay off credit card debt, therefore applying for another credit card should be out of the question. However, zero per cent balance transfer cards can be helpful in saving you money going forward. Just be sure to find a card offering an extended zero per cent introductory period, which can range from 15 to 18 months. After you find a card, transfer all of your outstanding credit card debt to that one account. You can focus on one payment with no interest.

4. Reach out to your creditors.

It’s worth a try to reach out to your creditors so together you can work with them to come up with a payment plan that suits you. This lessens the pressure for you and you can concentrate on paying off your debits according to your ability to pay. This way, you minimize the need to go for desperate recourses like pay day loans with high interest rates. Most creditors are understanding of people’s financial situation because of COVID-19.

5. Change your behaviour.
   

All of the four tips above will be useless if you don’t make an effort to change your behaviour that put you deep into these arrears in the first place. While there’s a good chance you’ll pay off your debts and you’ll come out unscathed, be more mindful of those habits that can place you in a precarious situation again. Otherwise, it will be a never-ending cycle of overspending then struggling to pay off debts.

Financial savviness is a valuable skill these days, but there are times when our debts get out of hand. When this happens, know that there are ways to manage the situation. However, going forward, you have to make an effort to avoid getting yourself in the same situation again.

 

Sources

Collie, Meghan. “Canadians fear debt almost as much as they fear death: survey.” Global News. https://globalnews.ca/news/6096075/canadian-personal-debt/

Niemeyer, Brooke. “7 Tips for Paying Off Credit Card Debt.” Credit.com. https://www.credit.com/debt/tips-for-paying-off-credit-card-debt/

Pyles, Sean. “How to Get Out of Credit Card Debt in 4 Steps.” NerdWallet. https://www.nerdwallet.com/article/finance/credit-card-debt

Segal, Troy. “Paying Off Debt With a Balance Transfer.” Investopedia. https://www.investopedia.com/ask/answers/111714/when-balance-transfer-good-idea-paying-debt.asp

Weliver, David. “Kick Debt’s Butt! How To Get Out Of Debt On Your Own.” Money Under 30. https://www.moneyunder30.com/get-out-of-debt-on-your-own

COVID-19 had such a strong impact to the world economy, no doubt. But if there’s one bright side to the pandemic, it was the fact that Canadian interest rates reached historic lows during the height of COVID-19.

Thanks to a push for Canadian banks to lower interest rates and their fees by organizations like ACORN Canada and other anti-poverty advocates, six of the country’s biggest banks agreed to reduce interest rates on credit cards as a relief to customers affected by the pandemic. These banks were Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank, Royal Bank of Canada, National Bank of Canada, and Canadian Imperial Bank of Commerce.

All these banks had their own way to alleviate the financial strain felt by their customers due to COVID-19. TD Bank, for example, cut their interest rates by half, while BMO reduced theirs to 10.99 per cent.

Before the pandemic, most of these banks charged interest rates between 19.99 per cent and 20.99 per cent on purchases.

Lower interest rates also extended to mortgages, which was good news for aspiring and current homeowners.

Three months into the health crisis, the five-year fixed rate dropped to a record low of 1.99 per cent. At the time, homebuyers everywhere were ready to take advantage of the decreased interest rate for mortgages. At the same time, it was a good opportunity for those who were already homeowners to refinance and consolidate debts.

The Canadian government also urged banks to offer mortgage relief plan to those affected by the health crisis that allowed them to defer or skip payments for as long as six months.

Lower interest rates also made it attractive for any borrower looking into spending on a large purchase, apart from a house, like a car.

However, lower interest rates also brought in disadvantages.

For one because it made borrowing costs cheaper, it led to greater spending for some consumers. Some individuals also were tempted to take out larger loans beyond their payment capabilities even though they didn’t truly need these loans; it was tempting to apply for them because of the promise of lower interest rates.

Another bane is that consumers were deprived of an incentive to save since the lower interest rates were encouraging them to spend more rather than hold on to their hard-earned bucks.

Those who sent money abroad to family and friends also bore the brunt of lower interest rates because there was a depreciation in the exchange rate and the Canadian dollar experienced a fall in its value.

The lower interest rates offered its own set of the good and bad for consumers, but it’s still too early to tell its effects in the long run. Now that the pandemic is easing up, financial situations may have been more stable, but some things may still be up in the air. It’s good to be vigilant and be well-prepared for changes in interest rates to avoid missteps.

 

SOURCES

Better Dwelling. “Bank of Canada Waited Too Long, Expect Much Higher Interest Rates: Scotiabank.” https://betterdwelling.com/bank-of-canada-waited-too-long-expect-much-higher-interest-rates-scotiabank/

Foran, Pat. “Canadian banks urged to do more to lower fees and credit card interest rates.” CTV News. https://toronto.ctvnews.ca/canadian-banks-urged-to-do-more-to-lower-fees-and-credit-card-interest-rates-1.5507869 

Foran, Pat. “Pandemic pushes Canadian interest rates to near historic lows.” CTV News. https://toronto.ctvnews.ca/covid-19-pandemic-pushes-canadian-interest-rates-to-near-historic-lows-1.4982314

Press, Jordan. “Raising interest rates will help lower inflation in time, BoC governor says.” Global News. https://globalnews.ca/news/8658247/bank-of-canada-interest-rates-inflation/

Reuters. “Canada’s Big Six banks cut credit card interest rates to ease coronavirus impact.” https://www.reuters.com/article/health-coronavirus-cibc-idUSL4N2BR42T

Congratulations, we have made it! It looks like the end to the pandemic is near! Now you feel like you deserve a reward. After all, the last two years have been difficult and you’ve had to make sacrifices while kicking your patience and resilience into high gear.

Now finally you can watch your favourite band live in concert or join your best friend and spend a weekend at a fancy hotel out of town. You can now splurge on these indulgences, right? Being cooped up for a long time at home wherein making a mental list of all the things you’ve missed became a daily activity – well, that can take a toll on anyone.

Though you have all the reason to treat yourself and reclaim the life you’re meant to have pre- pandemic, remember this doesn’t give you the license to go on endless shopping sprees and empty your bank account. Think of all the money-saving techniques you’ve acquired while we were dealing with COVID-19 and put them to good use even after it’s over and done with. Doing so will benefit you in the long run. Let’s look at these four wise tips below.

1. Go paperless.

You probably missed heading out to the bookstore to grab a paperbound or hard cover copy of bestsellers during the pandemic. There’s nothing like the smell of physical books, after all. However, like most people, you’ve likely embraced the wonders of e-books! Reading was truly a great way to keep yourself entertained during COVID, and it’s more economical to go for the digital book versions if you intend to continue with this wonderful hobby.

2. Do more streaming.

OK, we can all agree that nothing can compare to the experience of being in a crowded theatre watching a movie where you can hear everyone’s reaction, whether they’re screams of joy or exasperation. However, during lockdown, it’s likely you signed up for multiple streaming services, and it’s great to keep them if you can. It’s still the more practical option since you only need to pay a monthly subscription. When you go to the theatre, you have to deal with the rising prices of cinema tickets and snacks. Now, this doesn’t mean you should avoid the cinema like the plague, but to save yourself some bucks, go for those ones truly worth watching on the big screen.

3. Stick to home-cooked meals.

Now this recommendation is something you won’t welcome with open arms, but keep in mind that just because the world has opened up again doesn’t mean that you keep your wallet wide open too. If you’ve embraced the art of cooking during COVID, now’s not the time to stop. Cooking your own meals not only goes a long way to build your savings, but it’s a healthier option too! Sure, it’s enticing to head out to restaurants now that you’re free to dine in these places and they’re at full capacity, but limit yourself to maybe once a week or every two weeks.

4. Use the spreadsheet!

When you weren’t on the go since the world was basically shut down, most likely you managed to keep track of your daily budget, and it’s smart to continue doing that. You can rely on the good ol’ Microsoft Excel or use one of the various spreadsheet apps for mobile devices. Apply what you’ve learned from your bookkeeping or economics class. Have two separate columns for what goes in and what goes out. Note each item you spend on: food, transportation, mobile and internet costs, books, and miscellaneous fees. Keep receipts so you’ll always have a point of reference.

It feels so good to be able to spend money on things we’ve been deprived of for two years, but now is not the time to throw caution to the wind. It always pays to save up and increase your spending capacity. In the end, you’ll reap greater rewards.

 

Sources

Corbett, Ashley. “Money Habits During COVID-19, Here’s How To Keep Them Post Pandemic.” Narcity. https://www.narcity.com/money-saving-tips–budgeting-tricks-to-continue-after-the-pandemic

Discover. “4 Quarantine Money Lessons To Turn New Habits into Long-term Savings Strategies.” https://www.discover.com/online-banking/banking-topics/quarantine-money-lessons/

Hickey, Shane. “Covid lockdown savings: how to make the most of spare cash.” The Guardian. https://www.theguardian.com/money/2021/jun/19/covid-lockdown-savings-cash-money

A credit card is essential these days. Even if one has the means to pay everything in cash, a credit card is necessary for building up one’s credit score. A high credit score gives one a better chance of being approved for a loan for big-ticket items such as a house or a business franchise.

However, for some, it can be truly tempting to rely on the plastic for everything, especially if one has been granted a high spending limit. If one reaches the maximum limit, they tend to turn to quick loans with high interest rates, which will have its drawbacks. As a result, the debts pile up, and it becomes a never-ending cycle.

When one seems to go in circles with their debts, they have officially fallen into the debt trap. And that will be challenging to get out of. Fortunately, there are sure fire ways to manage your credit card spending so you won’t get ensnared by the debt monster. Read on below for 5 good ones.

1. Pay attention to your credit card statements.

It’s easy to ignore credit card statements, whether they’re received via traditional mail or email. Most people focus on what’s left of their spending limit, but not necessarily the items they have spent their money on, and this is a big mistake. Going through your statements and making sure every line item is a legitimate purchase gives you a clearer picture of your spendings. It’s also an effective way of analyzing those purchases that you probably can do without, like a paid subscription to an online graphic design platform that you barely use.

2. Use a budgeting app.

Most banks today have an app that allows you to keep track of your spending. Some apps even categorize your expenses, and if something isn’t clear, they’re placed in the miscellaneous category. These apps help you get an idea of where exactly you’re at when it comes to purchases. If you don’t want to use a bank app, you can opt for budget tracking apps for Android or iOS devices which you can link to your accounts. These apps are efficient in noting down your expenses to give you a good picture of your spending.

3. Try the envelope method.

Place bills inside envelopes and categorize them according to your expenses. The money should be a good estimate of how much you’d typically spend for that expense monthly. As we’re still in a pandemic, it’s understandable why businesses encourage customers to pay with debit or with credit cards instead of cash. However, most supermarkets and groceries still accept cash, and this is where you can apply the envelope method. Set aside $200 for your monthly groceries. When it’s nearing month-end and you feel your money is running out, then it’s time to get creative. If you have a rewards card, use those points or take advantage of coupons to save money.

4. Uninstall shopping apps from your devices.

The notifications about promotions from the online stores you frequently shop from are hard to ignore. Something as simple as a $10 off from a $50 purchase or a free shipping with no minimum purchase can easily urge you to drop everything and reach out for that credit card and make a purchase. It’s like FOMO. A good way to combat this is to remove these apps from your devices so the temptations are gone completely. What you don’t know won’t hurt you, as they say.

5. Adopt healthy habits.

You may not be consciously aware of it, but you may have made purchases or used services that you could have easily done without if only you worked on establishing healthy habits. Negative habits may be costing you more than you think. For example, if you notice that every Monday, you tend to spend more on coffee and fast food or sugary snacks, this means that you’re most likely trying to make up for lost sleep. A good way to solve this is to avoid sleeping late on Sundays and instead go to bed early. If you notice that you tend to forego taking public transportation and instead spend a lot of money on rides to get to work or school on time, then most likely it means you need to work on building your time management skills.

Avoiding accumulating debt completely is difficult, but it’s important to do all you can to avoid falling into the debt trap where financial obligations pile on top of another. Follow the suggestions above and they will help you become more money-sensible and steer clear of debts that you’ll struggle to pay.

 

Sources

Gravler, Elizabeth. “Here are the best expense tracker apps of 2022.” CNBC. https://www.cnbc.com/select/best-expense-tracker-apps/

Long, Kelley. “6 Ways To Track Your Spending.” Forbes. https://www.forbes.com/sites/financialfinesse/2017/08/17/6-ways-to-track-your-spending/?sh=8433e2e46503

Neidel, Courtney. “5 Steps for Tracking Your Monthly Expenses.” NerdWallet. https://www.nerdwallet.com/article/finance/tracking-monthly-expenses