Photo By Claire McCormack
Many people throughout Ontario are bracing themselves for financial challenges this year, thanks to increased cost of living expenses.
The Consumer Debt Index is based on an annual Ipsos Reid poll.
In this year’s survey, many respondents were concerned about higher living costs (72%), housing pressures (59%), a worsening economy (58%), interest rate and inflation strain (52%), and job market weakness (54%).
Wes Cowan, a licensed insolvency trustee with MNP Limited explained in an interview with Bayshore News that those concerns aren’t unfounded.
“Certainly there is a reason to be concerned about these things. For example, rent… although it’s been decreasing a bit, it is still about 14% higher than it was pre-pandemic. Groceries are up about 27% over what they were five years ago, and those costs are expected to increase by another 4-6% this year,” he said. “[There are] Other issues too — people are taking on car loans for longer periods of time at higher monthly payments, and just debt itself is something that persists. People have more debt and that debt is often at high interest rates which really drags one’s budget down. It’s hard to stay on top of other expenses when you’re trying to service debt.”
Cowan said that even with decreases to inflation, grocery prices, and average rent prices, many people won’t see their own expenses decrease right away.
When average rent costs go down, it only affects new lease agreements, and not existing ones.
“And that’s the trouble. A lot of folks who have rented a place in the past couple of years or so, they have a higher rent amount to pay. Landlords aren’t going to voluntarily reduce that. They may open up a new rental suite at a lower rate, but not necessarily reduce somebody’s that’s already there.”
He shared that most people he works with are doing what they can to take control of their finances so that they’re ready for what might come next.
“I think a lot of people are responding well to the challenges that we’re facing right now. What we noted in the [media] release is that there are… two approaches to these things, sort of a ‘fight’ or ‘flight’ approach. Almost 60% of people are taking a sort of ‘fight’ approach, which means they’re tackling their budgeting, they’re looking at budgeting better — maybe consolidating debt to get those high-interest amounts down into something that’s at a lower interest rate that they can pay off more easily. And then as well, speaking with a licensed or financial professional, such as a licensed insolvency trustee about their situation and try to get some advice on the best way to tackle it.”
As for those who aren’t trying to get a handle on their financial situation, “The flipside of that is those folks that are perhaps taking a ‘flight’ approach in the sense that they’re ignoring the problems, maybe not talking about those issues with friends, family, or financial professionals, and maybe relying on additional credit to get by, which is only a temporary fix.”
Despite the overall pessimism within the most recent survey, there has been one spot of improvement.
Cowan explained that out of the quarterly surveys that have been completed over the past seven years, each has revealed that around 50% of respondents shared that they were within $200 of not being able to cover their bills.
“That showed up as only 40% in this particular survey. So that would suggest that there are some things that are improving, and maybe it is because these people are taking a more proactive approach to dealing with their finances — budgeting better, consolidating debt, those kinds of things.”