More Than Just Financial Health At Risk For Canadians Struggling With Record High Inflation, Interest Rates And Overuse Of Credit

Tuesday, 20 September 2022 10:25.AM

- Increasing debt & confusion over how inflation & interest rates impact their finances may cause struggles in other aspects of Canadians lives including their overall wellbeing & relationships -

As Canadians continue to feel the financial pinch of yet another interest rate hike by the Bank of Canada last week, many are relying on their credit cards to supplement their monthly living expenses. Statistics Canada reported Canadians now owe $1.82 for every dollar of disposable income, just shy of a record $1.85. This coupled with Canadians struggling to decipher what this all means to their finances, while continuing to be forced to overspend on credit due to the high cost of living, may result in more than just a financial crisis. It could also put their mental and physical wellbeing at risk and cost them their relationships with loved ones, according to Farber Debt Solutions.

"A lack of financial literacy is leaving many Canadians confused how rising inflation and interest rates will impact them personally and leading to large amounts of debt and poor financial decisions. We know many Canadians lived in a false debt reality during the pandemic due to pandemic relief, lower interest rates, and payment deferrals that enabled them to just get by. As we start to return to pre-pandemic life, these same Canadians are now faced with their true debt reality and likely more debt than they had before, along with confusion as to how they got there and how to get out of it," said Shane Pennell, Chief Executive Officer of Farber Debt Solutions.

Recent news of the Federal government's initiatives aimed at helping Canadians struggling with higher inflation may not be enough to help them avoid a financial crisis, warns Pennell. To help even more Canadians struggling from coast-to-coast with debt, Farber Debt Solutions opened four new offices in Charlottetown (PEI), Moncton (NB), Saint John (NB), and St. John's (NL).

Pennell adds this vicious debt cycle is not necessarily the fault of the debtor. It's primarily caused by a lack of financial understanding and the fact most Canadians couldn't make their monthly bills without credit. It's estimated that Canadians are currently forking out an additional $300 - $400 a month over last year due to higher interest rates, increased mortgage payments, and skyrocketing grocery and energy bills.

As the financial aid from the pandemic stopped, insolvency numbers have been creeping up this year, as reported by the Office of the Superintendent of Bankruptcy in Canada (OSB). In July 2022 there was a 19.1% increase in insolvency filings over the previous year, and this number is expected to continue to rise in the fall/winter.

As insolvencies increase and more Canadians face a potential financial crisis, so does their stress levels, which ultimately takes a toll on their wellbeing and relationships. According to Psychologytoday.com, one of the top five reasons couples divorce in Canada is money issues and their different views and management of it.

As a first step to taking control of debt and moving towards a healthier financial future, Pennell recommends conducting a financial health check sooner rather than later. Key questions Canadians struggling financially should ask themselves, include:

• Are you spending more than you make each month?
• Are you still using a pre-pandemic monthly household budget?
• Does your current credit card statement tell you it will take 25+ years to pay off your current credit card balance when making monthly payments?
• Are you receiving harassing collection agency calls?
• Have you depleted all your savings just to keep up with bills and don't have a reserve fund in case of an emergency?
• Are you not sleeping at night and your debt is occupying your thoughts day and night?

If answering 'yes' to three or more of these questions, it's time to get help with your finances, take back control of life and not be overtaken by debt. A financial expert also helps to better understand personal finances and how inflation and higher interest rates impact each household.

"Just like you would visit your doctor annually for a physical exam to maintain and protect your physical health, why wouldn't you do the same for your financial health? Don't go it alone. Get help from a financial expert who will help you strive for a healthier financial future and a happier household. It is possible," added Pennell.

Farber Debt Solutions offers Canadians free financial consultations to evaluate their current debt situation and discuss options available to get back on track financially and to gain more restful nights. Its Licensed Insolvency Trustees, the only government regulated debt professionals in Canada, will review all possible debt solutions including a Consumer Proposal versus bankruptcy that is an offer to pay creditors a percentage of what is owed to them without interest. It enables one to regain control of their debt, has less impact on credit scores in the future, and over time enables one to rebuild their finances.

SOURCE: Farber Debt Solutions