The pandemic and rising costs of living are challenging for many, but they can’t see a way to improvement
The cost of living is rising, debts are increasing, and for many Canadians it seems they have to accept a weakened standard of living.
For millions, the pandemic has made life in Canada less affordable, and they are struggling to find a path back to the level they enjoyed pre-COVID according to an Angus Reid Group survey in conjunction with BDO Debt Solutions.
Findings from the fourth annual BDO Affordability Index reveal that 43% of those who carried debt before the pandemic have increased their debt burden since, and more than one quarter of respondents have added a new source of debt with credit cards the top choice.
But most (70%) who have taken on more debt say it has made their standard of living worse and respondents are fairly evenly split on whether they will be able to restore their pre-pandemic living standards.
With rising costs of living, many Canadians say they cannot save as much as they did before, with prices for essentials such as groceries and housing (57%) being a larger barrier this year than loss of income or job loss (51%).
“Rising costs of living are definitely contributing to many people's debt challenges," said Nancy Snedden, national leader of the BDO Debt Solutions practice. "And because people are often hesitant to seek debt help, many people are simply unaware of the range of solutions that are available to them."
Spending priorities
Faced with more expensive essentials, many people are cutting back on other spending.
The research shows that two-thirds of Canadians have reduced their non-essential spending, including entertainment and vacations, almost half reworked their budgets and around one third sold off their possessions.
Applying for government help and starting a new or second job were also part of the mix of solutions.
This reduced spending has been the leading factor in those who have been able to save more (28% of respondents) to do so.
Those more likely to indicate they are saving less or not at all since the beginning of the pandemic include women (45%), Canadians ages 35 to 54 (48%) and Atlantic Canadians (50%).
Retirement goals
With household budgets tightened by higher costs, retirement savings are impacted and 60% of respondents feel they are not on target.
Even among those aged 55 and above, where almost 8 in 10 say they have retirement savings, 3 in 10 say they don’t have enough.
Homeownership is also increasingly out of reach with 74% of those in the 35-54 age group who don’t own a home saying that’s unlikely to change in the next 3 years. Around half of all age groups say this will be the case due to inadequate savings for a down payment.
Saving is a priority for most respondents in the coming year.
For younger Canadians (18-34 years) and those earning less than $50K, saving for an emergency or nest egg is the priority, while older people (35-54) and those earning $100K+ retirement savings are most important.
"With restrictions easing across the country, the temptation for Canadians to increase spending on non-essentials may be high. But as we look ahead, we continue to stress the importance of paying down debt and adhering to household budgets to help avoid adding new debt," adds Snedden.
