COLIN CORNEAU/ BRANDON SUN
Financial planner Darrell Juliak of Assante Wealth Management says that reducing debt means changing habits and having a plan. A recent national poll suggests the top financial priority for Canadians going into 2013 is reducing debt.
After piling up purchases on credit cards and overspending during the holidays, January can sometimes be known as the "Christmas hangover" for Canadians who may now find themselves in debt.
Certified financial planner Darrell Juliak of Assante Wealth Management in Brandon said that reducing debt means changing habits and having a plan.
"You need to know where (your money’s) going to the dollar," he said. "If you’re not bringing a lunch to work, or if you’re going to get coffee multiple times a day, over the weeks, and the months, and the year these things will add up."
That’s timely advice in light of a recent national poll that suggests the top financial priority for Canadians going into 2013 is reducing debt. The poll, conducted for CIBC by Harris/Decima between Oct. 25 and Nov. 4, surveyed 2,009 adults 18 years of age and over and found that 17 per cent had paying down debt as their No. 1 priority, followed by building savings and managing day-to-day spending.
"These results highlight that Canadians are well aware of the importance of good debt management and remain focused on reducing debt in the year ahead," said Christina Kramer, executive vice-president of retail distribution and channel strategy for CIBC, in a news release.
But Juliak says making the necessary changes could be difficult for consumers.
"People have been trained to be consumers for so long, it’s hard to forego their wants," he said. "They need to know what they’re spending. These days everybody has a computer and it’s easy to make up a simple spreadsheet to track spending."
Juliak said people often don’t realize how their day-to-day spending adds up over time, and a person needs to track their spending over an extended period of time to see where their money tends to go and what can be cut out to save. He said often people will get into debt because they don’t have a plan before they borrow money.
"It’s really boiled down to discipline. If you don’t think you can pay back any money that you’re going to borrow, then you shouldn’t be borrowing it."
Eliminating multiple credit cards is a way to simplify your debt, says Sun Life adviser Shawna Jackson of Taylor Jackson Financial.
"The first thing to do is pay off your high interest credit cards. You can transfer the higher interest onto another lower interest card or take out a consolidation loan to have all your debt in one place," she said.
Jackson said if you make a solid goal and are paying your bills on time — and especially if you are making more than the minimum payment — then you can steadily get out of debt.
According to Barry Twerdun, financial planner for Twerdun Wealth Management, people often don’t pay attention to how much interest is accumulating.
"If you set out a budget for $500 for Christmas gifts, for example, and you end up spending $100 and you use that credit card with the 18 per cent interest rate, you could end up with what they call a Christmas hangover and end up spending more for those gifts than you thought," Twerdun said.
He advises people to stay away from high interest cards unless they can pay off the card before interest is applied.
"Those ones that have the bells and whistles — points for travel or shopping or other things. You need to ask if you’re going to use that card to its maximum payback to get those points, and if you’re not, then why are you paying an 18 to 20 per cent interest rate?" he said.
Not everyone falls into debt, but Twerdun said it’s important to plan ahead and invest in RSPs or other personal savings in case of an emergency.
"Put yourself first. You can’t overspend and think ‘I’ll make up for it here or I’ll make up for it there,’ but if you plan ahead — you’ll have that extra money to spend when you need it."
The CIBC poll shows that reducing debt has been the No. 1 priority for the past three years.
The survey also found retirement planning was knocked out of the list of top three priorities among respondents.
Republished from the Brandon Sun print edition January 3, 2013