Canadians fear debt almost as much as they fear death: survey

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When Canadians were asked in a survey to rank their biggest fears, death was ranked the highest — and debt was a close second.

In fact, respondents said they are more afraid of debt than they are of public speaking, climate change and even spiders.

The October survey, conducted by Qualtrics on behalf of Credit Karma, collected data from 1,052 Canadians over the age of 18.

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Forty-three per cent of Canadians reported that they lose sleep over their finances, with the top concerns keeping them up at night being debt (57 per cent), a lack of savings (55 per cent) and retirement planning (22 per cent).

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Among the most common financial fears were surprise or unexpected expenses (44 per cent) and not having enough to retire (38 per cent).

Generational differences

These fears aren’t completely unjustified. Recent data from IPSOS on behalf of MNP LTD found that the average Canadian is $200 or less each month away from insolvency, including 26 per cent who report having no funds leftover at the end of the month.

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The report also provides some interesting insights into how different generations think about finances. Millennials and Gen X reported being most concerned about having enough savings to retire, while Gen Z is most worried about unemployment.

Although the age ranges are debated, millennials are generally understood to be born anywhere between 1981 and 1996, while members of Gen Z were born in 1997 onward. Gen X is loosely defined as being born between 1965 and 1979.

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The closer Canadians get to retirement, the more worried they become about their retirement savings. Only 26 per cent of Gen Z reported feeling worried about having enough money to retire, while 36 per cent of millennials and 40 per cent of Gen X said the same.

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However, younger respondents were more likely to avoid dealing with financial problems.

Thirty-two per cent of millennials with occasional financial fears reported avoiding calls from a lender, and 30 per cent said they’ve avoided looking at their credit card statement at some point.

The results also show, however, that younger generations are becoming more comfortable with asking peers for financial advice.

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Forty-one per cent of Gen Z and millennials said they occasionally ask peers for advice, compared to only 20 per cent of Gen X respondents.

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This could have to do with how different generations view money. According to the report, roughly 50 per cent of Gen X view finances as a “private matter,” compared to 37 per cent of millennials and 29 per cent of Gen Z.

The results of the survey may surprise you, but they didn’t shock Monisha Sharma, head of business development at Credit Karma.

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“I was most surprised to see Canadians are as afraid of debt as death, [but] this makes sense when you consider so much of what we are afraid of is rooted in the fear of the unknown,” she told Global News.

Sharma has seen first-hand how finances can be intimidating and overwhelming.

“Without having a full picture of their finances and credit health, it can be very stressful to know where to start,” Sharma said.

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“Anecdotally, we’ve heard from members who will sometimes spend money that they don’t have when they feel stressed. That can perpetuate the cycle of debt because it leads to stress when the next bill comes.”

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The number of people who lose sleep over financial fears is especially worrisome for Sharma.

“This is concerning from a financial standpoint, but also for Canadians’ overall health and well-being,” she said.

Sharma recommends first getting “in-the-know” about what could be causing your financial struggles, and then devising a plan to improve them.

Possible reasons why Canadians struggle with money

Personal finance expert Barry Choi believes the financial woes of Canadians stem from one central issue: the cost of living is rising, but wages are staying the same.

“Costs just keep going up,” he told Global News. “Tuition costs, post-secondary education, student debt … that’s nothing new.”

“It’s getting higher and higher, and it seems like wages aren’t catching up.”

Another thing that can contribute to financial fears is the Canadian real estate market, which seems to grow more unattainable by the day.

“For young people, especially in Canada, if you live in major markets [like] British Columbia or Ontario, real estate is a big concern for many people,” Choi said. “They’re seeing the cities they grew up in and they already don’t feel like they’ll ever be able to afford a home [there].”
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Ultimately, Choi says some tough decisions will need to be made by upcoming generations if they want to be able to climb out of debt and eventually retire.

Steps you can take to feel better about your finances

For starters, moving away from expensive markets, like Vancouver and Toronto, to smaller, more affordable markets can make a huge difference in how much you’re able to save — but that’s easier said than done.

Choi also recommends living with your parents for as long as possible, if that’s an option available to you.

“If your parents aren’t charging you rent or a minimal amount of rent, that obviously will benefit you a lot,” he said. “I feel like a lot of my peers moved out a lot earlier than previous generations, only to get saddled with debt.”

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Choi isn’t suggesting living with your parents into your 50s, but “it’s not really a bad thing” to stay at home a little bit longer than usual, he said.

The easiest action people can take, at any age, is closely examining their budget over a period of a few months.

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“If they don’t have a budget, they should start making one,” Choi said.

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Sharma backs this up.

“Our survey found 44 per cent of Canadians would rather organize their closet than plan a budget,” she said. “However, knowing how to make a budget that works can be a key way to prepare so you don’t feel so anxious about your finances.”

If you have a budget, track it closely for a few months to see where you’re losing a lot of money.

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“Often you realize, ‘Hey, I’m spending too much on subscription services. I don’t really need Netflix, HBO and cable all at the same time,'” Choi said.

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“If you live in a condo, do you really need a separate gym membership if you’ve got a gym in your building?

“It’s the small things. Cutting back on that will help increase the cash flow.”

In attempting to cut “the small things,” Sharma recommends managing money expectations with family and friends.

“It might seem awkward at first, but talking with friends and family about expectations for spending can help a lot,” she said.

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Finally, Sharma says it’s important to track your credit score — even if it seems intimidating at first.

“It’s important to have an idea of your credit health because having poor credit could increase what you pay for loans, prevent you from renting an apartment and even disqualify you from financial products,” she said.

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Learning how to improve your credit — like “making on-time payments and paying off balances,” said Sharma — and implementing those changes can be a huge help.

Invest in your future

When it comes to saving for retirement, Choi recommends focusing less on learning about how to save and more on how to advance your career.

“Saving is important, but your best investment is in yourself,” he said. “Increase your skills, get a job promotion. Increasing your earning potential is almost more important.”

That said, the earlier you learn about personal finance, “the better off you are.”

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“A lot of people are turning to friends, which is a good start,” Choi said. “Blogs, personalities, even TV segments are out there. But you can even just pick up a book.” (Choi’s favourite is Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School.) 

“If you read one book, you’re instantly already in better shape because you start to understand the basics. Once you understand the basics, you can build that foundation.”

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Combining all of these small actions — reading books, understanding your costs and reducing monthly fees — will slowly improve your finances over time.

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“There’s no reason to be afraid,” Choi said. “Once you’ve established [a relationship] with money, you can rebuild from there.”

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