So I have a couple of day's worth of posts to catch up on, let's get started. I mentioned earlier in this post that I've had a very busy weekend - it was also super expensive. All in all, between the concert, the party and the grocery shopping, I dropped at least $600 in the last four days. If I had a budget for entertainment, I would be way, way over.
Budgets, savings, spending have been on everyone's minds since the 2008 Great Recession that saw several millions of people around the world declare personal bankruptcy, face foreclosure on their homes and lose all of their personal savings. Some of the behaviours that led up to that mess were things like taking on too much debt and overspending (like I did this weekend).
It's no surprise then that there's now a great deal of concern from the Bank of Canada that Canadians are now starting to edge closer and closer to taking on ridiculous amounts of debt similar to what Americans were before the recession. According to a Globe and Mail article back in May of last year, Canadians had $1.44 of debt for every $1 they earned. Of course, most of that is attributed to mortgage due to low interest rates, but credit card and short-term debt has also climbed, to the warning of many government officials like BoC Governor Mark Carney.
So, what's happened to make Canadians act this way? One key factor is that interest rates are down so people are borrowing more at the cheaper rates in order to save more money in the long run on paying interest. The other is that Canada, unlike other G8 countries, was not affected as badly during the meltdown - while consumer spending did take a dip, it rose back up quickly compared to our neighbours to the south. People bought more, all on credit cards. And speaking of those cards, people used more credit cards due to loyalty programs - the perceived value of earning points while using your cards makes people spend more on their plastic, not actually keeping a track of that spending until the bill comes at the end of the month to serve a swift kick to the gut.
MacLean's magazine this week featured articles about Canadians and finances. One article called, "Nevermind the facts of life, talk to your children about money," highlights what the province of Ontario plans on doing to educate youth and building their financial intelligence. Grades 4 - 12 students will now have financial literacy classes starting next year, Manitoba and Alberta are planning similar changes to their curricula.
About time, I say. I think back to my classes in grade school, junior high and high school and the only time I remember ever being taught anything close to financial literacy was in Home Ec when we spent one class on how to do a personal budget. Then we moved onto sewing for about 10 classes, 'cause, you know, that was more important.
It is never too early to get people to think and learn about taking care of their own personal finances, but it can't be just up to schools to teach this - parents shoulder the main responsibility. I am pretty grateful that my mom (who I credit for engraining in my brain my sense of financial responsibility) started me out at a young age - age 6 was when I first opened my savings account at National Bank. Age 7 was when I bought my first Canada savings bond. Age 10 was when I first opened up an ING Savings account (to which I still have). When she passed in early 2000, I had learned enough at that point to help manage a personal budget which tracked my wages from my part-time jobs and my expenses, which included a car, and then saving for my future education.
While being mostly financially responsible, I've had a few moments of irresponsibility that, thankfully, were minor and taught me valuable lessons like overdrafting on my accounts, paying credit cards late, and nearly missing a mortgage payment. Small issues - but enough to give you small heart palpations and sleepless nights.
So I can't even imagine another stunning fact in the same MacLean's issue, where it stated that $32,499 was the minimum income a family of four needs to get buy. This number is shocking - for me, having an income that's over twice this amount, I often find myself frustrated with the money I have remaining once I pay my mortgage, maintenance fees, monthly expenses and then set aside an amount for my savings and RRSPs - and this is all to support ONE person. I can't imagine that four people can survive on half of that amount.
Then there was the other mind-boggling fact that in a recent Angus Reid poll, 32 percent of Canadians are hoping that a lottery windfall will help fund their retirement. Have we taken crazy pills? What are the chances of winning a lottery - one in a kabillion? How did Canadians all of a sudden become so financially retarded?
For people of my age, it's not to late to start thinking about how one will fund their retirement. When I discuss RRSPs or TFSAs with people who didn't go to a business or commerce school program, I often get responses like, "I don't know what that is," or "it's too early to think about that, I have to pay off my student debt first." While the latter point is valid, the former point is nothing short of ignorance. I even find my friends who did business or commerce school programs don't know exactly what the benefits of contributing to an RRSP or TFSA are. Take a few hours, read about them!
And it's never too early to ask for help - that's what financial planners are there to help you do! Every bank branch has one - go to your bank and set up an appointment (now that the RRSP rush is over, they have all the time in the world). They are there to help get you out of your student debt faster by finding ways of consolidating that debt into more managable ways of repaying it back, so that you can start saving for the future.
It often angered me in 2008/09 to see that many people put the sole blame on big corporations for the financial meltdown. True, they did a lot of damage, but the finger pointing should have also been put on the ignorant public that signed on dotted lines when they knew they couldn't afford to or spent their savings thinking that money would magically reappear someday in their accounts. Financial literacy starts with each and every one of us. Pick up a book, google or wiki that term you're not understanding - with all the information we have at our fingertips these days, you're a fool not to read up before you make a major financial decision.
So, I say all of this whilst I plan for how I will be scrimping and saving for the next couple of months to balance out all the spending I've done since January. And just when I thought not drinking and eating healthy was supposed to save me money...
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