Albertans Pessimistic Concerned About Worsening Debt Situation

While a recent Ipsos poll conducted by MNP LTD. has found Canadians are increasingly optimistic about their debt situations – that sentiment seems to have bypassed Alberta. Compared to the national average of 61%, barely more than half (54%) of Albertans say they feel positive about the direction their debt is heading. Moreover, while the average Canadian has noticed improvements in their personal finances, things seem to be worse than ever for Albertans. Compared to five years ago, less than a quarter (22%, down 6%) say their debt situation is better. Reducing the timeline to one year ago, that figure drops to less than one in five (18%, down 5%).

Frighteningly, the survey also indicates the worse may be yet to come. Even with a modest two-point decrease over the past four months, half (50%) of Albertans say they expect to go further into debt over the next year to make up the gaps in their living and family expenses.

At the core of their concern is interest rates and their continued unpredictability. Fewer Albertans feel prepared to weather a potential rate hike (25%, down 2%) now than they were in March. The survey notes marked improvements in the number who worry an interest rate hike will move them toward bankruptcy (30%, down 13%) and the number to say subsequent increases could place them in financial jeopardy (50%, down 2%). But still between 1.3 and 2 million Albertans find themselves sitting on a financial knife edge. All it would take is one unexpected expense to tip them in the wrong direction.

Nowhere is this concern more apparent than when looking at Albertans’ disposable income. Despite a four-point improvement over the last four months, more than two in five (44%) say they have $200 or less remaining at the end of the month after bills and debt payments. And nearly a third (29%, down 1%) continue to say they have absolutely no wiggle room in their budget.

All these less than optimistic figures appear to conflict with a Stats Canada report released in June which noted the household debt ratio experienced the largest drop on record in the first four months of 2018. With many suggesting credit is due to new mortgage rules and higher interest rates, it’s clear Alberta consumers (and indeed all Canadians) need to do more to reduce their existing debt burden.

It does appear Albertans are at least in the initial stages of a financial diet. The poll reveals half (53%) have reduced their variable expenses (e.g. entertainment, dining out, etc.). More than two in five (42%) have committed to a regular budget and nearly three in ten (29%) have cut back on fixed expenses such as housing costs and car payments. Nearly one in three (31%) have sold items while 15% have taken on additional employment. However, less than one in ten (8%) have reached out for professional help.

Given the severity of the situation for millions of Alberta debtholders, it’s doubtful incremental changes will be sufficient to achieve the financial fresh start they need — especially as quickly as they need it. The sooner these people speak with someone, the sooner they can have peace of mind and the sooner they can get out of debt and back to life.

Other poll highlights include:

• Four in ten Canadians (41%) rate their debt situation as excellent, up 5 points since March.
• Regionally, British Columbians (47%) are most likely to rate their personal debt situation as excellent, followed by Atlantic Canada (46%), Quebec (44%), Ontario (41%), Alberta (36%), and Saskatchewan and Manitoba (30%). There is also a generational divide, as Boomers (49%) are more likely to rate their debt situation as excellent compared to 37% of Millennials and Gen Xers.
• Fewer Canadians say they are already beginning to feel the effects of interest rate increases (38%, down 5 points), while more now say they have a solid understanding of how interest rate increases impact their financial situation (78%, up 4 points). Less than half of Canadians (47%, up 1 point) express concern toward the impacts rising interest rates could have on their financial situation.
• While concern over interest rates have softened, a majority (77%) continue to brace themselves for the possibility of an increase and agree that they will be more careful with how they spend their money.
• Overall concern about rising interest rates have decreased since March, with fewer Canadians concerned about moving towards bankruptcy (28%, down 5 points), repaying their debts (49%, down 2 points), and being put into financial trouble (42%, down 2 points) if interest rates rise.
• Overall, Canadians are gaining confidence in their ability to cope with unexpected life changes without taking on more debt. That includes: being able to cope with an unexpected auto repair or purchase (35%, up 7 points), a change in relationship status (36%, up 4 points), and paying for their own or someone else’s education (28%, up 4 points).
• Looking to the future, Canadians are far more optimistic: one year from now, 38 per cent of Canadians expect their debt situation to be better, while nine per cent expect it to be worse, giving a net 29 per cent score, the highest since tracking began. Five years from now, half (50%) of Canadians think their personal debt situation will be better and only eight per cent think it will be worse. The net score has increased 5 points since March (37% to 42%) and 4 points since December (38% to 42%), also the highest since tracking began.Though things may be looking up for some, half (50%) of Canadians are not confident that they will not have any debt in retirement.

About MNP Debt

MNP LTD, a division of MNP LLP, is the largest personal insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 230 Canadian offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit www.MNPdebt.ca to contact a Licensed Insolvency Trustee or get a free checkup for your debt health using the MNP Debt Scale.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, follow a budget, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians. Visit www.MNPdebt.ca/CDI to learn more. The latest Index data was compiled by Ipsos on behalf of MNP LTD between June 15 and June 19, 2018. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population. This represents the fifth wave of the MNP Consumer Debt Index.