Impulse shopping cost Canadians $3,720 a year.

A majority of Canadians surveyed by the Bank of Montreal say they shop to cheer themselves up and mood-lifting impulse purchases cost Canadians $3,720 annually.
The Bank of Montreal poll found that 59 per cent of those surveyed did impulse shopping and bought items like clothes and shoes and also treated themselves to eating out.

“We’re really struggling to save money on a monthly basis,” said Janet Peddigrew, district vice-president of midwestern Ontario at BMO.

Consumers have been spending more than they’ve been saving over the last 10 years, which is cause for concern, Ms. Peddigrew said. “Those who answered the survey, the majority, said they would do it to cheer themselves up.”

The survey found that 60 per cent of Canadians did this kind of emotional shopping and 55 per cent bought something they might not need because it was on sale.
On average, that amounts to $310 a month being spent on items that are wanted but not needed, according to the survey released on Tuesday.

Those surveyed believed they could save two-thirds of that amount if they made an effort to limit impulse spending, the bank said.

Ms. Peddigrew said setting a budget and using online tools to track spending can help keep impulse spending in check.

Ms. Peddigrew said not having enough savings can leave consumers caught short when an emergency arises, when they need to do a major home repair or when they lose their job.

The poll results come as Canadian debt-to-income ratios sit at a record 152 per cent and top officials issue warnings to start paying down debt before interest rates rise.

There’s also an element of regret that comes with impulse shopping and in some cases, financial difficulties.

The survey found that more than half of respondents regretted their purchases and 43 per cent sometimes spent more than they earned in a month. Another third of those surveyed had to borrow money or take out a loan to cover their impulse spending.

The consequences of impulse spending were more common among Canadians under 30 with one in three unable to afford something they needed because of spending on “wants,” the survey said.
Men said they spent more than women on average, $414 versus $207 dollars but men tended to spend more on technology items, Ms. Peddigrew said.

BMO said its psychology of spending report is the first in a series that will examine personal finance and investing behaviours among Canadians.

LuAnn LaSalle- The Canadian Press

Canadians may be too blase about debt: poll

Saving money...We all want to do it, but, do we know what we're doing it for?
Some of us would like to be filthy rich, while some would like to live a comfortable lifestyle.
What we all can agree on is that staying out of debt is a must and a priority so we can live a financially healthy lifestyle. What would you do if an unexpected event occurred where a lump sum of money is needed? Savings? Ask family? Take out a loan?


TORONTO - A new poll suggests that most Canadians are quite comfortable with using debt as a financial strategy — at a time when debt loads have risen to alarming new highs. The survey, done for bankruptcy trustees Hoyes, Michalos & Associates, finds nine out of ten respondents would consider borrowing money to cover an unexpected cost.

The poll by Harris/Decima asked respondents how confident they were about being able to raise $2,000 within a month if an unexpected need arose. While 55 per cent said they were extremely or very confident they could raise the cash, 92 per cent said they'd consider borrowing to come up with some of the cash.

Less than half — 45 per cent — said they'd never faced a debt problem.

The poll results come as Canadian debt-to-income ratios sit at a record 152 per cent and top officials issue warnings to start paying down debt before interest rates rise. The findings suggest consumers have been unmoved by warnings that rates will inevitably rise and that the resulting financial burden could sink some households.

"It's frightening to see that Canadians have become totally blase about debt — it's becoming their new 'normal' and they're numb to this dangerous trend," says Douglas Hoyes, a bankruptcy trustee with Hoyes, Michalos & Associates Inc.

"For many, the use of debt to not only pay for big ticket items like cars, but also to cover day-to-day living expenses, has become commonplace."

Consumers have taken advantage of ultra low interest rates since the 2008-9 recession to heap on low-cost debt.

The Bank of Canada's key interest rate — which affects banks' prime rates for loans — remains on hold at one per cent, where it has been since September 2010. Coming out of the recession, the central bank set the rate as low as 0.25 per cent in an effort to stimulate borrowing and therefore the domestic economy.

However, with rates still low as the central bank tries to buffer against a globally depressed economic backdrop, the Bank of Canada has declared household debt the number one risk to Canada's economy.

The Hoyes, Michalos & Associates poll results suggest the trend toward debt accumulation is continuing as 26 per cent of respondents said their debt level is higher than a year ago. The survey also found that 70 per cent of respondents said they need immediate help with daily financial matters, including paying down debt (20%), increasing savings (16%), and improving cash flow (13%).

Ted Michalos, a bankruptcy trustee with Hoyes, Michalos & Associates said it appears that Canadians are replacing saving for a rainy day with accessing debt to deal with financial problems.

"Canadians are carrying record levels of debt and yet, surprisingly, 62 per cent of those surveyed are comfortable with their financial situation," Michalos said.

"That is quite a disjoint. It's concerning to see that access to credit and taking on more debt has become an accepted part of financial planning," he added.

One-in-five Canadians surveyed said they believe it would take them two months or longer to come up with $2,000, even if they could borrow. Among those who said they couldn't raise the money within a month, 26 per cent said they couldn't raise the money no matter how much time they were given.

"That's a lot of people who are already at their maximum borrowing capacity," Hoyes said.

The Harris/Decima survey interviewed 1,010 Canadians between Aug. 15 and 23. The survey has a margin of error of plus or minus 3.1 per cent, 19 times out of 20.

Last month, a report on Canadian debt trends by TransUnion found the average consumer's non-mortgage debt load rose another $192 to $26,221 in the second quarter — the highest average debt per person it has seen since it began tracking the variable in 2004. The quarter also marks something of a turning point as the second consecutive quarter in which debt accelerated following more than a year of quarterly declines.

In July, another consumer credit reporting agency, Equifax Canada reported that consumer indebtedness, excluding mortgage debt, grew 3.1 per cent year-over-year in the second quarter, down from 4.4 per cent in the same period of 2011.

The Equifax study also found that high-interest credit card debt fell by 3.8 in the quarter and consumer bankruptcies were down 4.5 per cent from a year earlier. Meanwhile, bank loans and lines of credit showed very moderate growth compared to a year ago.

By Sunny Freeman, The Canadian Press, thecanadianpress.com, Updated: September-24-12 3:00 AM

Can't find a job? Consider moving back home

When job opportunities are not presenting themselves, moving back in with your parents is an option to help ease any financial burden you may be facing.

 

Today's millenials face a tough road ahead of them thanks to the unfortunate effects of the recession. With the unemployment rate for those aged 15-24 at a whopping 14.7 per cent in Canada, double that of the national rate, more and more young adults are graduating into a tough job market.

 

The lack of jobs coupled with high student debt is a common reason for youth to move back home, but other crises like ending a romantic relationship or living with bad roommates can also influence a return to the nest.
Rob Carrick, an Ottawa-based personal finance columnist for the Globe and Mail newspaper and author of a financial guide for young adults, How Not to Move Back in With Your Parents, says it's the most sensible solution for someone who doesn't have a job.

"Ideally, you won't have to pay rent and you can live pretty much cost free," he says. "It means you don't have to go into debt to pay your day-to-day living costs... It gives you a chance to plot a strategy for moving forward without digging yourself into a worse hole of debt."

Before the move
Christina Newberry, a Vancouver-based author and founder of The Hands-On Guide to Surviving Adult Children Living at Home, says before the move happens, both sides need to sit down and discuss:

1. Why you're moving back home
2. What you plan on doing during your time living at home
3. How long you plan on moving back for
4. Other details about your stay such as rent, computer, car, and TV privileges, curfew, and your significant other

There's a huge sacrifice made when both sides agree to live together again. She suggests putting together a contract that serves as a reference whenever there's a problem.

If you move back home again, it is up to the child to renegotiate the terms, says Carl Pickhardts, a psychologist in Austin, Tex., who specializes in parenting consultation about adolescence.

"There's no fixed schedule for the achievement of full independence, it varies for young person to young person and that is OK," he says.

Should you pay rent?
Newberry moved back home twice, once for eight months after she graduated from university and again for two months after a romantic relationship ended. When Newberry moved back the first time, the family decided she didn't need to pay rent, unless she stayed past a year. But she thinks other young adults should.

"It helps maintain that pattern of having that monthly expense to consider," says Newberry who covered her personal expenses during both times. "It also helps the adult child feel less like they're mooching off of their parents — they're making some contribution to the household."

Carrick says the young adult should offer to pay rent and let their parents decide.

How much is enough for rent? It's impossible to suggest a figure, says Newberry, but the family should put together a budget and calculate the financial impact of the adult child moving back. If the child can't cover the cost, then rent could be a percentage of their income.

If your parents won't let you pay rent, lend a hand with household chores, pay for groceries or utilities and treat your parents to dinner to show your appreciation. Use the money you would have used for rent to pay your debts or put it towards the down payment on a house, Carrick adds.

Plan an exit strategy
Avoid becoming a kidult and use your time wisely, says Newberry.

"Some people get into the mindset that they're going to live with their parents until they land the perfect job," she says. "[Instead] focus on the opportunity to really develop your skills because you don't have the obligation of a huge monthly rent or mortgage payment."

Before moving back home, estimate and negotiate the length of your stay and what you plan to do while living there.

Moving back out
If you just landed a job, congratulations, but don't move out right away, says Carrick. To move out, you'll need first and last months' rent, enough money to cover food, the move and any other expenses. Also, if your workplace has a probation period it's safer to stay at your parents' place until that period is over, he adds.
"When you're moving out, you want it to be a one-way trip. You don't want to put yourself in the position of going back a second time," he says.

 

By Josephine Lim, Bankrate.com, June-14-12