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GenX Families: Why Everything Costs More When You Have Debt

Feel like you’re wheels are spinning, but you’re not making much traction? Year after year, those goals to pay off debt and save more are unmet? You’re certainly not alone! Many Canadians are finding it harder and harder to pay for basic day-to-day items and having even more difficulty planning long term goals because of a lack of affordability.

Why is life unaffordable for GenX families?

New data from our Affordability Index shows that Canadians, especially those with children, are having difficulty covering all their expenses. Here’s what else the poll found:

  • 30 Per cent of Canadian households with kids delayed paying off credit card debt over the past two years because they couldn’t afford it.
  • 1 in 3 GenXers say they have no retirement savings at all and they are the most likely to have credit card debt.
  • 34 per cent of Canadian parents say they’re overwhelmed by their debt and don’t know how to manage it.
  • Half of Canadians say they don’t earn enough to live debt free.
  • Average personal debt is $20,000 for families who earn under $100k.

Although expenses and income are a few pieces of the puzzle, debt is also a contributing factor for families who feel overwhelmed. As families are having more trouble with everyday expenses, they are more likely to have serious financial trouble if they were faced with an emergency they couldn’t afford.

2 reasons carrying debt can make everything more difficult

  1. You’re unable to save. When money is tight, savings usually come last. However, savings are what can keep you afloat during an emergency or keep you from turning to debt when unexpected circumstances arise. If you’re paying $1000/month toward credit card debt now, imagine how quickly your savings would add up if you didn’t have that looming over your head.
  1. You’re more likely to justify more debt. When you’re frequently using your credit card to fill in the gaps and make purchases, it’s easier to justify one more card, one more loan or one more big purchase. However, when you have zero debt, you’re more likely to want to keep it that way by weighing out each purchase beforehand.

How to break the debt cycle

Ready to say enough is enough? Freeing up money each month to cover expenses, save for big-ticket purchases or start a retirement fund doesn’t need to be a future destination plan. You can start now by making some changes:

  • Follow a budget. Can’t remember last week’s purchases? Which bills are paid and unpaid? Download this worksheet or a budgeting app to get started. Budgeting is a crucial part of your financial health because it keeps you in the driver’s seat.
  • Re-think your priorities. Which expenses are draining your account? Chances are there are some splurge areas in your budget that you can reduce to free up some extra money. In addition, you should learn your triggers when shopping to avoid impulse purchases. This might include following a strictly cash budget, leaving your credit cards at home or detaching your credit cards from your Amazon account.
  • Deal with your debt. Compare your debt relief options using this calculator or schedule an appointment to speak to a Licensed Insolvency Trustee (LIT). An LIT will go over all your options, based on your debt and situation to see what works.
  • Increase your savings. Once you’ve freed up cash by dealing with debt and trimming your expenses, start paying yourself first. Start by setting up an automatic withdrawal so you can easily build an emergency fund and start working on your bigger money goals.

Are you finding it hard to pay for essentials because heavy debt is eating up your paycheques? Find more debt relief tips by connecting with us via Twitter #DebtSolutions #PaychequeToPaycheque #GenX

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