Over half of Atlantic Canadians feeling a ‘financial whiplash’: survey

Money is removed from an ATM in Montreal, Monday, May 30, 2016. THE CANADIAN PRESS/Ryan Remiorz

A new report says more than half of Atlantic Canadians, or about 55 per cent, are experiencing a sort of ‘financial whiplash’ as global headlines and current economic conditions disrupt their financial plans.

The MNP Consumer Debt Index took from a sample of 2,000 Canadians aged 18 and over between March 10 and 11. It found nearly three-quarters of people surveyed, or about 74 per cent, said rising prices for essentials like food or gas are putting a strain on their finances.

“Across Atlantic Canada, many households are not just feeling financial pressure, they are trying to adjust to financial conditions that continue to shift. This can make it increasingly difficult to budget and plan ahead,” explains Tina Powell, a local licensed insolvency trustee with MNP LTD, in a news release Monday.

“With the cost of everyday essentials still elevated and broader global uncertainty that is largely outside of an individual’s control, this can create a sense of ‘financial whiplash.’ Over time, those unpredictable conditions can make it harder to stay on track financially, absorb unexpected expenses or move forward with larger financial decisions.”

The survey found ongoing costs and uncertainties have led to about 71 per cent of people saying they are cutting back on spending, and about 85 per cent saying they are more cautious of taking on new debt.

Findings show many Atlantic Canadians feel stuck, with about 64 per cent of those surveyed saying they feel like they are working harder financially but not getting ahead. Seventy-one per cent say they are delaying any major financial decisions because of the unpredictability of current conditions.

The survey also found about 22 per cent Atlantic Canadians say their debt situation has improved, while 16 per cent say it has worsened compared to a year ago.

Atlantic households limited in financial flexibility

The average amount people have left at the end of the month also dropped, according to the survey, from $995 last quarter to $874, with 42 per cent of those surveyed saying they are within $200 of not being able to meet their monthly financial obligations, and 27 per cent saying they already do not earn enough to cover their bills or debt payments.

The survey says Atlantic Canadians are feeling the impact of higher borrowing costs despite a recent decision from the Bank of Canada to hold its key rate at 2.25 per cent. Two-thirds of those surveyed said they need interest rates to come down.

“While interest rates are holding steady for now, and there are some signs of improvement in how some households are feeling about borrowing costs, many Atlantic Canadians are still feeling the effects of higher borrowing costs and remain uncertain about what lies ahead,” says Powell.

“For households already managing with limited financial flexibility, even small changes in rates or expenses can have an impact, making it difficult to keep up or plan with confidence.”

More than half of Canadians fear if rates rise, they will be in financial trouble, with about 44 per cent concerned rising rates could lead them toward bankruptcy. About half, or 49 per cent, say even if rates decline, they are still concerned of their ability to repay their debts.

Twenty per cent say they could pay an additional $130 in monthly interest payments, but nearly one third, or 33 per cent, say they could not.

Atlantic Canadians worry as tax season approaches

The survey says financial challenges have also become more apparent as Atlantic Canadians approach tax season.

Almost a quarter of Atlantic Canadians, or 23 per cent, say they are expecting to owe taxes they are unable to pay. Atlantic provinces hold the highest share among provinces unable to pay, according to the survey.

The survey found 12 per cent of Atlantic Canadians say they will delay paying as they need more time to figure out a way to come up with the funds, and another 12 per cent saying they would need to borrow or go into debt to meet their payments.

Eleven per cent say they expect to owe and will be able to pay but will need to take money from their savings or money set aside for other purposes to pay it.

“When people begin relying more heavily on credit or stretching to cover everyday expenses, it can be a sign that financial pressures are building, often in response to circumstances that feel outside of their control,” says Powell.

“In those moments, taking a step back to assess your financial situation can help identify where adjustments may be needed and what options are available to regain a sense of stability, regardless of what’s happening in the economy.”