TORONTO, ON—Despite a global pandemic and financial uncertainties, a new CIBC study finds that for the 11th straight year, paying down debt remains the number one financial priority for Canadians heading into the new year (20 percent), followed closely by keeping up with bills/getting by at 18 percent. Optimism for the year ahead has declined, as fewer Canadians believe their financial situation will improve in 2021, significantly lower than a year ago (24 percent versus 32 percent in 2019).
Pessimism about the year ahead is driven by concerns about a possible economic downturn (78 percent, up from 55 percent in 2019). Top concerns for many over the next twelve months include inflation and the rising costs of goods (60 percent) and slow overall economic growth (34 percent). The uncertainty of the current environment is also making it difficult to plan ahead, say most survey respondents (71 percent).
“Canadians have faced so many challenges this year, it’s understandable they are concerned about the economy in 2021. If this year has taught us anything, it’s that we don’t always know what’s coming next and the best buffer for the unexpected is to be prepared with a plan and be open to adjusting it when circumstances change,” said Carissa Lucreziano, Vice-President, CIBC Financial and Investment Advice.
Close to half (43 percent) say their personal finances have been negatively impacted by the pandemic. Of those impacted, half (52 percent) say they don’t have the advice and information they need to get their finances on track, and almost half (46 percent) believe it will take more than 12 months to get back on track. Almost three-quarters (74 percent) of respondents say they held back from borrowing more in 2020.
“With the uncertainties we’ve experienced this year more than half of Canadians say they need to get a better handle on their finances next year and many say they could use expert planning advice. An advisor can act as a guide to help with priorities such as balancing debt with savings, creating a solid plan to weather difficult times and keeping you on track to meet your financial ambitions,” added Lucreziano.
Lucreziano suggests the following three key tips for Canadians during uncertain times, which may affect the way corporate finance teams adjust their forecasts, strategies and customer interaction planning.
Cash-flow planning: keep track of all income, whether through paycheques, government benefits, rental properties, investments or others. Then, track spending, including any automatic payments out of credit cards or debit accounts, to get a realistic picture of where money is going, where to cut back, and how best to redistribute funds.
Consider consolidation and credit-planning: there are several ways to improve credit. An advisor can help with looking at overall debt loads, interest rates and costs associated with each. Next, the best steps to repayment can be considered, including combining multiple debts into one loan, which can make it easier to manage payments and may lower overall interest costs.
Stay focused and flexible: no matter what challenges the external environment may pose, to the best of individual ability, keep focused on financial goals and remain open to revising plans to meet ambitions.
Key poll findings:
1. Top reasons for taking on more debt this year was day-to-day expenses beyond their monthly income (39 percent) and loss of income (27 percent)
2. Top dream bucket list items include: travelling (43 percent, down 22 percent from 2019) and reaching a personal fitness goal or starting a creative hobby (17 percent)
3. Fewer Canadians believe that their financial situation will improve, significantly lower vs. a year ago (24 percent vs. 32 percent in 2019)
To help clients stay on track with their ambitions for the long-term, CIBC recently launched the CIBC GoalPlanner, an innovative new platform that takes the complexity out of goal setting. Available now to CIBC Imperial Service clients, the CIBC GoalPlanner modernizes and simplifies the goal setting experience, enabling clients to digitally kick start their planning through CIBC Online Banking. Clients then work with their advisor to get the expert advice and insights needed to build their long-term plans, and can use the CIBC GoalPlanner to track their progress anytime. CIBC GoalPlanner also gives clients a full view of their finances and highlights opportunities, shortfalls and surpluses in areas such as cash flow, so that they have a clear understanding of opportunities to further their progress and know what it takes to achieve their goals.