News Article

Canadian Debt Solutions Demanded: Personal Debt Hits $2 Trillion

Posted: May 08, 2018 By : Evelyn Jacks and Knowledge Bureau Staff Writers
Posted in: Strategic Thinking, Debt Management, Financial Literacy, knowledge bureau, interest rates, Bank of canada, Evelyn Jacks, Essential Tax Facts, cash flow management, financial education, reducing debt, financial calculators, online campus, debt consolidation, Canada's debt, steven Polaz, mortgage interest

Canadian personal debt levels are now at such an alarming level, that most Canadians can’t even comprehend the size of the rising figure: $2 Trillion, as of last week. As part of their best interest duties to clients, financial advisors need to broach this uncomfortable subject, as things could get worse in the near future.

According to  the Bank of Canada, increasing interest rates, anticipated in the second half of 2018, could impact the financial security of many Canadians.  On May 1, Bank of Canada Governor Steven Poloz shed light on why a cautious approach has been taken with interest rate hikes in recent months – and the $2 Trillion personal debt owed by Canadian taxpayers is among the primary concerns.

It’s not a new issue, as it continues a trend that has been witnessed over the past three decades. Canadian debt levels just keep rising due to low interest rates designed to stimulate the economy, and a hot housing market, according to Poloz. The numbers support this, as $1.5 Trillion of the current debt can be accounted for in mortgages.

After a lengthy period of maintaining lower interest rates, the central bank’s concern is that Canadians will become increasingly unable to meet their financial obligations or pay down their debt when interest rates do start to climb. As the Bank of Canada notes, there is potential for detrimental effects on the economy.

It is an issue of particular concern for those who have access to lots of credit; and, contrary to perception, that’s often higher net worth individuals.  This is where the “Know Your Client” process is of utmost value; in fact, financial advisors must be sure to explore the entire financial environment and this includes the amount of debt being carried by the investor.

A professional strategy and process is therefore required. Knowledge Bureau’s Debt and Cash Flow Management course can assist advisors in developing knowledge and key skills in this field and provide credentials after a rigorous process of true-to-life practical applications that can enable more confident discussions, too.  This course will help you lead your clients through a discovery and empowerment process to maintain a healthy balance sheet and use debt more responsibly and deliberately to build family wealth. 

Tax efficiency in managing debt is explained as well. This certificate course will help you help your clients plan to pay down debt, maintain ideal debt-to-income ratios and make smart debt consolidation choices. It includes access to EverGreen Explanatory Notes and the following calculators to help you work out scenarios and what-if examples:

  • Take Home Pay Calculator
  • Financial Assessment Calculator
  • Cash Flow Calculator
  • Income Tax Estimator
  • Debt Reductions Solution Calculator

Take advantage of our spring early-bird deadline by June 15 and save on tuition fees.  A free trial of this course is available, and once you’ve brushed up on your debt management skills, credits from this course can be applied towards a Designation – either DFA – Bookkeeeping Services Specialist, or MFA – Retirement and Estate Services Specialist.

Additional educational resources:

  1. Pick up a copy of Essential Tax Facts, by Evelyn Jacks. Written in easy-to-understand language, it’s great for sharing with your clients so they, too, can learn more about tax-efficient income planning.
  2. Sign up for our free trials, which offer a preview of EverGreen Explanatory Notes and important tax calculators, as well as a glimpse at course content, including Debt and Cash Flow Management.
  3. Earn CE credits efficiently while you enhance your education by attending a live event with Knowledge Bureau. Spring CE Summits are quickly approaching, and this fall the Distinguished Advisor Conference heads to Quebec City!

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