Debt Reduction Top Priority in 2013

According to a study released by CIBC we Canadians are more concerned with debt reduction than retirement planning as our main financial priority in 2013.

For a third year in a row debt reduction has topped the list; according to a poll done by Harris/Decima for the bank.  Unchanged from 2012; 17% of the respondents selected debt reduction as their main priority for 2013.  Fourteen percent chose debt reduction in 2011.

However, it remains to be seen how much progress Canadians will make in accomplishing their goal, according to Statistics Canada the household debt to income ration actually increased to a record high level in 2012 to 164.6%.  In other words; for every dollar we earn in income; we have $1.64 in debt.

Second on the list of priorities was Building Savings – chosen by 10% overall and unchanged from last year.  Managing day-to-day Spending/Budgeting followed in third place selected by 8% of respondents, down from 14% last year.

Retirement planning was further down the list selected by only 7% of respondents; this is down from 11% last year, and 13% in 2011.

“A key finding of the poll is that age groups where retirement planning was traditionally a top priority have now shifted to a focus on debt reduction,” CIBC said.

Only two year ago, 24% of respondents aged 45-64 named retirement planning as their top financial priority, this year; that number has dropped to 12% among that age group.  At the same time this group’s debt management priority has increased from 14% to 18%.

“While it is important to address immediate financial needs such as debt reduction, it is equally important to keep long-term goals such as retirement in sight,” says Christina Kramer executive vice-president, retail distribution and channel strategy, CIBC.  She adds “Even small contributions today can make it easier in future years to reach your retirement savings goals.”

Still, Kramer said the survey results highlight that Canadians are “well aware of the importance of good debt management.  Having been named the top priority three years in a row, there is an opportunity for more Canadians to turn awareness of debt management into action and outline some clear steps towards paying down their debt in 2013.”

Kramer said that while it can be challenging to keep multiple financial goals top of mind “it is possible to make debt repayment a priority while still keeping up regular investments into your retirement plan.”

Among other things, she said people should recognize that their finances are all connected and that making progress on one aspect of a person’s financial goals can lead to an opportunity to improve in other areas as well.

In my experience people tend to shy away from investing when the markets are turbulent, maybe this is part of the reason why debt management has surpassed retirement savings in the last few years.   However; it doesn’t have to be a choice between reducing your debts and saving for your future, give me a call and we can implement strategies so you can accomplish both goals.

Have a great weekend,

Tracey

Sources:  Original article by Hugh McKenna published 01-02-13, Investment Executive.com