Yet many Canadians struggle to reduce the amount they owe
WATERLOO, ON, Sept. 16 2010 – More than two-thirds of Canadians in a national survey rank being debt-free among their top financial priorities, yet close to half feel they lost ground or only held steady in the past year in their struggle to reach their goal, according to an online poll of 1,000 Canadians.
“Becoming debt-free is a goal that most Canadians share, but few put concrete plans in place to make sure they’ll get there,” said Doug Conick, President and CEO of Manulife Bank of Canada.
Even though more than two-thirds of Canadian households (69 per cent) continue to name “debt-freedom” as their top financial priority, a similar number say they did not make any extra mortgage payments in the past year.
The poll for Manulife Bank of Canada was conducted by Research House in late July and early August.
Despite low interest rates in the past 12 months, the poll suggests many of those surveyed did not reduce their debts. More than one in four (29 per cent) said their debt increased in the past year, up slightly (two percentage points) from a similar poll in April.
Another 17 per cent saw no change in their level of debt, while 16 per cent said they did reduce their debt, but by less than they’d expected.
Fewer than one in 10 (eight per cent) said they shaved more than they expected from their debts in the past year.
When asked about their financial priorities, almost a full third (32 per cent) of those surveyed ranked being debt-free as a ’10’ – their top financial priority. Another 37 per cent ranked it as a nine or eight on the 10-point scale.
“If they’re working with a financial advisor and have a plan in place, they stand a better chance of reaching their goals,” Mr. Conick explained. However, 77 per cent of those surveyed said they prefer to manage their day-to-day finances on their own, without advice.
“Often homeowners miss opportunities to reduce their debts because they don’t have the time or expertise to learn about the options available to them,” he said. “Luckily, more and more advisors are stepping into that gap to help their clients not only manage their debt, but integrate debt management into their overall financial plans.”
Also, 43 per cent of those surveyed said they would have difficulty making their regular mortgage payment within three months, if the primary income earner lost their job. Of these, 17 per cent would have difficulty after one month. A further 40 per cent could keep up their mortgage payment for 3-12 months.
The remaining 16 per cent have flexible mortgages that allow them to easily increase or decrease their mortgage payment as their needs change.
“When it comes to home ownership and mortgages, lack of payment flexibility is a significant risk that most people aren’t even aware they’ve taken on,” said Mr. Conick. “Missing required mortgage payments can have a negative impact on your credit rating and lack of payment flexibility can add extra stress to that already associated with a job loss.”
Almost two-thirds of those surveyed (64 per cent) said they did not make any additional mortgage payments in the past year. Yet nearly half of respondents said they would be likely to make mortgage payments if they could easily access that money again, should their needs change.
Dessa Kaspardlov, a Windsor-based Advisor and Chief Operating Officer of Kaspardlov, Laverty & Associates, notes that, while many Canadians understand the importance of debt management, they simply do not have the tools or strategies to do so efficiently.
“We’re often taught that financial planning simply involves saving for retirement,” says Kaspardlov, author of The Fireman and The Waitress and creator of “Dessanomics”. “We fail to consider the role our debts have in our near-term and long-term financial health. Debt and cash flow management is often not given the attention it deserves because the cost of failing to do so is not well understood. A financial advisor can integrate these into a broader financial plan to help clients achieve their goals far sooner.”
Manulife Bank launched Canada’s first all-in-one account, Manulife One, in 1999 to help Canadians better manage their finances. The all-in-one account brings all your banking together to simplify your finances so income and savings can work harder to reduce debt faster.
An online financial calculator at manulife.ca helps Canadian homeowners understand how much interest they could save and how much more quickly they could become debt-free simply by managing their banking needs more efficiently within a single account.
Manulife Bank believes that by comparing their current way of banking to a more efficient, all-in-one structure, mortgage-holders may gain a better sense of the factors that ultimately drive their interest costs and learn how they could become debt-free more quickly.
The Manulife Bank of Canada poll surveyed 1,000 Canadian homeowners between ages 30 to 55 with household income of more than $50,000. It was conducted online by Research House from July 28 to August 11, 2010.
For more information about Manulife One, ask your advisor for a referral or find your closest Manulife Banking Consultant by visiting www.manulife.ca
About Manulife Bank and Manulife Financial
Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife Financial. As Canada’s first advisor-based bank, it has successfully grown to nearly $16 billion in assets and serves clients across Canada. Manulife Bank provides its innovative Manulife One account and deposit and loan products through independent financial advisors to help individuals make the most of their financial plan.
Manulife Financial is a leading Canadian-based financial services group operating in 22 countries and territories worldwide. For more than 120 years, clients have looked to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We provide asset management services to institutional customers worldwide as well as reinsurance solutions, specializing in life and property and casualty retrocession. Funds under management by Manulife Financial and its subsidiaries were Cdn$454 billion (US$428 billion) as at June 30, 2010.
The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.