According to a newly released study by IG Wealth Management (IG), a significant percentage of Canadians have the opportunity to more effectively manage their cashflow by including mortgage payments in their monthly budgeting.
The study, conducted in partnership with Pollara Strategic Insights, found that:
- More than two-thirds (67 per cent) of all Canadians reported having a budget that helps them manage their monthly cashflow.
- These budgets include expenses such as groceries (90 per cent), gas (72 per cent), and entertainment and savings (54 per cent each).
- However, despite the fact that mortgage payments are among the largest monthly expenses (35 per cent) for those who hold one, just two-fifths (39 per cent) reported that they factor in their mortgage when developing their monthly budget.
“In many cases, monthly mortgage payments, along with taxes, account for one of the largest monthly expenses Canadians face,” said Alana Riley, Head of Mortgage, Insurance and Banking, IG Wealth Management. “So, while it is encouraging that so many reported having a monthly budget, it’s only providing a partial snapshot of their overall cashflow situation if they don’t factor in their mortgage. In order to truly optimize the effectiveness of a monthly budget, it should include all major expenses and be a part of a comprehensive financial plan that captures all dimensions of an individual’s financial world.”
Ms. Riley noted the integration of one’s mortgage in budgeting has taken on added importance in a rising interest rate and inflationary environment. In fact, the study found:
- More than half (56 per cent) of mortgage holders are concerned about their ability to make their mortgage payments should interest rates continue to rise.
- Just 45 per cent feel they will be mortgage free by the time they retire.
- Sixty per cent of all Canadians feel they will have to reduce their expenses given rising interest rates and costs, and 43 per cent are unsure how they will be able to make ends meet on a monthly basis.
“The combination of rising interest rates and inflation is causing stress for many Canadians and in some cases tense dinner table conversations across the country,” stated Ms. Riley. “Canadian families are wrestling with questions such as should they go with a fixed or variable rate mortgage, how can they more effectively manage their money and what can they do to set themselves up for the future, whether it be their retirement, the purchase of a home or paying for their children’s education. The value of advice and financial planning has never been more important.”
“If you have questions about your finances or the current economic environment, seek out the help of a financial advisor who can work with you to build a holistic plan and help you face the future with confidence,” concluded Ms. Riley.