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Canadians' top financial priority: cutting debt

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Almost one third (30 per cent) of Canadians says their single most important financial priority is to reduce or eliminate debt, according to a new report.

BMO Wealth Management, a unit of BMO Financial Group, discloses this finding “The Personal Balance Sheet.” The study examines how Canadians adapt financially as they move through different life stages, balancing saving, investing, borrowing and spending to reach their financial goals.

Related: A study in contrasts: financial outlook of boomers vs. Gen Xers

According to Statistics Canada, the debt-to-disposable income ratio was 165.3 per cent for the first three months of 2016. This is the amount Canadians owe for every after-tax dollar they earn, that is $1.65 for every dollar earned.

The BMO report found Canadians’ other financial priorities include:

  • Effective investing and tax efficiency (24 percent)

  • Saving more (23 percent)

  • Budgeting (14 percent)

  • Spending on personal needs or goals (4 percent)

Priorities shifted depending on the age of respondents. While the most important priority for boomers (those aged 35-54) is to reduce or eliminate debt (34 percent), the number one priority for millennials (those aged 18-34) is saving more (26 percent). Canadians aged 55 and over prioritize effective investing and tax efficiency (29 per cent).

Conquering financial fears

The report also finds that almost one third of Canadians (29 per cent) are concerned they will not be able to save enough to reach their financial goals. Millennials are more likely to have this concern (35 per cent) than boomers (29 per cent).

Canadians report the following events have made it difficult for them to save or invest to achieve their financial goals:

  • Stock market losses (36 percent)

  • Failed business ventures (23 percent)

  • Divorce or separation (18 percent)

  • Financial loss on a property sale (13 percent)

“These types of financial losses weigh on people’s minds and may make them more tentative, fearful or hesitant to prepare for the future,” says Chris Buttigieg, a senior manager of wealth planning strategy at BMO Wealth Management.