Special to the Financial Independence Hub
Prior to the pandemic, the financial health of Canadians was of great concern to the Bank of Canada, who often cited the record level of household debt as a serious threat to our economy. In 2019, the average Canadian household was carrying $1.76 in debt for every $1.00 of disposable income.
Other statistics related to the financial health of the average working Canadian were just as alarming: 52% were living pay-cheque to pay-cheque, 44% say it would be difficult to meet financial obligations if their pay was late, 40% were overwhelmed by their level of debt, and 48% were losing sleep because of financial worries.
We all know now that the COVID-19 Pandemic of 2020 is the gravest economic and financial shock anyone could have imagined. With no time to prepare, millions of Canadians and countless businesses are facing extreme financial stress and a global economic recession has taken hold. Now, more than ever, Canadians must focus on their financial health.
We need to think of health as a three-legged stool
Our overall health is connected on three levels: physical health, mental health, and our financial health. Financial challenges and difficulties are experienced by individuals across all income levels and age groups. Financial stress is the most obvious symptom and proves that financial health is strongly linked to our mental health.
Poor financial health can lead to more serious mental health issues such as anxiety and depression and can also negatively impact our physical health, from fatigue, poor nutrition, to substance abuse and dangerous conditions like high-blood pressure and heart disease.
A state of being in good financial health is when an individual:
- has control over their day-to-day, month-to-month expenses,
- has the capacity to absorb a financial shock,
- is on track to meet financial goals – short, medium and long term, and
- has the financial ability to make choices that allow them to enjoy life and seize opportunity.
Just like our physical and mental health, we need to put in the time, effort and commitment, and apply proven strategies, to maintain and improve our financial health. The Financial Health Network has created a measure of financial health called the FinHealth Score™. An individual’s score is based on four financial behaviours: how you Spend, Save, Borrow and Plan for the unexpected and your future. Your overall score will change with your circumstances and ranges on a spectrum from financially healthy to financially coping to financially vulnerable. Continue Reading…