Face your financial future now rather than hiding from your debt

Trade your book club for a debt-destruction club, says personal-finance expert Bruce Sellery.

We hate talking about money but experts say we need to, especially as interest rates rise

Manulife found that 45 per cent of millennial homeowners — those aged between 20 to 35 — would have the most difficulty making their mortgage payment within three months or less if the primary income-earner in their families were to suddenly become unemployed.
Rather than fretting about your finances now that interest rates have risen, tap into your community for support, a financial expert suggests. (Damir Khabirov/Shutterstock)

If you run, hide, or plug your ears every time the topic of money comes up, you're not alone. But as the era of ultra-low interest rates comes to an end, you need to force yourself to face your finances.

"These days the debt issue is becoming so much more problematic because interest rates are rising," says Bruce Sellery, author of Moolala: Why Smart People Do Dumb Things With Their Money (And What You Can Do About It).

Sellery's advice is to tackle high-interest debt first and head-on, and to tap into your community for support, ideas and accountability.

Start a debt-destruction club

"Form a debt-destruction club," Sellery suggests. "Give book club a rest and take those same people and bring their dirty laundry on their net-worth statements and hash it out."

The last taboo: we hate talking about money, but here's why we need to

6 years ago
Duration 14:19
CBC's Jacqueline Hansen and Renée Filippone sit down with Andrew Chang to figure out why our finances are such a touchy subject

The Bank of Canada's first interest rate hike in seven years is likely manageable for most people, for now. But many analysts expect another increase in October, from 0.75 per cent to 1 per cent.

Look further into the future, and rates could easily climb even higher.

recent outlook by the Parliamentary Budget Officer projects that the Bank of Canada's rate could reach a "normal or neutral level of 3.0 per cent by mid-2020."

Spend now or spend later

Rising rates or the threat of more to come may not be enough to change people's behaviour, though.

"When we think about interest rates, it's really about the trade-off between consuming now versus saving our money so that we can consume later," explained Lisa Kramer, a professor of finance at the University of Toronto who has done extensive research on behavioural finance.

Kramer points to Stanford University research that suggests humans are bad at thinking about their future selves and tend to be averse to dealing with how future finances are affected by things like changes in interest rates.

"The way that you can break that bad decision-making is by building a better connection between our present self and our future self," Kramer says. 

Wrinkles inspire retirement savings

A face-aging app by Merrill Edge has embraced that research and transformed a person's photo into an aged version.

"People who saw age-enhanced images of themselves were more likely to save more for retirement, compared to those who weren't exposed to their future selves," said Alok Prasad, head of Merrill Edge, in a press release.

Community-based discussion or interactive technology could be key to getting engaged in today's changing financial environment.

"There are some people who are right on top of things and any time there is an interest rate change they're thinking about whether it's a good time to refinance their mortgage, but that's a minority of the population," Kramer said. 

"Probably the majority of people don't have their finger on the pulse of the economy quite in that way and are probably making financial mistakes as a consequence."


Jacqueline Hansen

Senior Business Reporter

Jacqueline Hansen is a senior business reporter for CBC News. Based in Toronto, she's been covering business and other news beats since 2010.