Money-wise, this past year has been tough for many Canadians. The start of a new year is an ideal time to rethink spending habits and adopt strategies that improve your financial health. Avoid these three common money mistakes to set yourself up for greater stability and progress in 2023.
Money mistake #1: Not paying off debt quickly
If you’re carrying debt, you’re far from alone. In 2022, Canada’s mortgage burden saw its largest year-over-year increase in more than a decade, and inflation pushed up the cost of essentials from groceries to holiday gifts. With tighter budgets, it’s tougher to make headway on outstanding balances.
Not all debt is the same. Some obligations, such as a low-interest line of credit or a student loan with a temporary interest-free period, are less urgent than high-interest credit cards or payday loans. Still, reducing debt is generally one of the best moves you can make. Interest compounds over time, and carrying balances month to month increases the total you’ll pay. In fact, an estimated 41% of Canadians carry a growing credit card balance each month. Starting the year with a clear plan to eliminate or reduce debt will save money and stress in the long run.
There are three widely used strategies to tackle debt. The debt snowball method focuses on paying off the smallest balance first, which builds momentum as each account is cleared and payments get redirected to the next target. The debt avalanche method targets the debt with the highest interest rate first, reducing the total interest you pay over time before moving to lower-rate debts. A third option is consolidation—if you have access to a low-interest line of credit, such as a home equity line, consolidating smaller debts into a single payment can simplify repayment and sometimes lower your interest costs. Choose the approach that fits your financial situation and motivation—consistency matters more than the method itself.
Money mistake #2: Using the wrong credit card
Credit cards can be powerful tools when used wisely. They offer convenience, help build credit scores when managed responsibly, and can provide rewards that offset routine expenses. Equifax suggests that having two or three active credit cards along with other credit types, like a line of credit, can look favorable on a credit report. But not every card is right for every household.
When picking a card, pay attention to terms such as the interest rate, annual fee, and the rewards structure. Match the card’s benefits to your spending patterns—if you rarely travel, a premium travel rewards card with a high fee might be wasteful. Conversely, a cashback or grocery-focused rewards card could save you money on everyday purchases. Also, avoid carrying balances whenever possible; interest charges quickly erode any rewards benefit. The best card for your family is the one that complements your budget and spending habits while helping improve your credit profile.
Money mistake #3: Not talking about money
Money remains a delicate topic for many people. Discussing income, investments, or retirement savings is often avoided at work, among friends, and sometimes even within families. If you grew up in a household where finances were considered off-limits, opening up about money as an adult can feel awkward—but it’s essential for sound financial planning and shared goals.
Start small: weave simple money conversations into everyday life. Invite family members, including children, to participate in discussions about household spending or saving for a family vacation. Teaching kids how decisions are made and why priorities matter builds financial literacy and reduces stigma around money talk.
With a partner, make money a regular, casual topic rather than saving everything for rare, intense conversations. Talk about contributions to registered retirement savings plans (RRSPs), short- and long-term goals, and how you’ll handle routine expenses. Regular check-ins prevent surprises and foster shared responsibility. If you need extra guidance, consider consulting a qualified financial advisor who can offer objective planning support and help resolve complex issues.
Read more about budgeting:
- Back to basics: Finding balance in your budget
- Budgeting for a less stressful holiday season
- How to set financial goals that are realistic and achievable
- How to manage money as a student