Household debt in Canada is getting too big to ignore
Household debt. It’s huge. And getting bigger.
When it comes to debt, size really does matter.
But first, some perspective: a few weeks ago Greece generated mostly ho-hum headlines around the world by (once again) reneging on its debt. Greece’s public debt stands at more than 320 billion euros, or about 175 percent of gross domestic product. Ouch! Or, as they say in Greece: Af̱tó ponáeiIn.
Fact is, countries can go into debt and often do so deliberately, and when things go pear-shaped—as they always seem to do— suddenly and somehow it’s our problem. When individuals go into debt, however, it’s your problem. But here’s the real news: more and more of us will be getting those calls . . . and soon. How come? We Canadians are deep into our own reckless party of free spending and we are in deep. How deep? So deep it makes last winter’s snow seem like a light dusting. And unlucky for us, there won’t be any global economic conferences convened to bail us out.
Recently, the Bank of Canada released figures showing that Canadians “collectively piled on more than $1.5 trillion in debt in the third quarter of this year, up 7.4 percent from $1.4 trillion for the same period a year earlier.” The report concluded that “household imbalances”—a polite way of saying we are living beyond our means—”present a significant risk to financial stability.” Your financial stability, it means. At the same time, Statistics Canada reported that “household total credit-market debt (mortgages, consumer credit and non-mortgage loans) rose to 162.6 per cent of disposable income in the quarter, as consumers’ continued borrowing for home purchases outweighed the slower growth in their disposable incomes.”
Is it just me, or when it comes to piling on debt do we Canadians seem to be giving those Greeks a real run for the money?
So what do we do?. We need to put ourselves on a diet and right now. We need to curb spending and pay down debt. It’s just that simple. Debt isn’t a snow bank in April that will melt away by itself. We need to put ourselves on a healthy financial diet. The binge-eating is over.
How do we get started? Most experts agree that the biggest problem we all have is becoming overly discouraged before we even start. Keep it simple. The most important step is the first. Here are some tips to help you get started:
- Create a financial plan with clear goals and a plan to achieve them
- Put away the credit cards, don’t add to your debt
- Make a budget you can stick to that will allow you save a bit each month to pay down debt. If possible, use an automatic payment schedule to help keep you focused
- Seek professional advice sooner rather than later
- Stick to the plan
You’ll feel better. All the studies show that the more debt the lower the levels of self-confidence and well being. And who needs a self-confidence problem? Remember, when it comes to debt, size matters.