Debt Spiraling

Debt-Refinance Debt is a disease, and Canadian have it.  Debt has risen seven times faster than incomes in the past four years.

Canadians now owe $80,000 per household, or 131% of our average household income. In 1990 it was 90%. 

Of course, a lot of that debt is mortgage and car loans.  But, a lot of it is not.  The average household has $22,500 in credit card debt for example.

If this is you, and you have equity in your home, talk to a mortgage planner about rolling your high-interest credit cards into a new low-interest mortgage or credit line.  Then take this spending test to get a handle on your finances.

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Side bar:  Since 1990, the average Canadian’s net worth has risen faster than their debt, but that’s largely on the back of rising house prices.  What happens if: a) we can no longer depend on annual home price gains to finance our spending; or, b) our incomes can no longer service our rising debts?

  1. Rolling high-interest credit card debt into a mortgage or credit line makes sense if, and only if, the borrower is committed to cutting up their credit cards.
    Many people consolidate their debt into a low-interest vehicle, and then start accumulating a balance on their credit cards – the “zero balance owing” and “$$$ available credit” prove to be too much of a temptation.
    After a few months or years, you can end up in a worse situation than before the consolidation of your debts – you’ve now got all of your old debt rolled into your mortgage, and a lot of new debt costing you high interest on your credit cards…

  2. yeah, good luck with that buddy. give me a call in 2012 when you’re looking to rent another apartment – i might have something for ya.

  3. As the host of Til Debt Do Us Part, I’ve seen a lot of people with a LOT of debt, and the number one reason is that people have no idea what they’re spending. Consolidating, lowering interest costs, all the strategies typically touted as being the way to become debt free don’t mean a thing if people aren’t in control of where their money is going. I’ve just finished doing a speaking tour across Canada, and you wouldn’t believe the number of people who are now taking charge of their money and learning to live within their means. THAT is the answer to our debt problem.

  4. Hi Gail,
    On behalf of Rob & I, thanks so much for stopping by!
    Your show, with its black-and-white calculations and honest dialog, vividly illustrates how spending is an addiction (“financial crack” as we call it) for far too many.
    More importantly, it shows that it’s clearly possible for people in deep to escape the debt whirlpool.
    We encourage folks to stop in and see you at Til Debt Do Us Part.
    All the best,
    ~Melanie

  5. Hi MT,
    With debt mounting now is the time to deal with it. In the past, low interest rates and high unemployment happened well before the high interest rates of the 80’s. Cutting interest rates helps, but when rates are this low, it is limited.
    Gail Vaz-Oxlade’s way of dealing with cash flow/debt is with real money, is simple…like the old days, before you got the multiple credit card offers in the mail every week!
    regards,
    Brian

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