“I really like new cars. I kept on trading and trading…and I was buying a lot of gifts for people and getting more and more into debt,” says D’Arcy George who lives in Lethbridge, Alberta. Eventually his spending habits caught up to him and D’Arcy was up to $70,000 in debt and struggled with a bank account constantly in overdraft. But D’Arcy’s experience is not unique.
In a province where the average wage is over $28/hour, a sustained period of low interest rates has caused consumers to become overconfident in the economy which has led to rising consumer debt. But now that oil and gas prices have slumped some people are forced to re-examine their financial situations. 😕
D’Arcy has realized this reality and has taken dramatic steps to get his debt under control. He started a second job at Costco to make more money. He now works every day of the week, often more than 12 hours a day, and he drives a used car. “I feel more confident that I can save money and know how to handle it,” he says. “I always have a balance of $8,000 in the bank and I get worried if I have less.”
Canadians are getting the message when it comes to our consumer debt. A recent report from TransUnion shows the average Canadian individual owed $21,428 non-mortgage debt by the end of 2014. This number includes credit cards, lines of credit, student loans, and other types of credit products but does not include mortgages, home equity lines of credits, or margin loans.
$21,428 is up 2.3% compared to the previous year. However digging deeper into the number we see that Lines of Credits, which make up 40% of consumer debt, has increased by 4.4%, while credit card debt has actually fallen by 2%. In other words consumers are getting smarter about where they’re borrowing money from. People are familiarizing themselves with how credit works and are making better decisions about their spending habits overall. 🙂
It’s important to save in good times because the fickle economy can change on a whim. Sometimes it may seem that everyone else around us already owns a home, has an expensive phone plan, and takes tropical vacations every year. But a generation ago consumers lived in smaller houses, prepared almost all their meals at home, travelling out of the country was a pretty big deal, and only rich people had a dishwasher or a second TV. Consumers had to save for their own retirements and medical emergencies because the CPP and universal health care wasn’t available across the country yet.
We have so much now compared to before. If our parents could do it back in their generation, then using our abundance in resources, technology, infrastructure, and services today, surely we can all find ways to make meaningful strides with our finances. 🙂
Random Useless Fact:
The Prime Minister of Singapore has the highest salary among major world leaders