Debt Complacency

A recent study about individual debt has made me reflect on the question of whether people are too smug about their debt situations. The poll seem to suggest that even though our debt levels are at an all time high, most Canadians are quite comfortable with using debt as a financial strategy. 9 out of 10 respondents would consider borrowing money to cover an unexpected cost. In an awkward way, I am really glad to read that because my personal strategy has always been to use my line of credit for emergencies and unexpected expenses. It appears now that other Canadians are also replacing saving for a rainy day with accessing debt to deal with financial problems. Glad to see I’m not the only one.

The average person in Canada has about $1.50 of debt for every $1 of income they make per year. Despite this, 62% of those surveyed said they are comfortable with their financial situation. Are you comfortable with your financial situation? I sure am! But this kind of debt to income ratio is around where the US economy was right before the housing crisis and then the rest of the recession. So there is certainly the possibility that we are underestimating how much risk we’re really putting ourselves into.

It’s frightening to see that Canadians have become totally blasé about debt – it’s becoming their new ‘normal’ and they’re numb to this dangerous trend,
~Hoyes, Michalos & Associates Inc.

I wonder if people will be as “blasé” about debt if interest rates were 3-5% higher like normal economic times? 😀

The survey interviewed 1,010 Canadians between Aug. 15 and 23. The survey has a margin of error of plus or minus 3.1 per cent, 19 times out of 20.

Random Useless Fact:  Over 86,000 Americans each year have to visit the emergency room because they trip over their own pet. (source:

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Not Working
Not Working
09/24/2012 6:48 am

Do you calculate mortgage in the debt to income ratio ?

09/24/2012 6:49 am
Reply to  Not Working

Yes, I believe the mortgage is included in the calculations.

Modest Money
09/24/2012 8:38 am

It’s not surprising that people are becoming complacent about debt. As more and more people get into debt it naturally becomes the norm. They all just think that because other people are in debt, there must be nothing wrong with it and they’ll find a way to deal with it. It does create a pretty dangerous situation for the economy though.

09/24/2012 8:43 am
Reply to  Modest Money

Sometimes I almost think the government likes it when we spend more and go deeper into debt, but it does make for a risky situation when those rates spring back eventually. Although currently it doesn’t look like they’ll be moving anywhere for least the until the end of this year.

Mo' Money Mo' Houses (@momoneymohouses)

Interesting, especially the random dog tripping fact lol 🙂

09/24/2012 3:24 pm

Haha, dog tripping… dog tripping everywhere 😀

09/24/2012 8:58 pm

Looks like I fall right on that 1.50 avg (including my mortgage) I would think the amt would be higher if I look around me and consider the leased vehicles/prices of homes/incomes of people?

I am DEFINITELY not comfortable with my debt level, I want NONE of it!

09/25/2012 6:18 am
Reply to  Renée

lol yeah, I expected the ratio to be higher as well. Mine is over 4.0 times, but with interest rates so low, I don’t really feel any pressure from my debt.

Harry Campbell (@PFPro1)
Harry Campbell (@PFPro1)
09/24/2012 9:12 pm

Hm interesting results. Personally, I don’t ever plan on going into debt for non-appreciating assets like cars and vacations. I don’t mind taking on debt for a mortgage or education(in the right situation) because there is the opportunity to make money, sometimes a lot more. But with a car, the second you buy it, it goes down in value and continues to drop. Double whammy if you go into debt to buy it!

09/25/2012 6:24 am

I second that opinion. One way I look at it is purchasing a home or an education is an investment, and therefore, it’s not really spending in the traditional sense. 🙂

09/25/2012 7:02 am

Kinda funny really. Apart from the big stuff like mortgages, if we did all save for the smaller stuff first instead of borrowing, we’d all be so much better off. It’s just the temptation to have stuff NOW is just so great 🙁

09/25/2012 9:43 pm
Reply to  Matt

I saw a research today that showed on average we spend over $3700 a year on just impulse buying, and half of the time we regret it right afterwards. I guess the temptation for immediate gratification is too strong for some of us to control.

09/25/2012 11:42 am

Once I get my condo, I’m going to be way above that average – ouch. I wouldn’t say that I’m complacent about my debt, more that I see this as a good time (compared to historical rates) to take on debt like a mortgage. Whether the prices in Vancouver are good is another issue… :/

09/25/2012 9:46 pm

I bet realtors would say that Vancouver’s prices are good, but I guess that doesn’t mean much since any time is a good time to buy according to them. Prices are finally starting to come down a bit, which I think is a good thing.

09/26/2012 11:30 am

I’m scared of debt… a couple of years ago I was leveraging to buy stocks… but I got out of that as I didn’t do too well in that. Some people are good at managing debt though like you! I’ll be in debt soon enough though with the upcoming condo I have in a year or so.

09/26/2012 1:14 pm
Reply to  agentfang

As long as debt is offset by an equal or more valuable asset then there’s no problem 😉 Your condo purchase was a good decision. Even if it doesn’t appreciate in price right away at least you can live in it, or rent it out for income, which I bet is going to be more than the interest you’ll pay on the mortgage.