We know, it’s shocking. After years of being warned by Bank of Canada governor Mark Carney that our debt levels are frighteningly high, we’ve done nothing. Or at least very little, about the situation to correct it. Yet another study has been done regarding our debt levels here in Canada. And while our debt levels used to be “shockingly high,” it seems most of us have gotten over the shock. Now, our debt is just really, really high. And it seems as though we’re comfortable with that.
The study comes from bankruptcy trustees Hoyes, Michalos & Associates. Their study questioned over 1,000 Canadians regarding their debt situation and found that indeed, our debt levels are still very high.
As shown from the chart above, when asked how easy it would be to raise $2,000 in one month, most of us couldn’t do it on our own. A whopping 92 per cent of people think that they would have to use some means of borrowing to come up with the funds. But still, over half at 55 per cent are comfortable that they could still do it. What might be most interesting about this portion of the survey is that 45 per cent of people said they’ve never had a debt problem. That’s nearly half! So either the survey questioned the wrong people, or we are truly in denial about our debt levels.
The survey didn’t just look at how much debt we have though; it also questioned people as to how easy it was for them to take care of their expenses. Those results too, were shocking, showing that 70 per cent of people need help with daily financial matter. 20 per cent said that included help with paying down debt, while 13 per cent said they needed help with their cash flow.
“It’s frightening,” says Douglas Hoyes, a trustee with Hoyes, Michalos & Associates Inc. “Canadians have become totally blase about debt. It’s becomign their new normal and they’re numb to this dangerous trend. For many, the use of debt, to not only pay for big ticket items like cards, but also to cover day-to-day living expenses, has become extremely commonplace.”
But have we become blase? While there does seem to be a new report almost every day concerning our debt levels, are we really ignoring the warning signs? The survey found that only 26 per cent of Canadians polled have higher debt levels than they did a year ago. At nearly a quarter of our country, that’s not great but could we be worse off. 62 per cent of Canadians think so, saying that they feel comfortable with their debt levels.
“That is quite a disjoint,” says Ted Michalos, also a trustee with the bankruptcy group. “It’s concerning to see that access to credit and taking on more debt has become an accepted part of financial planning.”
He could be making a very good point, when you look at how strapped Canadians are – even if they’re comfortable with it. Back to raising $2,000 in one month, 26 per cent of people said that they’d never be able to come up with it – no matter how much time they were given. This shows that a lot of people have already tapped out their borrowing power to the max.
But although some of the statistics may sound reassuring (such as the fact that only a fraction of us have higher debt than a year ago), the news is still bleak. For the second quarter in a row, our debt totals rose, this time to $26,221 per person. And this after it seemed we were getting the message and starting to do something about what Mark Carney has called the biggest threat to our domestic economy.
What do you think? Are our debt levels really that out of control? Like us on Facebook and let us know. And, if you’re a homeowner who needs help managing your consumer debt, talk to us about how you can better manage it!
