The recent headline in the newspaper was pretty direct: “Canadians’ overspending is escalating.” As though we haven’t talked about that for a long time now.
This was a study by Mackenzie Investments that reinforced what you’ve have heard me say for some time: Try saving a little and stop impulse spending with money we don’t have. In this case, it’s pretty much a generational divide, breaking down the over and under 50 age group. In the over 50 age group, only five percent are chronic over-spenders, while those under age 34 are the biggest debtors at 29%.
The key findings are a lot of common sense. It’s just that common sense is so uncommon these days. Factors to overspending include an almost non-existent social stigma to being in debt and vast amounts of available credit. Just sign here, quick approvals, and introductory rates designed to make you feel like you’re saving today, just to get the rug pulled out from under you later.
The online survey actually had 53% of people under age 50 admitting they use their credit cards to buy stuff when they don’t have enough money. THAT is impulse purchases and not having a clear understanding between needs and wants.
What was even more eye opening was the admission by almost half the respondents that they have purchased something without any consideration of the long term implications of the debt, and costs to their personal finances.
And things will get worse – way worse. Remember that I’ve been saying for two years what happens in the U.S. will happen here in Canada. 90% of Canadians now have more debt than they did just five years ago, and last year we barely reached seven percent of our RRSP contribution room.
Singles are twice as likely to be over-spenders than married people, which stands to reason. But what was an interesting insight is that women are also twice as likely to be over-spenders, than men!
The best line of this article from Canwest News had to be the sub-title: “We don’t deny ourselves much – except for a dose of reality.”