Great News! Our Debt Increased 21% Last Year!

OK, if that doesn’t sound like great news – you’re right. But this Ipos Reid survey was done for the Royal Bank. Not to pick on the Royal, but banks are in the business of helping you go broke. They’re in the lending business and generate their profits when YOU borrow money and pay interest. So it is great news…if you’re a lender.

For the rest of us: Not so much. A 21% increase in just the last year of our non-mortgage debt is insane. That’s the Canadian average, but Alberta set the record with a 63% increase in debt last year. With pretty good incomes in Alberta and elsewhere comes that part of the brain that says: It’s OK, just borrow the money – you make enough to pay it off…eventually.

The survey also found that the same 38% of us are “very anxious” about out debt level as those who responded they’re “comfortable” owing the money. If you’re in the “comfortable” group, what would move you out of that? A job loss, any emergency, your partner leaving their job, the need for a newer vehicle, or a host of things that can go off the rails. Don’t get too comfortable, because things can change in a hurry – and it’s always when you least expect it.

When interest rates are low we tend to think we’re getting free money. Well, they won’t stay low forever, and when they turn, the interest you’ll pay goes way up for something you spent years ago. There’s a current radio ad with the line: You can eat whatever you want and still lose the weight. In financial terms, it’s just as much nonsense, but I bet most of us believe it – or at least want to believe it: You can borrow and spend whatever you want and still be financially successful. No you can’t. You can’t spend more than you earn, and you can’t eat everything you want and still lose the weight. Oh how we’d love that to be true. And after all these decades of weight loss programs having a more than 90% failure rate it isn’t any different for our finances.

For the majority of us, we earn enough for what we need. But we’ll never earn enough for everything we want. And it’s the “wants” that kill our finances, choke us with monthly payments, and stop us from putting any serious money into retirement plans, or even a simple emergency fund.

Until we get real and stop buying into the ads and marketing we can’t turn our finances around. Sorry, it’s mathematically impossible. May the reality check of that hit most of us before it’s too late and before we’re in our 60s and have 20 minutes left before retirement to put some money way.

Or, if you can’t retire when you really wanted to, think back to all the credit card charges, all those vehicles you owned and sold for one-tenth of what you paid, and that line of credit that was around so long you started thinking it was a member of the family…

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