Tag Archives: Primerica

The “Average” Person’s Debts

Maclean’s magazine had a small section on our average debts that was quite interesting. And, according to Statistics Canada, the average person in debt isn’t an unemployed renter in their 20s.

Some of the information is quite eye-opening:

In total debts, BC and Alberta run neck and neck for a record we really don’t want to have: BC averages $155,000 in debt per family while it’s $157,000 in Alberta. Only Ontario is close at $125,000.

Don’t think high income earners are always savers. We’ve talked before that the more income you earn, the less likely it is that you’ll live on a budget or are careful about your spending: 57% of the total consumer debt in the country is owed by people who make more than $100,000. But they’re a tiny group in the population! Ah, but they’ve got the income to pay the big mortgage, car, and credit card payments. No, not to pay them off, just the payments each month assuming there isn’t a hiccup in their earnings.

What’s strange is that people who have the most debt claim that they are the most financially literate. Is that backwards or what?
45% say they’re very financially literate owing over $250,000
35% respond the same way owing $150, 000 to $250,000

One sad fact is something we talked about before. It’s the 65 and older age group who still average $66,000 of debt.

The age group of 45 to 64 has $103,000 of debt. So, in the highest earning years of our 40s and 50s we manage to pay off only $37,000 of debt? Any family in the 40 to 50 age group likely has their kids moved out and still can’t save OR pay off debts? That’s cause for concern and sad.

In a US survey done by the Consumer Federation of America, along with Primerica, the average respondent admitted they had made at least one financial mistake averaging $23,000. THAT is one expensive lesson, and for many people not something they’ll recover from for decades.

What Just Happened This Week?

Wow – it’s only Wednesday and what a week it’s been in the financial markets.

Monday the world markets dropped enough to wipe out $5 trillion in wealth while the US markets were closed and Tuesday morning the US Federal Reserve dropped rates three quarters of a point.

Here in Canada they came down a quarter of a point that the banks did pass on, but there had been rumours that the no service mega banks were considering not lowering the prime rate.

While it was only a rumor that started back in December, there is no way to buy this kind of bad publicity is there? And how great that a number of media outlets, starting with columnist Greg Weston, brought this to the attention of the world.

The logic was that banks wouldn’t pass on the one-quarter point rate reduction to offset some of their rising expenses and that would include the billions of dollars some of them have lost in their subprime mortgage portfolio.

When the prime rate changes, it affects two-thirds of our borrowing costs, either directly or indirectly, for consumers and businesses. A lower rate is the Bank of Canada wanting to impact the economy, manufacturing, consumer spending and the dollar.

How dare the banks consider not moving down the prime at the same time? Isn’t it enough to keep charging us more and more interest, less and less competition and more service charges everywhere? Am I just cynical or are we supposed to cover some of their paper losses?

Just having this idea floated is another big reason to allow more competition in the banking field. In the U.S. there are about 3,000 financial institutions waking up each morning figuring out ways to bankrupt each other – that’s competition. Not the five we’ve got who want to merge into two or three.

But there’s good news in hearing banks might not change the rates. Because when we get mad – we get moving and there are alternatives for your financial needs:

For savings: ING right now is at 3.75%

For loans & mortgages: Credit unions are at or below the mega no service banks’ rates, are locally owned and run AND you’re a shareholder so you’ll get a large refund at the end of the year.

For RRSPs: Mine are with Primerica Financial. Many of their mutual funds have way better returns – and there are lots of other no-load no fee places to comparison shop.

Maybe this is another reminder to get informed because knowledge really is power and to remember to always always comparison shop. There are options and a lot of ways you can save interest and money.