Canadians More in Debt than Ever

No matter how you look at it, Canadians are deep in debt.

The Certified General Accountants Association (CGA) has studied our debt-to-income ratio, our debt-to-assets ratio, and our debt-to-net worth ratio, and all have greatly deteriorated in 2008. In total, we carry $1.3 trillion worth of debt. The worse news is that this increase in debt is mainly due to consumerism, not asset accumulation (meaning we’re more likely to buy televisions than houses).

In general, Canadians are not in "panic mode" when it comes to the economy: We haven't made the connection of how the global recession has affected or will affect our personal finances and we haven't gone into "save mode" as the US has. In fact, we continue to incur more credit card debt than ever.

CGA Report Statistics

• 58% of Canadians (up from 52% in 2007) say that their increased household debt is due to charging day-to-day living expenses on their credit cards.
• 85% of us have outstanding debt on a credit card.
• 21% say they are in over their heads in credit card debt.
• 33% aren't saving money for the future, despite the current recession.
• 10% would not be able to afford a $500 unforeseen expense (i.e., they would have to put an emergency car repair or hospital visit on a credit card). 

Recommendations

While the CGA isn't telling us to stop spending altogether, it does recommend that we start saving more and paying down debt. The Association encourages building wealth through asset accumulation and retirement investments, like RRSPs and TSFAs. The CGA also advocates more credit education for consumers, so that we all understand the true costs of putting something on credit.

Remember that opening new lines of credit and raising your existing debt levels can have a negative effect on your credit score. It's very important to pay your credit card and other debts on time each month, to avoid delinquencies from appearing on your credit report. These delinquencies will lower your credit score, hurting your chances of obtaining new credit and loans at good interest rates.