519-646-2222Debt and Lifestyle
Debt and lifestyle are of course very closely related, the more debt you have to repay the more negative the impact of debt on your lifestyle, or so we might think. But what if you never had to actually repay the debt, what if instead you cold keep growing the debt, using new debt to service existing debt, wold that improve the situation?
The answer is a resounding NO! However, that notion forms a part of the basis of Modern Monetary Theory (MMT) an economics classroom theory that emerged in the early part of the last century and has demonstrated itself to be incomplete and unworkable in the real world.
Nonetheless, today Canadians carry more consumer debt than people from any other country. Part of the reason is precisely because new debt is being used to make payments on old debt, increasing debt exponentially. One only need jump on the waybackmachine to revisit statistics published by the Canadian bankers Associating in 2019 (the last year they produced bank credit card data for all to see).
Many years ago I was visited by a man, a former banker who was carrying a massive amount of bank issued credit card debt, the volume of debt contrasted with his income made it abundantly clear it wold be absolutely impossible for him to manage monthly payments of any kind.
When asked how he was managing he responded “it is very stressful” – no doubt! What he was doing was relying on the proper timing of balance transfers from one bank card to another. Once the transfer was completed the new bank paid out the old bank in full, and would not require a minimum payment for another month. The challenge was monitoring payments on a day by day basis and ensuring that applications were processed in time to scoop the balance from one card to the next before a payment was required. Certainly not behaviour we would ever recommend.
When you live within you means you have less concerns about such things, but living within your means translates to something very different than it may have just a few short years ago. People have formerly used credit cards for superfluous expenses such as vacations, new furniture, home improvements and so forth. However, today more and more people are using credit cards to survive – to pay for groceries and utility bills.
How much are you able to adjust your lifestyle to avoid using credit cards – or any other form of debt – altogether?