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Debt is not an income supplement

September 5, 2017

Attitudes towards debt need to change

At risk of sounding like a broken record the main reason people in Canada rely so heavily on debt (you might prefer the bankers’ politically correct term of “credit” but let’s call a spade a spade it is “debt”) is insidiously high taxation and ever dropping incomes.

Canadians pay more taxes than just about any other country in the world – not just income taxes but all kinds of taxes including the most absurd, taxes on taxes – as an employer I must pay HST on all money brought into revenue. After I have paid HST I must pay corporate taxes as well as the employer portions of source deductions. Taxes are far too high especially for struggling new businesses and low-income earners.

In the face of low incomes, increasing taxes and rising living costs, along comes a credit card with a $10,000 limit and terms that allow hundreds of years to repay. We all think that surely our “lot in life is going to improve” and if we didn’t believe that we probably wouldn’t bother getting out of bed in the morning.

Unfortunately, upon its arrival in the mail, the credit card is not viewed as “available debt” but rather as “available money”.

“Hey hon, we’ve got ten grand to spend, and remember what the nice bank manager told us, he said;  ‘it would be good for us to max that credit card out so that our credit report improves and we can get more debt'”.

What if you viewed the credit card as purely there for an emergency – not emergency lunch, emergency beer money, emergency groceries or emergency vacations but emergency car repairs or emergency dental fee. Then suppose you believed that you could not use it for another emergency until the first one had been paid in full. Your bankers wouldn’t like that but your paycheque would thank you.