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Debt Survivor or Debt Dependent

November 16, 2021

Are you a “debt survivor” or a “debt dependent”?  Either way, people get into debt for al kinds of reasons – it is surely a rarity for anyone to deliberately set out to get themselves into debt.  Why, logically, would anyone want to be in debt?

You want to buy a house or a car – but unless you are rich or have recently won the lottery you will most likely need to use some form of financing to make either one of those purchases.  Furniture is also often financed.

Using debt to buy groceries, kids back to school supplies or clothing is not an appropriate way to make those purchases, unless you have no choice.  The cost of living is far outpacing any increases in income.  In the last five years the cost of housing has more than doubled in most Canadian markets.

The government uses measures such as GDP, and the antiquated “basket of goods” formula to estimate inflation – neither are viable measures of what is happening in our everyday economy.  A can of baked beans is now $3.00 a loaf of bread is as much as $8.00, communications services are staggeringly expensive.  Gasoline and diesel prices have increased due to government policy, and they pretty much drive all goods and services costs up – through transportation costs.

Once you start to use debt to make everyday purchases you get stuck in a cycle that is extremely hard to break.  Debt builds expectations, “if I had good credit, I could buy a cheaper car” – that of course is a double fallacy.   Using credit is never cheap – the only advantage of having a good credit rating is having access to cheaper (lower interest) debt.  Of course, there is no such thing as “good credit” in any event.

Most people would pay their debts if they could, those who don’t pay their bills on time, most often, have suffered some misfortune.  We always seem to, cognitively, go to the old standbys such as marriage breakdown, loss of employment, business failure, death in the family or illness.  While it’s true that these can be triggering events the reality is the broader economy is more likely to blame.

The median income in Canada is somewhere around $37,000 – which means that half of Canadians earn less than that amount of money.  After paying income taxes the median income earner has about $2,200 per month to spend.   Even if we increase our threshold to the 60th or 70th percentile most families will require multiple incomes to pay day to day maintenance costs.

Debt survivors move debt around, shifting credit card balances from one card to another, or onto a line of credit, or a consolidation loan, or use one form of debt make minimum monthly payments on another.  Inevitably debt is consolidated into loans and mortgages and in some cases some of the craziest consolidation plans.

These days we see people financing new cars over nine years, and some car dealerships will even allow other debts to be included in the car loan.  All of these strategies leave the debtor struggling to make the next loan, credit card or other debt payment.

Did you manage to make all of your payments last month?   Did you use debt to pay for debt, a cash advance loan perhaps?  You may be a debt survivor – and we have a strategy for you to break the cycle.   Call us at 519-646-2222