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# HOW MUCH DEBT IS TOO MUCH DEBT?

September 5, 2017

## We might also ask, “where do these numbers come from?”

The information in this blog comes from news reports on CBC online news media.

Before getting into the meat of the subject let’s look at the numbers:

• Apparently Canadian consumers owe \$1.92 trillion in debt.
• Canadians, on average, owe 1.65 times annual, gross, income in debt.
• There are approximately 36 million people living in Canada.
• Stat’s Can reports that there about 13 million households.
• Most Canadian families (70%) are supported by two incomes.

Therefore, if \$1.92 trillion (debt) is divided by 36 million (people) every man woman and child in Canada would owe about \$53,333 in consumer debt.  Assuming that figure represented 1.65 times their gross annual income they would each earn \$32,323 per year.

Stats Can reported that there are about 13 million households in Canada.  They have also reported that 70% of families are supported by two incomes.  Which means that there are 18.2 million people contributing to those two income households and a remainder 3.9 million income earners supporting the rest of the households.

Assuming that the total national debt is evenly distributed across that population that would mean that each income earner is in debt to the tune of \$86,887.  Therefore, each income earner must earn \$52,653 per year (which is significantly more than the reported median income of \$28,000).

Now we know that minimum monthly payments on credit cards and lines of credit used to be calculated at a mere 3% of the outstanding balance payable each month, more recently those minimums have been pushed downward to inhibit default.  Using that information each debtor (Canadian income earner) would need to come up with about \$2,600 per month of after tax income just to service their debt.

I’m no tax accountant but would estimate that after meeting payment obligations each income earner would be left with about \$500 per month for groceries, clothing, and all the rest of their basic living expenses.

If I have made a miscalculation somewhere perhaps someone would be kind enough to email me to let me know.  Assuming the validity of the information it seems to me that we should be asking our politicians “who created the rules that allowed the banks to get away with this?”