While reading the news the other day, I came across an article that talked about the fact that Canadians are carrying more debt today than ever before. If this isn’t a concern to Canadians and the Canadian government it should be. History has shown (especially recent history in the United States), that when debt loads rise to unsustainable levels the resulting correction can be devastating on individuals and on the economy as a whole.
Interest rates are at historical lows and may be encouraging the increased debt load. An increase in interest rates could be all that it takes to trigger that debt correction many fear.
It is important to remember the costs of a high debt load.
A high debt load often means higher payments to service the debt. Of course, the result of higher debt payments is less money available for all the other things that are found in a monthly budget. Sometimes having to adjust a budget to deal with higher finance costs means less money available to do those things we want to do – other times, however, it could mean less money available for obligations with less flexibility like food and shelter.
Another important consequence of higher debt financing is less money available to save.
Saving is, or should be, an important part of everybody’s financial routine. By saving for a new house or car, you rely less on financing to make up the difference. This lowers financing obligations and improves monthly cash flow. More savings now means more money to save or spend later without the worry of debt – a virtuous cycle of savings over a vicious cycle of debt.
Saving for retirement is as important as ever. Most Canadians do not have a pension plan at work that they can rely on for their retirement. This places the responsibility on the individual to put money away for their retirement. This can’t be done if the high price of carrying debt means that your last bit of disposable income is being spent on paying bills and making minimum credit payments.
Can you afford to be this much in debt?
If you find yourself struggling to meet your monthly financial obligations because of debt or are finding it difficult or impossible to save for retirement, then you may wish to take a second look at the options available to help you make this personal correction.
Control your future with Frendo and Partners.
My name is Gene Frendo and I am a Licensed Insolvency Trustee. We offer a free, no-obligation consultation to anybody who would benefit from discussing their financial situation and finding out about the debt solutions available to help reduce the costs of living in debt.
To schedule this consultation, you can call me: 289-273-2841 or email me: gene@frendoandpartners.com.