It seems Canadians continue to run on the debt treadmill. We are spending our way further into debt and few Canadians seem to be focusing on debt reduction as a top priority.
In statistics released today, Statistics Canada reported that household consumption (ie spending) grew by 1% in the third quarter while disposable income grew by only 0.8%. In other words, we spent more than we took in, again.
The household savings rate was 3.9%, down from the previous quarter so we are not saving either.
Why is that? Because debt is cheap. These same statistics show that the household debt service ratio (the amount of debt payment you make as a percentage of your income) was 7.4%. This rate is below the 7.6% average for 2011 and has been on the decline. In other words, it takes less of our income to pay interest on our debt than it did in 2011. Unfortunately Canadians are not putting this extra cash flow to good use by paying down debt. Instead we are spending it.
Run on the debt treadmill for too long and you will eventually run out of energy. More and more of your income is going to be used up paying interest on your debt. In fact you are still paying for yesterday’s goods. At some point there will not be enough to pay for today’s needs – so the solution seems to be to turn to even more credit. Now you are on a debt treadmill you can’t get off.
You can deal with out-of-control debt and get off the debt treadmill before you collapse. There are a number of ways you can reduce or eliminate your debt including taking a look at your personal budget, getting a debt consolidation loan to reduce interest costs (and put the difference towards your debt repayment) or if you need more help you may want to consider a consumer proposal or, as a last resort bankruptcy.
Talk to an expert today to see how all of these options will help you reduce your debt and ensure that you are in better shape for the future.