Canadians 'drowning in debt': 47% will borrow to cover costs, survey says

[Scroopy Noopers]

Originally Posted by Sliver

So many people have this expectation that they deserve extravagant travel. Forget a week camping, we're hopping on a plane to somewhere warm. If you're debt free and paid up on your RESPs, RRSPs and TFSAs, then go nuts. Otherwise, you're being super dumb with money.

Having said that, people must be getting something out of travel I'm unable to tap into, so I'll preemptively concede I don't really get vacationing in far flung locations. Spending what will take me four months to net on a week or two vacation is pretty much the worst trade off I can imagine.

“Oh you gotta go ______ (flight over water location), you gotta go!” is something I hear far too often. It’s a dumb small talk line that you should quit immediately if it’s a go to of yours. I like hearing about cool things people did, and places I’ll never see. But your suggestion goes on a list of 48 other countries I “have to see”.

[Oling_Roachinen]

Originally Posted by Fuzz

Right, but interest rates were up to 20% back then. I've never compared the affordability between now and then, but I suspect it's similar. Housing prices don't tell the full story.

I do acknowledge that I cherry picked but by 1985 the interest rates had already dropped significantly (was just over 10%, still high but not 20% high). And of course interest rates don't matter as much if you can pay off a significant portion of your house with a down payment.

But really with the bust in the 1980s in Calgary, certainly a lot of different arguments could be made one way or the other. Again, not trying to justify those living beyond their means or arguing kids have it that much worse (or better) but just that the entire situation is completely different than the kids today and their parents and grandparents.

[PepsiFree]

Originally Posted by nik-

You have children?

Yeah, Dion is my dad, bro.

[wwkayaker]

Blaming debt on the education system is a bit much. How much is a school expected to teach? Parenting and lifestyle choices in the home are a far bigger problem IMO. For example, my brother has always been bad with money. He has a brand new truck every two or three years. His son, who is 18, has already owned 5 vehicles and just took out a loan for another used vehicle. My brother has been supportive of this since my nephew was 15. Everytime I visit them I am surprised at how everyone in the family has a new phone. I don’t think the education system would win over parenting. Maybe adults need to quit blaming external forces and start accepting more responsibility.

[peter12]

The cost of housing is the number one culprit. All the Rich Dad blathering on in this thread is tiring as hell.

[jayswin]

Originally Posted by Travis Munroe

It is a tough fix but if the government were to step in, I would imagine that they would need to limit "financing" options. If you can't afford to buy that new mattress for $2,000 then you can't afford to pay $20 a month for 120 months with interest. The ability to finance almost anything has taken from the art of saving.

It's so standard now and engrained in businesses that sell $1000-$3000 products. "Thanks for your help, going to wait until Black Friday and see if this TV comes down".

"Oh we can finance here, we can have you approved on the spot and you leave with it". What? No, I wasn't implying I wanted to finance a TV, I was implying exactly what I said - I want the best price I can get which is most likely on Black Friday.

[nik-]

Originally Posted by PepsiFree

Yeah, Dion is my dad, bro.

That ... explains a lot actually

[Dion]

Originally Posted by peter12

The cost of housing is the number one culprit. All the Rich Dad blathering on in this thread is tiring as hell.

Student loan debt is another.

[jayswin]

Ha! Thanked by Dion.

[peter12]

I do feel like old dumb Boomers living in the suburbs of Calgary or Kerrisdale in Vancouver or Greektown in Toronto have no idea how brutal it is for the bottom third of Canadians to even exist in either Vancouver or Toronto.

Housing is at a premium and further construction is capped by a bunch of old white hairs absolutely bent on preserving their house value at all costs because they didn't save enough for retirement.

70% of Vancouver is zoned for single-family home use only. This in a growing city with absolutely no space to expand. Any option to build townhouses or condos or rental apartments or any combination is blocked by old neighbourhood associations.

Now any of you financial geniuses want to guess what happens when supply is curtailed and demand continues to increase?

[Dion]

Originally Posted by peter12

I do feel like old dumb Boomers living in the suburbs of Calgary have no idea how brutal it is for the bottom third of Canadians to even exist in either Vancouver or Toronto.

Housing is at a premium and further construction is capped by a bunch of old white hairs absolutely bent on preserving their house value at all costs because they didn't save enough for retirement.

70% of Vancouver is zoned for single-family home use only. This in a growing city with absolutely no space to expand. Any option to build townhouses or condos or rental apartments or any combination is blocked by old neighbourhood associations.

Now any of you financial geniuses want to guess what happens when supply is curtailed and demand continues to increase?

[Oling_Roachinen]

Originally Posted by Dion

Student loan debt is another.

Yeah, don't want to conflate the USA and Canada too much but:

https://www.forbes.com/sites/camilom.../#453f21e666c1

The average for all four-year institutions comes out to $26,120 per year. This brings the total cost of attendance to an astronomical total of $104,480 over four years. The comparable cost for the same four-year degree in 1989 was $26,902 ($52,892 adjusted for inflation). This means that between the academic years ending in 1989 and 2016, the cost for a four year degree doubled, even after inflation.

[Enoch Root]

Originally Posted by Oling_Roachinen

Obviously cherry picking, but if you tried to buy a house in 1985 in Calgary, you're looking at $75,000. In 2006, the average house is costing you $450,000.

Inflation between 1985 and 2006 wasn't quite doubled yet prices increased 6x.

Even if you don't cherry pick on the boom and busts, the cost of housing inflation is just in no way comparable to the dollar inflation.

What matters is the monthly mtge payment, not the house price.

According to the BOC, mtge rates in 1985 were 11.75%. So a 5 yr fixed gives you a mtge payment of $757. For today's $450,000 house, at 2.59%, the mtge payment is $1,799. Much closer to the change in inflation.

Also, with today's lower interest rates, a larger portion of your payment is going towards the principal, meaning you are saving more. On average, 69% of what you pay goes to paying the principal and building equity. In 1985, only 28% of your money, on average, went to equity (and 72% of it was interest).

So the real cost of housing is not all that different. In fact, today's environment is arguably more advantageous.

[undercoverbrother]

Originally Posted by peter12

I do feel like old dumb Boomers living in the suburbs of Calgary or Kerrisdale in Vancouver or Greektown in Toronto have no idea how brutal it is for the bottom third of Canadians to even exist in either Vancouver or Toronto.

Housing is at a premium and further construction is capped by a bunch of old white hairs absolutely bent on preserving their house value at all costs because they didn't save enough for retirement.

70% of Vancouver is zoned for single-family home use only. This in a growing city with absolutely no space to expand. Any option to build townhouses or condos or rental apartments or any combination is blocked by old neighbourhood associations.

Now any of you financial geniuses want to guess what happens when supply is curtailed and demand continues to increase?

On second thought let’s not go to Vancouver, ‘tis but a silly place.

[shermanator]

While the price of a home in this city has skyrocketed in the last 20 years, I think too many first time home buyers exacerbate the problem by trying to buy their "forever home". Your don't need 2400 sq ft with a 2 car garage for yourself and your spouse and your dog. Just a money sink that isn't necessary until you expand your family.

[btimbit]

I definitely feel bad for people that came of age 5 years after me when the boom was over. I was able to get a bit of a nest egg going. Would definitely have a hard time starting out now

[Table 5]

Originally Posted by Oling_Roachinen

Yeah, don't want to conflate the USA and Canada too much but:

https://www.forbes.com/sites/camilom.../#453f21e666c1

Yeah, I don't think Canadian tuition is unreasonable. It's not dirt cheap, but to me it seems like a fair cost for post-secondary education...with some sacrifice and effort (and making sure parents utilize RESPs), it's still relatively accessible to most. It's nowhere near the insanity you see down south.

In the end, there's no one reason for the situation. It's a mix housing costs going crazy, salaries not keeping up, throwaway culture, and terrible financial decisions by people living way beyond their means.

[jayswin]

Originally Posted by shermanator

While the price of a home in this city has skyrocketed in the last 20 years, I think too many first time home buyers exacerbate the problem by trying to buy their "forever home". Your don't need 2400 sq ft with a 2 car garage for yourself and your spouse and your dog. Just a money sink that isn't necessary until you expand your family.

Also, too many new homeowners treat homes the same way they treat new vehicles. "I want all the options and I want to customize everything to fit my needs!!!!".

"A non new home in a 30 year old community? Bleccccchh! Take me 50 minutes away from downtown in a cookie cutter, small square footage NEW BUILD where I get all the CONTROL over OPTIONS! for $450-$550k.

[Slava]

I think that as others have said we have both an income issue and a spending problem in our society. We spend a lot on food and such, which feels like a necessity, bit part of it is we eat out a lot and even the groceries we buy are "fancy". People need special craft roasted coffees and fine cheeses. Otherwise the photos we take to show everyone how awesome our lives are won't be as good!

And then you get to the trips with the guys/girls. I'm not super old, but a stag used to be a night out on the town after a good dinner. Now guys are flying to Vegas for a weekend, partying and going to shows and all kinds of insanity. The urge to go is there because all your friends are going and FOMO is the real deal with social media! Not only do you skip going now, but you get live updates as it happens on what you're missing and it's got to be so damaging to peoples mental health.

[burn_this_city]

Home values have skyrocketed but the amount of money that was hoovered up by the banks in interest has gone way down. Cars cost more but are cheaper to operate and last longer. Electronics and other durable goods are a fraction of what our parents paid.

Overall I think it's more to do with consumerism on overdrive. Social media has amped up the comparison culture, you aren't keeping up with the Jones' anymore, now it's everyone in your social bubble. It's to the point where people think there is something wrong if they don't have new toys and instagram worthy vacations every year.

I can't imagine living with the crushing debt some of our friends have. It seems like there is a whole bunch of late twenty early thirties with a years salary in credit card debt.

Buy nice things, but plan on having them for a long time. That way you aren't susceptible to the latest greatest must have. The new truck with a slightly nicer interior and apple carplay isn't worth the $30k in depreciation. If you are buying vehicles based on what you can afford on a monthly basis, you're doing it wrong. Get off the never ending payment treadmill, otherwise you'll be on the cat food diet at 70.