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

[Sliver]

Originally Posted by you&me

I skimmed the article you linked, but the stats seem kind of dated. I will concede that a lot of wealthy people "purchase" their vehicles, but that is very often on some sort of line of credit, which is still not the same as an actual "cash" purchase.

But otherwise you might be surprised at the frequency very HNW individuals purchase very expensive cars using some form of finance or lease... I'm not talking a new E-class here, but at the level where the cars themselves become assets with prices in the 7 and even 8 figures.

Yeah, I'm still not seeing any evidence of that except for your word. Why would a hnw person use a line of credit to purchase a car just to sit on it and pay interest on a line of credit? If they're getting credit so cheap and risk free that the cost of borrowing is lower than their returns elsewhere, why aren't they just maxing out the loc and investing that? I don't get why they'd turn to credit to speculate on exotic cars.

BTW, I think you're the only one talking about exotic car speculation. And can you even lease a car bought at Barrett-Jackson? What, you pay on it for a while then give it back? I'm not following.

[Kipper is King]

Taking a personal finance course in university was one of the best things I ever did.

[GGG]

Originally Posted by GirlySports

You could furnish your entire house for free if you looked hard enough on kijiji and Facebook marketplace.

You could but the guys giving their stuff away keep refusing to deliver.

[blankall]

Originally Posted by Calgary14

Should've prefaced it by stating rental properties, not principal residence

Even then, the big advantage to property is the power of leverage. Your rental property may have only increased in value by 50k in 10 years, but if your down payment is only $50k you're laughing, plus there's the equity you ate building by paying down the mortgage.

There biggest issue with rental properties is that it's not entirely passive income. If you buy into a falling market you're hooped, and can end up underwater. You're fine in the long run if your rental pays the mortgage.

Stocks and other investments go through crashes too though.

[flamesfever]

This is something that I wrote 3 years ago. I don't think anything has really changed since then.

The economic factors and prevailing attitudes affect how many people handle their money. As most of you have probably observed, those that were affected by the Great Depression are in their late 80's and 90's and are extremely frugal. I knew a person who used to pull the plug on her electric clock, when she left the house, to save money. The fear of being destitute must have been so intense that it changed their spending behavior for the rest of their lives.

Nowadays, people think they should have everything before they earn it. They end up paying much more for everything, and miss half the fun of looking forward to owning something after they have worked for it.

Also it baffles me to see people thinking they wouldn't be happy with any house that is less than 2000 square ft, when no matter how small the space, the human brain will automatically adjust to make it comfortable in a short period of time. Some are starting to realize this, with the advent of the "mini houses" being built with only a few hundred square ft.

Also I see people thinking that if something is more than 10 years old, it must be due for replacement. Just look at the number of things in landfills that still have good use left in them.

In order to keep up with the Joneses, many think they have to drive an expensive car, when the sum of the intitial cost, the fuel, the insurance, and the maintenance is killing them financially.

I can't believe how much people spend on being continually entertained. Whether it's the internet, phone bills, movies, eating out, expensive trips, etc., it's keeping many people poor and unable to save for "rainy days" or retirement.

The unusually long period of big wages that came with the $100. oil in Calgary only helped to reinforce the above attitudes. Those that didn't realize what forces were acting on them, and that history always repeats itself, are doomed to suffer the consequences.

[jammies]

We need that Oilkiller dude back just for this thread to argue the spendthrift side of things.

Never going out to eat or traveling on a vacation is how you end up with a family of 6 like V. I bet he could be on the Spanish Riviera eating at the finest restaurants every December if he had zero kids to support! But the short sighted decision to stick to free entertainment eventually caught up with him.

[Oil Stain]

Originally Posted by CliffFletcher

The question for me isn't so much why people are bad with money. The question is why Canadians have become worse with money than Americans, the British, Dutch, Japanese, Germans, etc.

I would wager that it is mostly due to the fact that Canada came out of the Housing Credit Recession relatively unscathed.

9 months of recession, and no major depreciation of home values like some other parts of the world saw.

http://https://en.wikipedia.org/wiki...ided_recession

United Kingdom had 15 months of recession. Japan 27. Holland 39 months. US only 12 months, but their housing economy got blasted to an extent that we didn't see here.

If the average person doesn't face life altering hardships they aren't going to see a need to alter their behaviour.


Also I'm not sure I agree with vacations being seen as examples of frivolous spending. I think it must be a lot cheaper to travel now than it was 30 or 40 years ago. You can fly to China direct from Calgary now for about $600-$800. An all-Inclusive to Mexico for a week probably costs about the same as spending a weekend in Banff skiing.

[CaptainYooh]

Originally Posted by GGG

You could but the guys giving their stuff away keep refusing to deliver.

Free delivery of free stuff must be legislated as mandatory. We just need to give Rachel and Jagmeet another chance.

[Tyler]

Originally Posted by flamesfever

This is something that I wrote 3 years ago. I don't think anything has really changed since then.

The economic factors and prevailing attitudes affect how many people handle their money. As most of you have probably observed, those that were affected by the Great Depression are in their late 80's and 90's and are extremely frugal. I knew a person who used to pull the plug on her electric clock, when she left the house, to save money. The fear of being destitute must have been so intense that it changed their spending behavior for the rest of their lives.

Nowadays, people think they should have everything before they earn it. They end up paying much more for everything, and miss half the fun of looking forward to owning something after they have worked for it.

Also it baffles me to see people thinking they wouldn't be happy with any house that is less than 2000 square ft, when no matter how small the space, the human brain will automatically adjust to make it comfortable in a short period of time. Some are starting to realize this, with the advent of the "mini houses" being built with only a few hundred square ft.

Also I see people thinking that if something is more than 10 years old, it must be due for replacement. Just look at the number of things in landfills that still have good use left in them.

In order to keep up with the Joneses, many think they have to drive an expensive car, when the sum of the intitial cost, the fuel, the insurance, and the maintenance is killing them financially.

I can't believe how much people spend on being continually entertained. Whether it's the internet, phone bills, movies, eating out, expensive trips, etc., it's keeping many people poor and unable to save for "rainy days" or retirement.

The unusually long period of big wages that came with the $100. oil in Calgary only helped to reinforce the above attitudes. Those that didn't realize what forces were acting on them, and that history always repeats itself, are doomed to suffer the consequences.

You shoulder sore from patting your own back? Good lord, the self-righteous in this post is over the top.

[Calgary14]

Originally Posted by blankall

Even then, the big advantage to property is the power of leverage. Your rental property may have only increased in value by 50k in 10 years, but if your down payment is only $50k you're laughing, plus there's the equity you ate building by paying down the mortgage.

There biggest issue with rental properties is that it's not entirely passive income. If you buy into a falling market you're hooped, and can end up underwater. You're fine in the long run if your rental pays the mortgage.

Stocks and other investments go through crashes too though.

But leverage isn't exclusive to real estate, so it's not really an advantage. Anyone can leverage an investment to magnify the returns. When I said returns are mediocre for real estate I mean the true rate of return of a house/condo/etc aside from leveraging (ie. paid $400K for house and it goes up to $500K in 10 years). The key is positive cash flow every month which is hard to do sometimes when you consider repairs, bad tenants, vacancies etc.

Totally agree rentals aren't passive. And there are many, many costs that can quickly change a decent rate of return into a bad one - vacancies, evictions, court orders, damages, repairs, regular maintenance.

Stocks can go down just like every other investment as well.

[CliffFletcher]

Originally Posted by Oil Stain

I would wager that it is mostly due to the fact that Canada came out of the Housing Credit Recession relatively unscathed.

If the average person doesn't face life altering hardships they aren't going to see a need to alter their behaviour.

I think this is the main reason Canadians are still spending so much. On forums with people outside Canada over the last 12 years I was almost embarrassed about how well the economy was doing here in Canada and Alberta when much of the rest of the developed world was going through tremendous hardship (and many still haven't recovered). '08 was a game-changer in much the world. In Canada it was a blip.

This is also a big reason why Canada hasn't seen the populist revolt we've seen in much of the West. 15 years of strong commodity markets meant the working/middle class didn't suffer the way it did in other countries.

The downside is the commodity boom became regarded as the new normal, and Canadians still haven't adjusted their expectations and lifestyles to the new reality.

[Sliver]

Something getting a little lost in this thread is that there are people doing well and it is okay to spend money and have fun. Just because somebody eats out, goes to movies, travels, has cool cars, has a nice house, etc. doesn't necessarily mean they're bad with money. Maybe they're on top of all their savings and are enjoying the excess. Maybe they're even being frugal relative to their income.

Another kind of weird thing is there aren't really many options for tapering back work. I know some people that would be very happy to make 20% less for 20% more time off; however, there isn't really that option for many people in the work-a-day world. So there you are with the high salary and limited time off, so you spend it on nice things and entertainment. Nothing wrong with that.

[Fuzz]

If everyone worked 4 days a week the world would be a better place.

[Weitz]

Originally Posted by Sliver

Something getting a little lost in this thread is that there are people doing well and it is okay to spend money and have fun. Just because somebody eats out, goes to movies, travels, has cool cars, has a nice house, etc. doesn't necessarily mean they're bad with money. Maybe they're on top of all their savings and are enjoying the excess. Maybe they're even being frugal relative to their income.

Another kind of weird thing is there aren't really many options for tapering back work. I know some people that would be very happy to make 20% less for 20% more time off; however, there isn't really that option for many people in the work-a-day world. So there you are with the high salary and limited time off, so you spend it on nice things and entertainment. Nothing wrong with that.

I also find people with kids compare themselves to DINK's a lot. Not sure how they feel that is a fair comparison.

[Wormius]

Originally Posted by Weitz

I also find people with kids compare themselves to DINK's a lot. Not sure how they feel that is a fair comparison.

I am not sure that I have seen that, but what does that mean if they do or don't? Do you just mean than people with kids are trying to live the DINK lifestyle?

[Shazam]

Originally Posted by Sliver

Something getting a little lost in this thread is that there are people doing well and it is okay to spend money and have fun. Just because somebody eats out, goes to movies, travels, has cool cars, has a nice house, etc. doesn't necessarily mean they're bad with money. Maybe they're on top of all their savings and are enjoying the excess. Maybe they're even being frugal relative to their income.

Another kind of weird thing is there aren't really many options for tapering back work. I know some people that would be very happy to make 20% less for 20% more time off; however, there isn't really that option for many people in the work-a-day world. So there you are with the high salary and limited time off, so you spend it on nice things and entertainment. Nothing wrong with that.

Employers are convinced people want full time jobs, at least in the professional realm.

[Shazam]

Originally Posted by Wormius

I am not sure that I have seen that, but what does that mean if they do or don't? Do you just mean than people with kids are trying to live the DINK lifestyle?

Last time I tried that I got a restraining order.

[Torture]

Originally Posted by Shazam

Employers are convinced people want full time jobs, at least in the professional realm.

I'd argue that many aren't flexible/progressive enough to allow their workforce to work 4 days a week. Sure, you get the odd person here and there that has negotiated it as a one-off, but there's still a pretty pervasive "butts need to be in seats" mentality, even in the professional realm.

[Weitz]

Originally Posted by Wormius

I am not sure that I have seen that, but what does that mean if they do or don't? Do you just mean than people with kids are trying to live the DINK lifestyle?

I see lots of people with kids be like "how do they afford to do this?" "how do they afford to by that?" When they have 2 kids and the people they are referring to are 2 professional DINK.

[you&me]

Originally Posted by Wormius

I am not sure that I have seen that, but what does that mean if they do or don't? Do you just mean than people with kids are trying to live the DINK lifestyle?

I think he means that people with kids will look to the lifestyle and spending habits of DINKs with a degree of envy, which isn't a fair comparison.

DINKs will have more free cash and far more free time to spend it than their seemingly-tied-down parental counterparts.