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

[Sliver]

Originally Posted by PsYcNeT

And how much did you pay when you bought it originally?

Yeah, and how much money does he make? And what sort of financial start did he have in life? Parents pay for an education? Any inheritances? Were his grandparents putting money away every month into a retirement account for him from the time he was born (I know a guy who had this done for him...can you imagine!?)? How much does he save per year? Was there any parental help in buying his first home? Does he come from a reasonably wealthy family so he has a built-in safety net that isn't available to everyone?

I mean, to raise four kids, buy a house, support a dependent spouse and save enough for retirement while taking on the risk of being the sole breadwinner with five dependents sounds like hell - particularly if you have the expectation that you're going to enjoy life along the way with a little bit of disposable income. Plus, I hope V has some good life insurance as well as disability insurance. If something happens to him, there are going to be six people total that are totally fataed. Life insurance isn't necessarily expensive, but the right amount of disability insurance is.

Not saying it can't be done, but you obviously need a high income to do it and luck to be on your side with respect to health, real estate purchase timing, vehicle reliability, pension/personal savings, the economy (no lay-offs), etc. Maybe his parents have a cabin or something they go to for down time - we all need a break, but vacations can be expensive unless you have free accommodation. There are just too many factors that this cannot be universal advice you can give to most people. You can budget all you want, but you really have to make a single income go far to accomplish the above. Plus, imagine if you have a kid with special needs or if you want to save for their education - forget any of that.

[undercoverbrother]

Originally Posted by Slava

This might be partly the case (about everyone buying everything on credit these days), but that's basically necessary. A lot of us love online shopping, and obviously that's on credit for example.

There's a marked difference I see in my clients though. People who are better off are buying everything on credit are also paying that bill every month and paying $0 in interest. In the words of Patrick Ewing, "we make a lot of money, but we spend a lot to".

It is the credit/interest Siren that gets you.

At one point my wife and I had purchased a vacation condo, ran up debt with purchases/vacations and had a large line of credit which we ran up.

The banks don't care they will always give you money.

We used a move as a jumping off point to change our ways. Sold the condo, payed off the line of credit, went to paying the credit card off every month.

In short, living within our means. It was hard, with some hard decisions, we passed on a vacation in Costa Rica, where all where had to pay was flights, but it was the right thing to do and cemented our new approach.

Now 9 years on we are debt free (except for house) and don't take trips unless we have paid for them first with real money. There are times that is still sucks, buying #### feel good, but it is the right approach for us.

[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.

[Sliver]

Originally Posted by CliffFletcher

It has moved the window of what people regard as middle class behaviours. I used the example of elite sports teams. Spending on sports and recreation for kids has quadrupled in the last 20 years. Who are these people dropping 5k+ a year per kid on intensive sports activities with travel, hotels, etc? It started out as those upper-middle-class, dual-income professional households. But as tends to happen, now the middle-middle-class considers that kind of behaviour to be just a standard part of being Canadian parents, so they've followed suit. Even though they can't really afford it. Maybe it's a downside to the egalitarian pretenses of our society, but fewer people in Canada today seem to recognize that A) there are dramatic differences in income even among families who regard themselves as middle-class, and B) we should tailor our spending to what our income affords us. 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.

Great take.

One thing with people that overspend is there doesn't seem to be any outward consequences. Like, you can see people you know can't afford things based on what you can calculate for their incomes, yet there they are doing all the things and having all the stuff. I rarely see the house of cards come crashing down like you'd expect. Maybe it catches up with them at retirement age and at 42 I just haven't been around long enough to see the full repercussions manifest? IDK, but I imagine the fact that people can just go on and on in debt seemingly in perpetuity encourages other people to do the same.

[V]

Originally Posted by PsYcNeT

And how much did you pay when you bought it originally?

Good question, I have no idea, although not sure how it’s relevant.

[stone hands]

Originally Posted by Sliver

Great take.

One thing with people that overspend is there doesn't seem to be any outward consequences. Like, you can see people you know can't afford things based on what you can calculate for their incomes, yet there they are doing all the things and having all the stuff. I rarely see the house of cards come crashing down like you'd expect. Maybe it catches up with them at retirement age and at 42 I just haven't been around long enough to see the full repercussions manifest? IDK, but I imagine the fact that people can just go on and on in debt seemingly in perpetuity encourages other people to do the same.

it catches up to them when they will never be able to retire

[Cecil Terwilliger]

People can’t budget and capitalism is failing. There’s no single answer here. It’s a combination of consumption culture, keeping up with the joneses etc and stagnant wages, rising cost of living.

That’s actually more scary to me than wasting time arguing about which is correct, it’s both. Not only is it exceptionally worrying but instead of waking up to it, far too many people busy themselves with judging others for not keeping up or spending beyond their means to try.

It’s equal parts scary and sad how few people are concerned about wealth inequality and how to fix it.

[PsYcNeT]

Originally Posted by V

Good question, I have no idea, although not sure how it’s relevant.

Well you lived there prior to 2009, so the house being another 10 years old and approaching 450k is notable.

Part of what we're is discussing is the increased housing cost since Alberta's boom time. 450k in 2003 would get you a lot more than it gets you now. You can't really say "I wouldn't pay 450k for a house!" when in a lot of cases, 400k doesn't really even get you a detached single-family home anymore (unless you move to the edge of the city). It certainly won't get you more than 3 bedrooms.

That said, I'm not sure how property values have moved in Whitehorn as I know the NE saw less of a general increase than other quadrants so I'm just curious more than anything.

[Scroopy Noopers]

Originally Posted by V

Good question, I have no idea, although not sure how it’s relevant.

I’m not sure how saying “I’ve never spent $450K on a house” is relevant. The whole point here is that’s what houses cost now in most places in Canada. I can’t get under that figure in my town of 100,000 people unless I want to buy something built in 1890 and is falling apart. Which will then end up costing me much more than $450K to salvage it.

[you&me]

Originally Posted by PsYcNeT

Well you lived there prior to 2009, so the house being another 10 years old and approaching 450k is notable.

Part of what we're is discussing is the increased housing cost since Alberta's boom time. 450k in 2003 would get you a lot more than it gets you now. You can't really say "I wouldn't pay 450k for a house!" when in a lot of cases, 400k doesn't really even get you a detached single-family home anymore (unless you move to the edge of the city). It certainly won't get you more than 3 bedrooms.

That said, I'm not sure how property values have moved in Whitehorn as I know the NE saw less of a general increase than other quadrants so I'm just curious more than anything.

Exactly. It would be exceedingly difficult to find a home suitable for a family of 6 for $450,000 in Calgary.

This would be like my grandfather saying he never spent more than $10,000 on a new car... Great - but you haven't bought a new car for like, 35 years!

[Sliver]

Originally Posted by jayswin

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.

I think a new home is a better financial decision for a person starting out. My house was built in 1969 and in the 10 years I've lived there we've pumped a lot of money into it. Definitely a ton of it has been optional, but some things like windows, attic insulation, new roof, new electrical panel, hot water tank, etc. couldn't not be done.

I had a new house for five or six years before this one. It was great because there were not any maintenance surprises at all. Just paid my mortgage and that was it. We put up a fence, planted some trees and laid sod, but honestly, that's a drop in the bucket compared to maintaining an older house, plus I've had to replace the fence at the house I'm in now, too (and the sod, but again, optional).

Originally Posted by Enoch Root

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.

Are you joking? Of course it matters. There's your monthly liability, but also your term length. There's an insane difference between paying off your mortgage at 45 and paying it off at 60. All that money in interest (let alone principle) could be in your retirement fund. Plus the emotional burden of it.

[V]

Just for fun, I thought I’d answer these.

Originally Posted by Sliver

Yeah, and how much money does he make? And what sort of financial start did he have in life? Parents pay for an education? Any inheritances? Were his grandparents putting money away every month into a retirement account for him from the time he was born (I know a guy who had this done for him...can you imagine!?)? How much does he save per year? Was there any parental help in buying his first home? Does he come from a reasonably wealthy family so he has a built-in safety net that isn't available to everyone?

I make less than the median household income. I had no financial start in life. I paid for my own education. No inheritance. No money put away by grandparents. I save a lot, mostly by maxing out my kids’ RESPs. My parents gave me no money for my first house. My parents are not remotely wealthy, although it was a nice stable home that I guess if I failed miserably at life I could find a way to survive in their basement, I guess?

I mean, to raise four kids, buy a house, support a dependent spouse and save enough for retirement while taking on the risk of being the sole breadwinner with five dependents sounds like hell - particularly if you have the expectation that you're going to enjoy life along the way with a little bit of disposable income. Plus, I hope V has some good life insurance as well as disability insurance. If something happens to him, there are going to be six people total that are totally fataed. Life insurance isn't necessarily expensive, but the right amount of disability insurance is.

Yeah, of course I have life insurance. But I don’t have a cable package, I don’t have a data plan, I don’t have car payments, I don’t have student debt, I don’t travel for vacation. I don’t spend thousands on Christmas and birthdays. We don’t eat out. Ever. That list right there has to be worth, what, almost 1000 bucks every month? It probably sounds like hell to some people, but I think that’s part of the problem.

I do have a nice woodworking shop, but that came in my late 30s. It also helps as a bit of a side hustle. It hasn’t totally paid for itself, but it’s not far off.

Not saying it can't be done, but you obviously need a high income to do it and luck to be on your side with respect to health, real estate purchase timing, vehicle reliability, pension/personal savings, the economy (no lay-offs), etc.

I’ve been lucky, for sure. I’ve had steady employment my whole career, although part of that is because of where I choose to work.

Maybe his parents have a cabin or something they go to for down time - we all need a break, but vacations can be expensive unless you have free accommodation.

We enjoy camping. It’s a couple hundred bucks a year.

There are just too many factors that this cannot be universal advice you can give to most people. You can budget all you want, but you really have to make a single income go far to accomplish the above. Plus, imagine if you have a kid with special needs or if you want to save for their education - forget any of that.

It’s not for everyone, that’s for sure, but I really wonder if people are actually legitimately happy with their consumeristic lifestyle. There are alternatives, and I know we’ve found a life that we find very satisfying. Focusing on supporting others and spending time together as a family is rewarding for us, but I know it’s not for everyone.

[V]

Originally Posted by Scroopy Noopers

I’m not sure how saying “I’ve never spent $450K on a house” is relevant. The whole point here is that’s what houses cost now in most places in Canada. I can’t get under that figure in my town of 100,000 people unless I want to buy something built in 1890 and is falling apart. Which will then end up costing me much more than $450K to salvage it.

I just gave you an (nearly) entire neighbourhood that is under 450k today. Not 10 years ago, today. Almost the entire neighbourhood is under 400k.

[East Coast Flame]

Originally Posted by stone hands

it catches up to them when they will never be able to retire

I'm planning on dying fighting in the climate wars anyways, so until then AVO TOAST AND CUBA TRIPS BABYYYYYYYYYYY

[nik-]

Originally Posted by V

I just gave you an (nearly) entire neighbourhood that is under 450k today. Not 10 years ago, today. Almost the entire neighbourhood is under 400k.

But, Whitehorn. Ew.

[I_H8_Crawford]

Originally Posted by undercoverbrother

It is the credit/interest Siren that gets you.

At one point my wife and I had purchased a vacation condo, ran up debt with purchases/vacations and had a large line of credit which we ran up.

The banks don't care they will always give you money.

We used a move as a jumping off point to change our ways. Sold the condo, payed off the line of credit, went to paying the credit card off every month.

In short, living within our means. It was hard, with some hard decisions, we passed on a vacation in Costa Rica, where all where had to pay was flights, but it was the right thing to do and cemented our new approach.

Now 9 years on we are debt free (except for house) and don't take trips unless we have paid for them first with real money. There are times that is still sucks, buying #### feel good, but it is the right approach for us.

To go one step further, if you and your wife continue this lifestyle of living within your means and saving, sooner than later you will hit a point where you won't have to work to live.

There are not many better feelings than working in a job where you have "f*** you" money and you can walk away at anytime. I've seen so many people who have to put up with complete BS from their employer b/c they can't afford to lose their job.

[Scroopy Noopers]

Originally Posted by Scroopy Noopers

I’m not sure how saying “I’ve never spent $450K on a house” is relevant. The whole point here is that’s what houses cost now in most places in Canada. I can’t get under that figure in my town of 100,000 people unless I want to buy something built in 1890 and is falling apart. Which will then end up costing me much more than $450K to salvage it.

Originally Posted by V

I just gave you an (nearly) entire neighbourhood that is under 450k today. Not 10 years ago, today. Almost the entire neighbourhood is under 400k.

That’ll save us.

[V]

But, Whitehorn. Ew.

Exactly.

[redforever]

Originally Posted by stone hands

For the vast majority of people I know anecdotally, they could clear 1M a year and still be drowning in debt. Nobody buys stuff with money they actually have, everyone buys everything on credit no matter how much money you make. It’s a gigantic societal problem that doesn’t seem to care what your take home is. Lifestyle creep is real

So true. Anecdotally I can speak of two such cases.

In the one case, it has now got to the point where the house will be lost, but in the second case, outside of a few from their inner circle who know, everyone else still thinks they are doing extraordinarily well.

And in the second case, they still won't think of downsizing and getting rid of the second property in the States or anything else. Gotta maintain that keep up with the Jones's philosophy and pretend nothing is wrong.

[peter12]

Originally Posted by CliffFletcher

It has moved the window of what people regard as middle class behaviours. I used the example of elite sports teams. Spending on sports and recreation for kids has quadrupled in the last 20 years. Who are these people dropping 5k+ a year per kid on intensive sports activities with travel, hotels, etc? It started out as those upper-middle-class, dual-income professional households. But as tends to happen, now the middle-middle-class considers that kind of behaviour to be just a standard part of being Canadian parents, so they've followed suit. Even though they can't really afford it. Maybe it's a downside to the egalitarian pretenses of our society, but fewer people in Canada today seem to recognize that A) there are dramatic differences in income even among families who regard themselves as middle-class, and B) we should tailor our spending to what our income affords us.

I don't disagree with you.