The True North strong and indebted
At the close of last year (December 14th) The Globe and Mail's headline was "Debt Alert": Canadians now owe more than our American neighbours for the first time in a dozen years. Canadian's debt-to-income ratio is $1.48:$1.00, a penny higher than the nabes we like so much as free-spending visitors.
And you can't blame mortgages: the average credit-active household owes over $25,000 not counting mortgage debt.
And you can't blame mortgages: the average credit-active household owes over $25,000 not counting mortgage debt.
So, all those stuffed shopping bags that I noticed over Christmas were not my imagination! What are people buying? Wii, takeout dinners, snow blowers."When they are asking you for things, as a mom, you think 'OK, I can do that'", said one woman interviewed, who owed over $39,000 on three credit cards.
Lady, there's this word: no. I'm critical, yes–but not immune to temptation.
I just got my first-ever line of credit, in case we need a quick chunk of cash for the move. It pops up first in my list of online accounts, and I want nothing to do with it.
But then I saw an ad for a posh Caribbean resort–a bargain for one late-February week, a steal for two–and think, man, today was cold and bleak. Yoga on the beach for me, diving for Le Duc. The Easy Credit Snake flicked its money-green tail to indicate the luscious apple over my head. I will resist, but am shocked at how magnetic that low-interest credit line is. You might decide to incur debt if your disposable income is going up (and some advocate personal spending to pull us out of the lingering recession) but Canadians' disposable income dropped 1.5% during the last half of 2010.
We're still in a slow economy with unemployment at 7.6%, partly because of "a notable decline in youths participating in the labour market". (Source: Statistics Canada.)
Is the lure of low interest irresistible? Do people feel, If I can handle the payments, why not? Is there only so much deprivation they will stand?
What is happening? You don't have to be Canadian to comment!
Is the lure of low interest irresistible? Do people feel, If I can handle the payments, why not? Is there only so much deprivation they will stand?
What is happening? You don't have to be Canadian to comment!
Comments
And the few of us who practice restraint look on helplessly as people are bailed out on our dime.
It's a crazy world.
We refinanced our home to take advantage of lower interest rates and get some cash out for home improvement projects last year, but have not dipped into that equity for anything else, and our total mortgage amount remains the same as when we bought the house. I also insisted on the shortest mortgage we could swing (15 years). We use credit cards for the benefits (airline miles, cash back) but pay off balances monthly.
I read recently that English TV shows working class families like Coronation Street, but American TV shows the wealthy as in Housewives of New Jersy etc. The norm gets skewed higher, and everyone gets easy credit to try to follow.
I use credit cards for most purchases, but I also keep track of my spending and pay off my balances monthly. Last year we took out our first ever home-equity line to pay for some of the landscaping around the house. In the past we've saved for everything before spending it, but we had an opportunity to continue working with an excellent mason who was suddenly available as the company he worked for went under, and he hadn't yet lined up connections to build a private clientele. We spent the amount we could easily pay off within a year and we have already made a big dent in that. Our mortgage was paid off years ago, so the amount of the line is only a fraction of the equity in the house.
Having the equity line proved useful when I found myself suddenly having to do some home alterations to accommodate a sharp decline in my husbands ability to get around and allowed me a little peace until long-term care claims are finally approved, even if I extend the payments out over two years instead of one. Better to take that money from the equity line, than to take extra money out of an IRA, even if I end up paying it off over the full 10 years, which I would never allow. I am too uncomfortable with debt to allow that.
Pseu: Immediate gratification (as you and Rebecca mentioned) is a core issue. Is it strictly advertising or have we essentially convinced ourselves that if some people have it, we must, too?
Northmoon: I've seen that referred to as "disneyfication of class"; in Disney films supposedly middle class neighbourhoods are way posher than they look n real life; every home on a huge landscaped lot.
Mardel: My sons deliberately have very low-credit cards. One got in a hole, and I hope learned his lesson.
I have not touched the LOC but will if we need to pay moving expenses up front, etc.
I am of the same vintage as you, and remember layaway, a sound way to get what you wanted, but not immediately.
Dana: Few young consumers calculate the actual cost of the loan. Some lenders are far better than others about disclosing actual cost in clear English.
Having the mortgage paid off has brought to the fore essential differences in our approaches to money.
Markets rise but also correct and, as US homeowners learned, sometimes plummet. Some people do not have decades to recover, which may be why they are piling on more debt now.
Terri: I'll bet it does! I try to avoid depreciating assets so do not buy new cars and sometimes buy used furniture aka "antique"- and that can end up costing more :)
It's also true on this side of the border that as people's benefits at work have receded (i.e., needing to pay more out of pocket for health costs), or their employment has gone from full-time to part-time with a corresponding cut in income and benefits, it's easy for them to get into the habit of putting consumables like gas and food on credit cards. I remember going through a rough patch a number of years ago and doing the same thing -- even though I knew that it was a slippery slope.
I don't own a home, never have, and don't really aspire to -- after living in NYC and N. California as a single person, I came to the conclusion that it wasn't for me. I realize that I'm in some ways a radical for refusing the "dream of home ownership," and I'd like to suggest that for many of us at this point in world history, being renters is a much more sensible option. Heresy, I know, but there it is.
I also remember well not having a credit card--and this was after I married.
And yes, we have paid off our mortgages (three homes, one bought with cash). I don't own expensive handbags, only a limited wardrobe, and consider "extras" to be luxuries.
I DO like buying books on Amazon--it's a bit too easy.
materfamilias: Your post made me realize I can't do the things m mother could: turn a collar, remodel a coat- and I am not as economical a shopper, do not make all my own bread. I, never shy about making pronouncements, will say it is good life experience for everyone to learn to live within a budget. I was happy the day my son iving on his own learned how much cleaning products cost!
Tiffany: One of my sons works part time in a video store and talks about 9 and 10 year olds who complain that their iPhone is a "crappy older model". He's really disgusted, and says it is the parents' behaviour driving it.
Susan: I agree that what is 'enough' seems to have crept steadily up. In my midwestern American childhood, even the richest family did not own three cars.
My grandma taught me to sew, cook and balance a checkbook. She also emphasized taking shoes to be repaired, mending clothing and in general caring for all my personal items. It's a larger part of budgeting than it seems on the surface because caring for things requires an investment of time. I have met many people who never take shoes to be repaired, for example, or even really knew that was an option. Just toss them out and buy new. Our whole culture has been honed to think that way.
A lot of urbanism, as well as models shown in films, TV and magazines, is designed to encourage overconsumption, such as developments that require car use by all adult family members.
Most of the people I know who are in debt are having problems due to a severe downturn in jobs and contracts, not overspending. Though I do see a lot of heavy consumer spending among certain young acquantances.
In those days we didn't have many things, not because we couldn't afford them but simply because there was no need for 10 pairs of new sandals a season, etc.
Apparel was of a spectacular quality unknown to today's standards ( I still have a few of my mum's old wool suits and silk shirts, so I know what I'm talking about). In those days having a seamstress was 'de rigueur' and didn't cost a fortune. We also mended our clothes, hade them altered and took our shoes to the cobbler.
Today we are influenced by the industry through magazines, stylish? TV series like Sex and the City and a myriad of fashion bloggers trying to emulate them. It's all pure fantasy, it's unreal, it's unnatural and plain disturbing.
What ever happened to owning just one pair of boots, a coat, one black, one brown leather bag and one summer straw bag?
I am continually shocked and amazed by the sheer volume of apparel some bloggers (mostly Americans) have amassed. Even though most of these items are thrifted and are dirt cheap that still isn't a good enough reason for owning 30 odd coats and more than a 100 pairs of footwear.
is it an inability to delay gratification? Of course everyone wants to treat themselves sometimes, but I have a morbid fear of debt - we have a mortgage and a credit card that, like other commenters, we use for the benefits and pay off in full each month. I hope I'm teaching my children the same commonsense -it's hard when 8-year-olds have iPhones and a new outfit every week.