Avg. Canadian personal debt rises to $25,597: report

I dont have debt.I am careful where i spend but still manage to enjoy life . No stress for me!!

No debt for me either, people should buy only what they could afford with no second tought about it. Credit is bad for you and your peace of mind. Live free or be stess forever.

To Andre, good for you! More people should take your lead.
I'm surprised to see that the number is so low, actually. With the cost of education these days, student loans alone can be upwards of 60K by the time you finish.
My personal debt level is below the 25K level, at about 20K. More than half is my car loan, most of the rest is my student loan, and I have a teeny bit on my line of credit (which I will finish paying off in a few months). The recession has had little impact on my debt, other than lower interest rates. I plan to have my PLC paid off before Christmas, my student loan one year later, and my car a year after that. Managing debt is not that difficult as long as you live below your means and your means is high enough to afford you all you need and some of what you want.

Easy to avoid debt, even mortgage debt when you make 100-300k a year.

Do you have more or less debt than you did during the recession!
Sounds like you are saying we've come out of the recession, I think the worst is still yet to come.
There may be some that are working on paying down debt, and taking advantage of lower interest rates, good for you, but I think the majority are still not paying attention for whats ahead.

Why does everybody assume debt is bad?

Debt is a financial tool that can be very useful. Excluding mortgages my wife and I currently have 181K of personal debt. My average interest rate on that debt is about 4.5% (locked in for the next 5 years of course). Our mortgages stack up to another 1,200K (again locked in) and we are under 30. With the super low interest rates its pretty much a no brainer to load up, lock in and see where inflation takes us in the next 5 years.

In my world there are 2 types of debt. Debt used for investment and debt used for lifestyle. Lifestyle debt is horrible because it invariably means that in the future you will have to dimish your lifestyle just to cover your current life. All of my debt is investment debt and I have already done well off of it.

So for all of you that tkae pride in having no debt I congratulate you that you are able to manage your finances so that your lifestyle doesn't cost more than your earnings. I would mention, however, that you are missing out on the opportunities presented by the current low interest rate to really rachet up your future net worth.

I agree with Western Guy. I am approaching retirement and just bought a water front property with a mortgage that is close to $1 miillion. I have never had a debt before, and I don't really consider this mortgage a debt because I own other property and investments that have a total worth far above my mortgage principal. My mortgage rate is so insanely low that it would be stupid to cash in on investments, earning a much higher return than what I pay in interest on the mortgage. Banks give money much more freely to those who do not need it, so I take full advantage of that. I cringe when I hear people having credit card debts. Now that is completely stupid given the insanely high interest rate. There is no excuse for that.

I don't think that they are talking about investment debt. Investment debt is business. They are talking about buying a new car because the new model is out and your neighbour has one. Some people have credit card debt that they can't remember what they bought with it.
I have credit cards for personal or household expenses but they are paid every month. If I can't afford to pay it off then I can't afford to build up a balance.

people got too look at my site i will show you things that make you go hmmmm .. click onto my name now and you will see what money can do ...you will be amazed all you need is two pages you dont need to READ A BOOK ... to get to the point....

If buying the weekly groceries with credit cards is considered a lifestyle debt all I can say is : Some life, some style.
For too many people in this country earnings have never kept pace with inflation over the last 25 years. The accumulated debts from all those years, through obsessively needing to put a crust of bread on the table, will never get paid off, no matter how many times we get kicked in the pants The simple reason being that unlike flat screen TV's, trips to Mexico, new cars and other things that we don't need, tomorrow morning we will be hungry again and we will hit the supermarket once more knowing full well that we will be deeper in debt as a result of such careless behaviour.
Maybe what is required for regular canadian citizens is that handy little tool that our corporate pals use whenever things go south for them. Its called Chapter 11 or protection from creditors.

They said credit card debt has dropped, but completely failed to mention where the numbers for line-of-credit debt are and which direction they're trending. This is usually a higher interest rate ratio. If we as a people, don't demand absolute control over interest rates and credit, then of course the big banks win. Bad enough they don't carry enough cash in their vaults to parlay a bank-run. I think every Canadian should gut their account and quit letting these greed mongers take your money and use it as part of their keep us rich schemes. Fractional banking and interest rates should be completely illegal. Seems like we, the people, continue to put up with this bullsh*t instead of saying NO and start voting this stuff down. We pay interest rates, user fees, and get NOTHING in return but shining objects that depreciate in value! Wake up Canada and demand a government that will print it own money instead of allowing our country to be bought and paid for by the private owned Bank of Canada and the rest of these greed mongers!

Michael if you are buying groceries with credit cards without the ability to pay them off you have obviously previously regularly made some very bad decisions. In Canada with hard work and ambition you can do really well. If you lack either of those than you get what you earned.

Also know Michael that using your credit cards to buy food means that in short order you will fill them up and then you will have interest at 20% plus you will still need to buy food. In short whatever your current lifestyle is it will soon get worse.

Now I know a bunch of people will jump on me with "but this happened and it wasn't my fault" but at the end of the day you have to look after yourself. If you failed to plan accordingly it is only your own fault. Personally I will be a millionare before 35 at the current rate and will add another million every 5 years after that (this should excelerate but it is the current projection with todays numbers). This will allow my family comfort even if my family suffers any number of tragedys (which I sadly know will inevitably occur). I consider somebody living paycheque to paycheque to be extremely reckless because you have to know at some point that there will be an interruption.

Also Michael how do you get to your situation? You can't really blame inflation. It has been at 2-3% for the last 10 years. If you can't increase your earning power by that amount each year its not inflation that is hurting you, its yourself.

Also please tell me you didn't have kids? If you can't afford to feed your children its almost criminal that you had them in the first place. Children aren't a right and if you can't afford them you shouldn't have them.

Earning enough to feed yourself is pretty basic in a modern econony. If you live on KD and other items I'm sure $10 a day per person will manage to feed you (it won't be luxury food but it will sustain you). How hard is it to earn $10 a day? How many hours do you work a week? Could you get a second job, a third job etc? Could you move to a cheaper place, a place with more work? All of these are pretty obvious.

Lifestyle debt is never necessary. In the end a failure to plan is a plan to fail.

I get the feeling that those that are boasting about their position are quite well off. Considering the avg wage is now under $30,000 I would suggest a wage ceiling should be put in place to prevent a further gap between the rich and poor.

Western,

How do you plan to handle the following scenario:
I assume most of your investments are in real estate and rental properties ($1.2 mm in dept).
In 5 years your locked in rates will be up for renewal, and we can assume the interest rate will be significantly higher.
Because interest rates have been climbing for those 5 years, access to capital will have tightened and as a result there is less investment capital in the market.
Because the investment capital pool has shrunk the underlying value of your investments will inevitably drop.
Now you are left in a situation where the value of your investments is less than you paid for them and the new interest rates are not affordable, and could wipe you out.
Thoughts?
This has happened sooo many tiimes in the past 50 years that I suggest you sell off your investments to pay off your debt, otherwise a spike in interest rates could really hurt.
Please stop encouraging people to take on more debt than they should. The right amount of debt is a number less than what you can pay on short notice.

Ummmm Capital Conservation you are off on a couple of points but kuddos for trying.

1. I do have a several rental units but my holdings are diversified.

A lesson in economics:
As interest rates rise it creates more capital because there is a greater return for the lenders, that doesn't reduce the capital investment available. What I think you were looking at is the situation where interest rates rise dramatically due to a lack of available capital (basically the reverse of what you said). That is possible. That will cause a large amount of inflation to incur (1980s had 20% interest but 15% inflation). I would happily take 15% inflation for the next 5 years while I pay 4% interest on my properties and watch the rental rates rise at that amount as well. Also please note I have a 30% gain now on the properties currently and have them on 25 year mortgages with 10% already paid off so in the next 5 years I will have paid them down another 10% or so. That means in 5 years my mortgage is only 50% of the current market price with good rental incomes. That is quite a strong position. Also the properties are spread in a couple of markets so market hits in any one place won't buckle me. Also worst case scenario I could strech the rental mortgages back out to 25 years which would also reduce the monthly payments.

3. My other investment for 500K is a business venture with a government backed loan at 2.48% for the next 7.5 years. They also further guarantee future money will be available to extend the loan. With that business I am able to insure my earnings meaning I am guaranteed a minimium of about 40K a year net income in perpetuity which will easily cover my mortgage and allow me to keep a reasonable leverage on my debt as Canadian market conditions change.

4. My personal income has doubled in the last 5 years and my wife's is up 60% as we both have high-end high demand jobs that we are gaining great experience in. That should continue at a slightly slower rate for the forseeable future. We keep a modest lifestyle which is allowing us to put about 15% a year into RRSPs not to mention pay down some of the personal debt ahead of schedule (we don't owe a dollar for vehicles with 2 good ones, we don't owe a dollar on anything in our house as I don't believe in consumer debt, only investment debt).

Basically speaking Capital Conservatism you have little idea what you are talking about. I am well aware that markets shift over time (I am too young to have been investing in the 1980s but I understand what occured there). I have taken a bit of a gamble but so far the markets have been less than stellar and I have already made 30% so I think I will keep at it with a careful approach with debt locked down as much as possible for as long as possible to reduce my risk. This is my life and while I am gambling I am taking every precaution possible.

I am 23 with a masters, a high-paying job, and a $1 mill+ in the bank with zero debt, mortgage or otherwise. I say that, Western Guy, because the situation you describe above is not feasible for the average citizen. The fact that mortgage lending rules are tightening does not give a person with an "average" wage the ability to invest hundreds of thousands of dollars (investment or not) in capital assets, such as rental properties. And being "capital rich, asset poor" isn't always the best way to spend your money when you struggle to feed yourself.

The fact you have a "government backed loan" is also not going to be possible for every Canadian to obtain. Good on you for getting it but not everyone can.

A fact of capitalism is that some people just don't have the ability or the means to obtain a high-level of education, and thus (typically) a high-paying job. Congrats on having your income grow substantially but there are still thousands of people working for minimum wage, no wage at all, or struggling to support themselves with the rising costs of food, gas, housing, etc.

Interest rates, investment debt, and rental properties aside, few people are in a situation that supports NOT having some form of debt. To blame a person for not being in the same situation as you is absurd. You don't know those people and you are in no position to judge them. There are always extenuating circumstances that a simple internet chat will not take in to account.

So, overall, congratulations on your life but maybe take a second to think about the people barely scraping by, working 2+ jobs at minimum wage and 60 hours/week. Next time you go order a burger at McDonald's, take a second to feel some compassion and empathy for the manager there who is 40 years old and is doing their best to make ends meet while working a dead-end job. I commend these people and wish them every bit of luck as they continue to live each day making the best of it they can and continue to try to take internet University courses so they don't have to hear how they never "seized the opportunity that Canada presents" that puts them even further in to debt.

Western Guy,
You're wrong about interest rate and money supply.
An increase in interest rate will decrease money supply and an decrease in interest rate will increase money supply.
The reason the interest rate increases is to curb high inflation not that other way around.

@Blackmonday, you propose a wage ceiling? That is absurd. We live in a free country. If I can ask for a huge salary in my profession, and get it, then that is what I am worth. If no one will pay me that salary, then either I starve, or need to lower my expectations. If my salary gets capped, then what incentive do I have to excel at anything to better myself and standard of living? Why would I spend 10+ years getting my doctorate and post-doctorate to get the edge I need in my profession? What becomes of that investment in time and effort? What incentive would I have to push myself to the limit to develop new ideas, with high risks and high rewards, when I could just dumb myself down, work half as hard and get paid the same.

I spent all my money at Tim Hortons...Now I am FAT and in debt...

I'm retired and never owned a credit card or had mortgage debt.
Sold the house 5 yrs ago for $300,000, and i averaged $15,000 a yr. in earnings over 35 yrs yrs.
If you want to save money, just do it !