Weekend Reading: Debt Binge Edition

Not a week goes by without hearing how Canadians are struggling with household debt. We’re taking on too much mortgage debt, using our homes as ATMs via home equity lines of credit, we’re financing brand new vehicles, and we’re not paying off our credit card balances in full each month.

A new report from the Financial Consumer Agency of Canada said there are about three million HELOC accounts in Canada, with an average outstanding balance of $70,000. The report went on to say that some 40 percent of consumers do not make regular payments toward their HELOC principal, and most consumer do not repay their HELOC in full until they sell their home.

Maclean’s commissioned a poll about Canadian household debt and found that 1/3 of Gen-Xers have borrowed large sums of money from their friends or family. Another interesting finding was that just 58 percent of Canadians pay their credit card balances in full each month. And, incredibly, a little more than 1 in 5 Canadians who purchased their home before 1990 still haven’t paid it off after 27 years or more!

Sooner or later this debt binge is going to catch up with us. So what can we do about it? It’s easy to say, “don’t get into debt in the first place”, but that’s not exactly helpful advice for someone looking to get their head above water, financially speaking.

If you find yourself overextended, start with taking a long look at your current financial situation. How much money are you bringing in each month, and how are you spending it? Is there an opportunity as a household to get out of the two-vehicle loan trap, either by selling one car and buying used, or paying off one car and then driving it into the ground for another decade?

Can you make more money renting out your basement or starting a small business on the side? Are you truly spending money on things you need and things that bring you joy, or are you spending mindlessly on stuff that doesn’t add a lot of value to your life?

Most of us have an ‘a ha’ moment at some point when we decide to get serious about our finances. For me, it took a maxed-out credit card and a second mortgage before I finally turned our finances around. For others, it’s a major life milestone, such as getting married or having a baby, that turns the light on financially. My hope is for a lot of Canadians to have their financial awakening soon before a major shock hits the economy.

This Week(s) Recap:

Many thanks to Shirley Won for including my comments in this Globe & Mail piece on university costs and student loans.

Last Monday I asked if we’ve reached peak stock market after a strong eight-year run.

Last Wednesday Marie posed an interesting question: Is it time to fire yourself, or your advisor?

And last Friday I explored the touchy subject of whether you should pay off your partner’s debt.

This Monday I went on a bit of a rant about how banning embedded commissions won’t lead to an advice gap because small investors are already getting screwed.

On Wednesday Marie explained how to go about choosing the right financial advisor.

And on Friday Marie explained these retirement planning basics.

Weekend Reading:

The Motley Fool blog has a good list of five budgeting mistakes you can’t afford to make.

Too pushy, too overconfident, and six other ways smart people act stupid.

The rise and fall of James Regan, Toronto’s classiest con-man.

What have we learned from the 1980s and that 21 percent interest rate?

“We have a generation of Canadians who have never experienced high, or even rising, interest rates,”

If American households ruined by the housing crash would have received as much attention as Wall Street, the world would be a different place today (or why Ottawa should bail out homeowners if home prices tank).

This time it’s different. Why every housing bubble looks like the new normal.

Meir Statman on the mental mistakes we make with retirement spending:

The same mind-set that works so well when people are building their nest egg can damage their quality of life in retirement.

Hey, I thought ETFs and indexing was in a bubble? Here’s why Canadians aren’t flocking to ETFs:

Jonathan Chevreau explains what to expect when receiving OAS at 65. Many people think they have to apply, but it turns out you’re enrolled automatically.

Sell the rental property or unwind the RRSP? Jason Heath looks at the pros and cons of these retirement income options.

A cool story about actor Kevin Bacon and his relationship with money:

“These days, I still like having cash in my hands—I never walk around with less than $200 or $300. In some ways, I’m still a cash-only guy, like I was in my restaurant days. There’s a kind of joy in seeing something in a store and being able to pull the cash out of your pocket and buy it for yourself.”

Summertime is expensive. Melissa Leong with six warm-weather spending traps, and how to avoid falling in.

Kyle Prevost, a teacher in rural Manitoba, figured out how to teach personal finance in school. Well done, Kyle!

People are torn: Is a $15 minimum wage a great thing, or a horseman of the economic apocalypse?

Finally, here’s an article that recognizes something I’ve learned over the last seven years of working my side-hustle: Moonlighting at other jobs makes your employees more creative and productive.

Have a great weekend, everyone!