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CANADA IN RECESSION: WILL THE ECONOMY FALL INTO A GREAT DEPRESSION?

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canada in recession

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Canada in recession Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Canada in recession introduction

It’s official. C.D. Howe Institute has declared that Canada in recession because COVID-19 is now a reality. Canada’s economy is in a recession. Nouriel Roubini is a world-known economist and a professor of economics at New York University’s Stern School of Business. He accurately forecasted the credit crisis of 2007-2008. He has some stark current thoughts on just how bad the Canadian economy can go. He has written and talked at length lately about the components that could take Canada in recession to a depression.

Canada in recession – When will there be a recovery?

Dr. Roubini sees three possible scenarios for how things are going to develop in the global economy. He says:

  1. His baseline assumption for North America this year is one of a U-shape recovery.
  2. The equity markets in the US are pricing in a V-shaped recovery with very strong growth in the second half of the year into next year.
  3. There is a risk of a greater depression for the rest of the decade but not for this year.

He believes there are forces that are going to lead Canada into a depression. His view is that there is going to be a U-shape recovery because this is a global shock. Both households and corporations will have to spend less and save more. Precautionary savings are going to go higher. Income is going to be lower. This will translate into less business capital spending. He says there will be a global investment slump because of a global savings glut.

That is a recipe for a very anemic recovery.

Could external forces push the US and Canada in recession into a depression?

The question is how long and how deeply related to this crisis the recession will be? Although in the short term there is Canada in recession, later in the decade is when there will be a price to be paid. That potential for depression and deep slump happens later in the decade as a result of fear and panic leading people and companies to save more and spend less.

So, what can governments do to stave off a worse depression? Dr. Roubini is very pessimistic and believes a greater depression will happen sometime later in the decade. He believes it is only a matter of when and not whether it will happen.

He describes the North American economy as a train wreck in slow-motion. It won’t happen this year but there are fundamental forces like debt and deficits leading people and businesses to insolvency. There will be an inability to fund liabilities coming from demographics that become worse. There will be deflation that is going to make more people insolvent. The need for quantitative easing will debase currencies. The need will be because of the large fiscal deficits that eventually are going to lead to inflation by the middle of the decade.

There is also digital disruption because manufacturers will have to substitute labour with the capital in equipment and technology because businesses will have to cut costs to save more and spend less. That implies more automation and more robotics; especially if we are going to try to lessen our dependence on China for goods.

We are in the process of a democracy backlash. People who are scared are becoming more populist and will try to elect authoritarian populist governments to come to power all over the world. Relations with China will probably become colder because of the coronavirus related anger towards China. It is going to get very ugly.

There will be digital rivalries including cyber warfare. It will get worse over the next few years. This is the way warfare is going to be. It will not be the conventional words the enemies of the Western Hemisphere be it China, Russia, Iran or North Korea. They cannot fight the USA using conventional weapons.

Events in the 2016 US election and the COVID-19 pandemic in 2020 shows our enemies that they can use cyber and biological war to successfully weaken the North American economy and create societal problems. They will continue to interfere with the US democratic process and use man-made disasters. Pandemics and global climate change are two things they can weaponize to try to destabilize our way of life.

This has the potential to make us wind up into a great depression. Government fiscal policy cannot do much about it. That is not the tool we need to fight these new threats.

What about internal forces pushing the US and Canada in recession into a depression?

One huge issue is the debt level; both personal debt and sovereign. We are in way over our heads. We were before this crisis. In terms of how we get out of it is there a natural path that would resolve it? It doesn’t seem clear right now because governments are having to spend trillions of dollars to keep their economies afloat during the coronavirus pandemic. What has kept things in check prior to the pandemic is that interest rates were close to zero, if not negative, like in Europe and Japan. The current economic environment is going to make it impossible for governments to change the historically low-interest rates for the foreseeable future.

I have written many times before discussing different issues relating to record high Canadian household debt levels. The debt levels are the single most internal reason why Canada in recession could become Canada in depression.

Canada in recession summary

I don’t mean to be pessimistic when talking about Canada in recession. However, today, I just don’t see any silver lining. I am sure there is one, I just can’t see it right now.

I hope you have found Canada in recession Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

 

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DO BANK OF CANADA INTEREST RATE HIKE DATES AFFECT YOUR MONETARY POLICY?

Bank of Canada interest rate hike dates: Introduction

I have recently written blogs on debt help and signs you need bankruptcy help. I have ended recent blogs with a question: “Are you worried that the future interest rate hikes will make presently affordable commitments entirely unmanageable?”. So, I thought I would write this blog on Canada interest rate hike dates and what it all might mean in 2019.

Bank of Canada interest rate hike dates

The Bank of Canada (BoC) scheduled dates for the interest rate announcements for 2019 are as follows:

  • January 9
  • March 6
  • April 24
  • May 29
  • July 10
  • September 4
  • October 30
  • December 4

Bank of Canada interest rate hike dates: 2018

In 2018, it was expected that the BoC would raise interest rates slowly towards the end of 2018 and into 2019. The BoC has actually hiked its trendsetting rate of interest, which affects borrowing expenses across the economic climate, five times since the mid-2017, up from a reduced amount of 0.5 percent. The BoC interest rate stands at 1.75%. It was raised to that level in October 2018 and has not risen since.

Bank of Canada interest rate hike dates: 2019 issues

So the BoC on March 6, 2019, decided to keep its target for the overnight rate of 1.75%. Let me explain the main reasons why.

First, there is a slowdown in the worldwide economic climate. It has actually been extra obvious and more widespread than what they were preparing for. It is much more obvious and a lot more widespread than what the BoC was projecting as recently as January 2019! The higher adverse impact on the global economic situation affected their choice.

Second, global trade stress and unpredictability are weighing heavily on self-confidence and economic activity. There is tension worldwide on the trade front between several different scenarios, including Brexit and nations. This results in weakened consumer self-confidence and the confidence of the total worldwide economy. If the China/USA trade war is settled, the world economic scene might improve a bit.

Domestically in Canada, there are reasons they required to keep the BoC rate where it was:

  1. Exports fell short of expectations.
  2. Business investment did not reach the anticipated level.
  3. Consumer spending was weak.
  4. The housing market was soft.

Consumer spending is a big part of GDP and the cost of living in Canada. As well it has a huge influence on the Canadian economy. The Canadian real estate market is a high ticket item and there are plenty of industries that are affected by and depend upon a vibrant housing market. Each of those measures was either short of expectations or soft on its performance.

Based on both these worldwide and made in Canada influences that I have pointed out, the BoC determined they were going to keep their interest rate and not hike it. As recently as October 2018 the financial press was reporting that rates will gradually be climbing throughout 2019. Increased unpredictability is now introduced on the timing of future rate increases.

What about the rest of 2019

We might now go all of 2019 without any price rise. It depends on future occasions. I believe that there are four main variables to watch:

Core inflation continues to be near 2 percent. The Canadian consumer price index reduced to 1.4 percent in January, greatly as a result of lower oil prices. The BoC expects the cost of living index to be somewhat below the 2 percent target for the majority of 2019, reflecting the influence of short-lived variables, including the drag from reduced energy prices and a bigger output gap.

We will certainly see exactly how some of these variables may transform between now and the spring. For the July and succeeding rate statement dates, we will certainly have to see what the spring real estate market looks like. As I stated above, the real estate market is a large driver of both housing spending as well as consumer spending.

What it means for you

The reality is that the BoC overnight rate holding firm is great information if you were going to be buying a house this year. Five year fixed mortgage rates have actually declined somewhat in 2019.

If you have a variable rate home mortgage or line of credit/home equity credit line, the rate hold is likewise excellent news for you.

What about you?

Is the tension, stress, anxiety, and pain of your debt negatively influencing your health and wellness?

If so, call the Ira Smith Team today. We have years as well as generations of experience aiding individuals and companies needing financial restructuring. As a licensed insolvency trustee, we are the only professionals accredited and followed by the Federal government to provide debt restructuring options.

Call the Ira Smith Team today to make certain that we can begin aiding you. We will rapidly return you right into a healthy and balanced worry-free life. We can develop a debt settlement strategy simply for you to prevent bankruptcy, where we can also make the interest clock stop ticking away at you. By doing this, all your payments go only against the principal balance owing.

You can have a no-cost appointment for us to gather the necessary information to advise you on how to fix your debt difficulties. We can end your pain so that you will begin your clean fresh start, Starting Over Starting Now.

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DEBT CONSOLIDATION: DEBT CONSOLIDATION LOAN MAY START PLAYING HARD TO GET

 

Debt consolidation

Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process

Introduction

On November 16, 2018, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) issued a press release on the state of consumer insolvencies in Canada. Hidden in the information was data which leads me to believe that debt consolidation may be tougher in 2019 and certainly in 2020.

A perfect storm is brewing

A historically low rate of interest and accessibility to credit have enabled some Canadians to stay up to date with debt and debt payments that would otherwise have gone into default. Interest rates are now rising and it is expected that the Bank of Canada will continue to raise its benchmark rate into 2019. Canadian household debt is on average at its highest level ever and is forecast to continue to rise. Rising household debt combined with rising interest rates is not a good combination.

Until now, Canadian real estate values have continued to rise, so consumers have been able to combine unsecured credit card and other debt into new mortgage or home equity line of credit debt secured by Canadian real estate. However, times have changed. Effective January 1, 2018, a new mortgage stress test came into effect. We described it in our blog “CANADA MORTGAGE STRESS TEST: WE EXPOSE THE SECRET TO TURN YOU FROM ZERO TO HERO”.

The mortgage stress test has resulted in one of its prime goals; a noticeable downturn in new mortgage loans. The second result is a slowing down of the runaway real estate markets in Vancouver and Toronto. If Canadian household debt continues to rise, interest rates keep rising making debt payments tougher and Canadians can no longer combine their unsecured debts by taking out a new loan by borrowing against their homes, debt defaults are going to rise.

That is why I say that debt consolidation loans may start playing hard to get.

The important relationships to consider

Below is a chart displayed in the CAIRP press release which I have reproduced here.debt consolidation 3

 

CAIRP came to some interesting conclusions about interest rates and consumer insolvencies, based on the trends shown in these charts. However, I believe they overlooked what I think is the central issue.

In the top chart, it shows that insolvency filings increased in the 2009-2010 years. CAIRP surmised that there was a lag between the time interest rates rose in the years 2006 through 2008 and the increased filings. This is true. However, the increase in filings mirrors the increase in unemployment in the 2009-2010 period. My personal view is that the more important finding is that the unemployment rate lagged the interest rate increase and it is the increase in the unemployment rate that produced a higher level of insolvencies.

With higher interest rates, corporations are paying more on their debt. Corporations want to show a steady increase in their profits year over year. If debt costs rise, companies have to find other costs to save. One cost that can be reduced in the short-term is labour costs. The forecast shows that as employees are terminated, the unemployment rate rises. Not everyone can find new work in the same time frame. This leads to increased consumer insolvency filings. In my view, the unemployment rate is a more important relationship to consumer insolvency filings.

Looking at 2019 and 2020

The bottom chart shows the relationship between household debt to income and the inflation rate. As you can see, the household debt to income ratio has kept a steady climb in 1996 through 2017 years. This steady climb has continued in 2018 and is forecast to rise even more in 2019 and 2020. The forecast also shows that inflation will nudge up to the 3% rate in 2020. So prices are expected to rise with inflation, and the household debt to income ratio is expected to rise also. This will put more pressure on Canadians trying to keep up with their debt payments.

The upper chart shows us that in 2019-2020, the forecast is that GDP stays flat, while interest rates continue to rise. In the same time frame, the downward trend in the unemployment rate bottoms out and begins to rise. Again, more unemployment and higher interest rates lead to problems for people trying to pay off debts. If you agree with my hypothesis that Canadians won’t be able to merge debt by borrowing more against their homes, this will lead to more financial problems and presumably an increase in consumer insolvency filings.

What you can do now

All is not doom and gloom. There are many things a person with a lot of debt can do now before things get out of control. There are many things that you can do right now to avoid a disaster down the road. My 5 steps for anyone who wants to resolve debt issues now are:

  1. Review your household budget now and cut spending on “wants” vs. “needs”. If you don’t have a household budget, develop a realistic one NOW!
  2. Rework the budget so that you spend less each month than you are currently spending. Look for ways to economize. Use that extra cash to paying down debt.
  3. Start paying more than the minimum monthly payment on your credit card and other unsecured debt. The more you can pay, the faster you can pay it off.
  4. Pay down the debt with the highest interest rate first. The less you pay in interest the better. That means more is going to pay down the principal debt.
  5. Perhaps you need to consider taking on a part-time extra gig to bring in more income.ira smith trustee

What if I can’t pay off my debts?

For Canadians that discover themselves not able to handle their debt on their own, there is a range of alternatives to take into consideration:

Identifying which choice is most appropriate depends upon a person’s scenarios as well as their unique asset and liability structure.

Debt consolidation: How we can help you

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to recognize all of your alternatives. The alternative you pick based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

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ANNUAL COST OF LIVING: WHY EVERYTHING RISES BUT YOUR SALARY

annual cost of living 0
annual cost of living

Annual cost of living: Introduction

We all read the headlines. The annual cost of living is rising, interest rates are rising, house prices are rising, food prices are rising, everything is rising; everything except for our paycheques. How can Canadians expect to keep up with their financial obligations when their paycheques are the only things that seem to be frozen in time?

Annual cost of living: The Canadian consumer price index

According to Statistics Canada, the consumer price index is:

“…an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.”

Statistics Canada measures the consumer price index against the year 2002. So as the base year, the 2002 consumer price index is the 100% level. The consumer price index has risen steadily every year since then. The annual average Canadian consumer price index for 2017 was 130.4%. The January 2018 Canadian consumer price index was up 1.7% as compared to January 2017. So, as you can see, up is the only direction our expenses go.

Annual cost of living: Frozen salaries breed discontent

This situation has created a great deal of dissatisfaction among employees. According to a poll conducted by Indeed (a major world-wide job hunting site):

  • 83% of Canadians are dissatisfied with the pay they’re receiving
  • More than 50% of employed Canadians are definitely going to ask for a raise this year
  • “There’s no money in the budget” is the top reason for why requests for a raise are rejected, accounting for 63% of rejections (women hear this excuse far more often than men — 77% of the time, compared to 54% for men
  • The average employee plans to ask for a raise of nearly $12,000, though 23% said they wanted a raise of $16,000 or more (Indeed cautions that when asking for a raise to do your research into the current pay scales for your job)

Annual cost of living: Unemployment is down and salaries are stagnant

Even though Canada has added 423,000 jobs over the past year and the unemployment rate has fallen to 5.7% (the lowest since 1976), salaries haven’t kept up. It seems that employers have gotten away with it by hiring temporary and/or contract workers. So, while your cost of living increases, your salary doesn’t.

Annual cost of living: What happens when the rising costs force you to go deeper into debt?

We wish you luck in getting your pay raise! But, if you’re one of the many Canadians who can’t keep up with your bills now and are feeling that pain, the Ira Smith Team can help.

Debt won’t eliminate itself. You need a professional trustee who understands your pain and can explain all of your options and come up with a solid financial plan for moving forward Starting Over, Starting Now. Give us a call today and book an appointment for a free, no obligation consultation. You’ll be happy you did!

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INTEREST RATES IN CANADA: ARE YOU WORRIED THAT HIGHER INTEREST RATES WILL CAUSE YOU UNDUE FINANCIAL HARDSHIP POSSIBLY CAUSING BANKRUPTCY

bank interest rates canada

Interest rates: Introduction

Canadians have been on a borrowing binge due in large part to very low rates. But, the tide is beginning to change and interest rates, although still low, are beginning to creep up. This rise in rates is making many Canadians very nervous. For some, it could cause serious financial hardship.

Interest rates: The threat of rising interest rates

Forum Research Inc. conducted a survey after the Bank of Canada raised rates in September and the results are quite interesting:

  • 60% of young people are at least somewhat concerned by the prospect of rising rates
  • Over 50% of Canadians think that rising rates will negatively impact their personal finances
  • 35% of Millennials aged 18 to 34 have no savings at all
  • Only 26% have an emergency fund
  • 12% expressed concern that more rate hikes were on the way and that the impact would be extremely negative

Interest rates: “It was almost like money was free”

In theory, higher interest rates should provide an incentive for Canadians to save more, but the long period with low rates have taken their toll on many. “Rates were so low for so long, it was almost like money was free,” said Forum Research president Lorne Bozinoff in an interview. “Some may have overextended themselves during that time, thinking rates will never go up.”

Interest rates: How will you cope with higher interest rates?

The question now is how will Canadians cope with higher rates? “Some households might not be able to afford an increase,” says Frances Donald, senior economist with Manulife Asset Management. “And this is where we can see defaults, first on auto loans and then on housing.”

Interest rates: Are you worried about defaulting?

Are you worried about defaulting on your loans or mortgage? Are higher rates causing you financial hardship? There’s no time to waste. Contact Ira Smith Trustee & Receiver Inc. today.

We approach every file with the attitude that your financial problems can be solved given immediate action and the right plan. Together we will explore with you all the bankruptcy alternatives available to you. I know that we can help you get back on solid financial footing, the same way we have helped many others just like you, Starting Over, Starting Now.3bestaward

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How Much Interest Am I Paying Every Month? Read The Bizarre Truth Here!

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How Much Interest Am I Paying Every Month?: Introduction

From my experience, how much interest am I paying every month is a question that nobody asks themselves. We’ve become a society based on credit. We have multiple credit cards, lines of credit, mortgages, car loans, student loans…

If I asked you how much interest you were paying each month I’d be willing to bet that not a single person could give me a correct answer. A monthly statement arrives either in the mail or electronically or an automatic payment comes out of your bank account or billed to your credit card. If you’re like most people the two things you see on a statement are the amount owing and the due date.

How Much Interest Am I Paying Every Month?: Start With Credit Cards

I think you’d be totally shocked at the amount of interest you’re paying each month, especially on high interest debt like credit cards. According to Capital Direct if you carry a balance of $8,000 on your credit card:

  • Your statement will show a minimum payment of $240. That may not seem like a big deal but did you know that if you pay the monthly minimum each month at an interest rate of 18.9%, it will take you 4 years to pay off the debt?
  • During this period you will pay $3,461 in interest charges.
  • The $8,000 debt will end up costing you $11,461.

How Much Interest Am I Paying Every Month?: How You Can Find Out

If you look at your credit card statement there will be a section that looks like this:

Document1 001

This is the area of your credit card statement that everyone ignores. By focusing on this area, it will allow you to calculate the amount and answer the question “how much interest do I pay every month”

How Much Interest Am I Paying Every Month?: The Bizarre Truth

According to TransUnion:

  • Credit card delinquency rates jumped 14% year-over-year from 1.81% in the first quarter of 2015 to 2.06% in the first quarter of 2016.
  • Subprime borrowing is up. Subprime borrowers pay a higher interest rate because they have a poor credit history.
  • The average monthly balance for subprime credit card borrowers rose 5.7% to $6,601 in the first quarter.

How Much Interest Am I Paying Every Month?: What to do if you have too much high interest debt

Don’t get trapped in the cycle of high interest debt. The Ira Smith Team is here to help. With immediate action and a solid financial plan you can get escape the high interest debt cycle Starting Over, Starting Now. Give us a call today. You’ll be happy you did.

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THE MODERN RULES OF SENIORS CARRYING DEBT

seniors, seniors carrying debt, seniors in debt, debt, auto loans, bank loans, lines of credit, credit card debt, interest rates, Ira Smith Trustee & Receiver Inc., retirees, starting over starting now, stress of carrying debtSeniors carrying debt becomes the norm

Many Canadian seniors are struggling financially in what should have been a carefree retirement. We’ve done a series of blogs about seniors in debt:

Seniors carrying debt is not going away

However, this problem is not going away. In fact, seniors have now become so accustomed to living with debt that they are using it to finance their lifestyles instead of downsizing or cutting back on expenses. For the time being, seniors are not feeling the stress of carrying debt. Given that retirees and working seniors carrying debt are less likely to be taking steps to accelerate their debt repayment, the problem may very well get worse.

Seniors carrying debt not bothered by it

According to a survey conducted by Equifax for HomEquity Bank:

  • A number of Canadians over 75 are still dealing with a mortgage and their numbers are rising
  • 11.3 million Canadians 55 or older have some sort of debt. Of that figure, about 1.87 million are carrying a mortgage which is up 20% in two years
  • Outstanding mortgage balances are up for every segment of seniors, which for the purposes of the survey was anyone over the age of 55
  • In the 75-and-over category, the average senior with a mortgage had $133,944 outstanding, up 11% from two years ago
  • The number of seniors carrying debt is also increasing in other credit categories, such as auto loans, bank loans, lines of credit and credit card debt

Yvonne Ziomecki, senior vice-president of marketing and sales of HomEquity Bank states, “A lot of people I talk to, they just don’t really care. This is how they manage their finances and they are perfectly comfortable with it”.

Seniors carrying debt need to take action now

This can be a recipe for disaster if interest rates rise. Where is the extra income going to come from? If you’re one of the seniors carrying debt, or anyone else who is relying on credit to support their lifestyle, give the Ira Smith Trustee & Receiver Inc. Team a call before interest rates rise and while you still have options. With immediate action and the right plan we can solve your financial problems and set you on a path to debt free and stress free living Starting Over, Starting Now.

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CREDIT CARD DEBT: 9 REASONS HOUSEHOLDS ARE BEING CRUSHED BY CREDIT CARD DEBT

average credit card debt, credit card debt, credit card debt consolidation loan, credit card debt help, credit card reward points, credit card debt settlement, credit card debt solutions, credit card, credit cards, debt settlement company, Visa, MasterCard, American Express, TransUnion, interest rates, budget, how to pay off credit card debt, paying off credit card debt, trustee, nerdwallet.com, starting over starting now, Ira Smith Trustee & Receiver Inc., how to get out of credit card debtCredit card debt because of reward points?

The quest for credit card reward points has caused many Canadians to overspend and get deeper into debt. We’re being lured by the promise of free trips, free merchandise, services and cash back. As a result we’re overusing credit and we’re left with monthly balances that are accruing high interest charges.

The 9 reasons people are being crushed by credit card debt

According to Canada.CreditCards.com:

  1. 52% of Canadian households had credit card debt not being repaid in full by the due date in 2014
  2. Credit card debt as of November 30, 2014: $75 billion
  3. Average credit card debt as of Nov. 30, 2014: $2,627 for each Canadian age 18 or over
  4. Average number of credit cards per Canadian adult: 2.9 in 2013 (including Visa, MasterCard and American Express)
  5. Canadian adult credit card holders carrying cards with rewards: 77% in 2013
  6. The average Canadian household has members belonging to a total of 8.2 loyalty programs

The US statistics are even more eye popping

According to nerdwallet.com:

  1. The average US household credit card debt stands at $15,706, counting only those households carrying debt
  2. Based on an analysis of Federal Reserve statistics and other government data, the average credit card debt per household is $7,327 on their cards
  3. Looking only at indebted households, the average outstanding balance rises to $15,706

What are your reward points really costing you?

Many Canadians don’t understand the true value of reward points. Typically reward points are worth 2% or less. However, annual interest rates are typically in the range of 20%. The reality is that if you’re paying interest on an unpaid balance then you’re really going into debt and not benefitting anything from your reward points. They’re costing you way too much for no return.

Start learning now how to pay off your credit card

TransUnion Canada says for every $1,000 charged in a given month, only about $600 will be paid off by the due date to avoid interest charges. Instead of focusing on reward points, make every attempt to pay off your credit card balance. If you are one of the many not paying off your balance in full each month, stop paying 20% in interest charges by:

  • Making a budget and sticking to it
  • Include some amount in your budget for paying off credit card balances
  • Use cash, not a credit card, to pay for necessities
  • Pay for everyday items with cash

When looking for credit card debt help, people normally first think of either a debt consolidation loan or a debt settlement company. Although these are two of the several credit card debt solutions for settling credit card debt, we caution:

How to get out of debt? Take action right now!

Don’t add more debt to your existing debt and don’t ignore your debt! Contact a trustee for professional help. The Ira Smith Trustee & Receiver Inc. Team will evaluate your situation and come up with a solid financial plan to put you back on the right track. We will review your options with you on how to reduce credit card debt and eliminate it, hopefully using one of the bankruptcy alternatives. Call us today and take the first step towards living a debt free life Starting Over, Starting Now.

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CANADIAN HOUSEHOLD DEBT: WE SEEM TO LOVE IT!

household debt, Canadian household debt, how to pay off debt, debt, mortgage debt, interest rates, financial danger zone, credit card, credit card spending, Moneris Solutions, Equifax, auto loans, seniors, trustee, lifestyle, Canadian debt, Canadian economyCanadian household debt at a record high

The ratio of Canadian household debt to disposable income has hit a record high of 164.6%. This means for every $1 of after tax income Canadians earned, they owed nearly $1.65 in credit market debt – mortgages, credit cards and other kinds of consumer loans. The reality is that many Canadians are living in a financial danger zone. They’re walking a financial tightrope where anything like the loss of a job or an increase in interest rates can throw off this delicate balance and plunge them into financial disaster.

Increase is no surprise

TD Bank economist Jonathan Bendiner wrote about Canadian household debt, “The increase came as no surprise. Rising mortgage debt drove most of the growth as interest rate cuts by the Bank of Canada earlier in the year spurred borrowing, especially in the hot housing markets in British Columbia with all the homes for sale in Mission BC and Ontario”. The great concern now is what happens once interest rates rise to more typical levels. How many Canadian will no longer be able to pay their bills or carry their household debt?

5 reasons why for the increase in Canadian household debt

Why is Canadian household debt at an all time high? In addition to rising mortgage debt it may come down to one simple word – lifestyle:

  • Credit card spending rose by 8% this year (Moneris Solutions Corp.)
  • Spending on restaurants and fast food rose by more than 12% (Moneris Solutions Corp.)
  • Home improvement spending soared nearly 10% in the second quarter of the year compared with the same time last year, led by sales of glass, paint, wallpaper and flooring (Moneris Solutions Corp.)
  • Furniture sales are up more than 17% (Moneris Solutions Corp.)
  • Auto loans rose nearly 4% in the second quarter on the back of record vehicle sales (Equifax)

Has income kept pace with Canadian household debt? No!

Unfortunately incomes haven’t increased in the Canadian economy to compensate for the increase in spending and Canadian household debt. A Bank of Montreal report states that approximately 80% of Canadians are in debt and nearly 66% would have trouble affording their household debt if interest rates went up by just two percentage points. Canadians now spend an average 14% of after tax income on their debts. Sadly, the group that’s struggling the most is seniors. According to Equifax, for the first time in five years, 90-day delinquency rates rose among seniors in the second quarter.

What is a person to do?

Are you walking a financial tightrope? If interest rates rise will you be able to afford your household debt? Better yet, would you know how to pay off debt?

Don’t wait for disaster to strike! The time for professional help is NOW. Contact Ira Smith Trustee & Receiver Inc. We’re experts in debt and debt management. We approach every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now we can give you financial peace of mind.

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PAYDAY LOANS TORONTO NO CREDIT CHECK

payday loans toronto no credit check, bankruptcy, debt, financial institution, financial institutions, financial plan, interest rate, interest rates, living paycheque to paycheque, payday loan, payday loan companies, payday loans, starting over starting now, the cash store, trusteeHere is a very funny bit from “Last Week Tonight with John Oliver” on HBO regarding the predatory lending practices of payday loan companies. It is very sad, but true. It is well worth watching this video because among the humour, are some very good lessons as to why not to get involved with payday loan companies and their related very high cost of lending.

Although it applies to the US payday loan industry, it is equally applicable to Payday Loans Toronto No Credit Check also. We also have written other blogs on the dangers of the Payday Loan Industry, including:

And now, click on the video to listen to this very funny bit by John Oliver.

Instead of perpetuating the cycle of debt, we encourage you to see a professional trustee. Contact Ira Smith Trustee & Receiver Inc. for a no fee, no obligation appointment. We’re a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. It’s time to end the cycle of debt. Say NO to payday loan companies. Say YES to a solid financial plan for moving forward to a debt free life.

Call a Trustee Now!