Tag: Statistics Canada

Categories
Brandon Blog Post

CONSUMER DEBT: OUR COMPREHENSIVE GUIDE HELPING YOU NAVIGATE THE EMOTIONAL WATERS

Consumer debt: Introduction

Every day, I encounter people—both consumers and entrepreneurs—who are wrestling with the ever-looming shadow of financial anxiety. You know the type: those who can’t remember the last time they had a peaceful night’s sleep, thanks to the chorus of bills and debts serenading them from their nightstands.

This personal rollercoaster got me curious about the tangled web between debt and our mental sanity. Debt is not just a financial issue; it’s intertwined with our mental health. Understanding this connection and seeking support can significantly improve our overall well-being.

Over the past two and a half years, I’ve penned several cheeky blogs on this very subject, including:

HEAL YOUR FINANCIAL HEALTH, HEAL YOUR MIND: A COMPREHENSIVE GUIDE TO FINANCIAL RECOVERY AND MENTAL WELL-BEING

UNDERSTANDING AND OVERCOMING FINANCIAL STRESS: A COMPREHENSIVE GUIDE TO GET FROM WORRIED TO WELL-PREPARED

THE HIDDEN EFFECTS OF FINANCIAL STRESS: WHAT YOU NEED TO KNOW

WHAT PERCENTAGE OF ILLNESSES ARE DIRECTLY OR INDIRECTLY CAUSED BY FINANCIAL STRESS? FINANCIAL STRESS IS THE MOST COMMON OF ALL TRIGGERS

My interest in this topic led me to look into a recent study that revealed some concerning statistics about financial stress. What I found was both enlightening and relatable for many individuals we have assisted.

In this edition of Brandon’s Blog, you can explore our detailed guide on navigating the emotional challenges of consumer debt. We cover the current state of consumer debt in Canada, highlighting troubling statistics and the psychological impacts like anxiety and depression that often come with it. We’ll help you recognize the signs of stress related to debt and provide practical tips such as financial self-care, budgeting strategies, and effective repayment methods.

Remember, you don’t have to face this journey alone—seek professional help if needed. If you’re feeling overwhelmed by debt, we encourage you to contact us for a free consultation at Ira Smith Trustee & Receiver Inc. Visit our website for more resources.

What is Consumer Debt?

As a Canadian licensed insolvency trustee, I’ve seen firsthand the impact that consumer debt can have on individuals and families. But what exactly is consumer debt, and how does it affect Canadians?

Definition of Consumer Debt

Consumer debt refers to the money borrowed by individuals to finance everyday expenses, purchases, and activities. This type of debt is typically unsecured, meaning it’s not backed by collateral such as a home or car. Common examples of consumer debt credit products include:

  • Credit card debt
  • Personal loans
  • Lines of credit
  • Student loans
  • Payday loans
  • Mortgages

Types of Consumer Debt

There are several types of consumer debt that Canadians may encounter. Some of the most common include:

  • Revolving debt: This type of debt, such as credit card debt, allows borrowers to continue making purchases and accumulating debt as long as they make minimum payments.
  • Installment debt: This type of debt, such as personal loans, auto loans or mortgages, requires borrowers to make fixed payments over a set period.
  • Open-ended debt: This type of debt, such as lines of credit or credit cards, allows borrowers to borrow and repay funds as needed.

The Consequences of Consumer Debt

Consumer debt can have serious consequences for individuals and families. Some of the most common include:

  • High interest rates: Consumer debt often comes with high interest rates, which can make it difficult for borrowers to pay off their debt.
  • Overwhelming financial stress: The pressure to make payments on time can lead to financial stress, anxiety, and depression.
  • Damage to credit scores: Missed payments and high debt levels can negatively impact credit scores, making it harder to secure loans or credit in the future.
  • Legal action: In severe cases, consumer debt can lead to legal action, such as wage garnishment or property seizure.

Seeking Help for Consumer Debt

If you’re struggling with consumer debt, it’s essential to seek help as soon as possible. As a licensed insolvency trustee, I can help you develop a personalized plan to manage your debt and achieve financial freedom. Whether you’re considering bankruptcy, a consumer proposal, or debt consolidation, I’m here to guide you every step of the way.A woman sitting in a small boat in very choppy waters to represent the emotional stress of too much debt.

Current Trends in Consumer Debt in Canada

I’ve seen a significant shift in the consumer debt landscape over the past few years. Rising costs of living, economic pressures, and increased delinquencies are all contributing to a perfect storm of debt for many Canadians. In this section, we’ll explore the current trends in consumer debt in Canada and what they mean for individuals and families.

Rising Cost of Living

The cost of living in Canada has been increasing steadily over the past decade, with no signs of slowing down. From housing costs to food prices, transportation, and healthcare, the expenses are adding up. According to Statistics Canada:

  • From 2015 to 2019, inflation remained relatively stable, averaging around 1.5-2% annually.
  • In 2020, inflation dropped to 0.72% due to the economic impact of the COVID-19 pandemic.
  • Inflation then rose sharply, reaching 3.4% in 2021 and peaking at 6.8% in 2022.
  • As of September 2024, the annual inflation rate has moderated to 1.6%, the lowest since February 2021.

This means that many Canadians are struggling to make ends meet, leading to increased debt and financial stress.

Economic Pressures on Consumers

The economic landscape in Canada is also having a significant impact on consumer debt. The COVID-19 pandemic has led to widespread job losses, reduced hours, and reduced income for many Canadians. This has resulted in increased financial stress, as individuals and families struggle to make ends meet. According to a recent study, 50% of Canadians are living paycheque to paycheque, with 22% saying they would struggle to cover a $500 emergency expense.

Increased Delinquencies

The combination of rising costs of living and economic pressures has led to a significant increase in delinquencies across Canada. According to Equifax, the number of Canadians with delinquent debt has risen by over 10% in the past year alone. This is particularly concerning, as delinquencies can have serious consequences for individuals and families, including damage to credit scores, legal action, and even bankruptcy.

Demographic Trends

Certain demographics are particularly vulnerable to the rising tide of consumer debt. For example:

  • Young adults (18-34) are more likely to be struggling with debt, with 62% of this age group reporting debt stress.
  • Low-income households are more likely to be living paycheque to paycheque, with 55% of Canadian households earning less than $40,000 per year reporting financial stress.
  • Single parents are more likely to be struggling with debt, with 71% of single parents reporting debt stress.

What Can Be Done?

So, what can be done to address the rising tide of consumer debt in Canada? As a licensed insolvency trustee, I believe that education and awareness are key. By understanding the root causes of debt and the consequences of not addressing it, individuals and families can take proactive steps to manage their debt and achieve financial freedom.

Additionally, policymakers and financial institutions can play a critical role in addressing consumer debt. This includes implementing policies to reduce the cost of living, providing support for low-income households, and offering debt counselling and education programs.

Factors Contributing to High Consumer Debt

It’s a feeling known all too well—those sleepless nights consumed by anxiety about debt. The clock ticks away, and all you can think about are the bills piling up. Does that sound familiar? You are not alone in this struggle. A staggering 91% of individuals express moderate to extreme stress related to their debt.

The Age Factor

Interestingly, most of those affected fall within the age group of 35-64 years. These years are crucial for many of us, balancing work responsibilities with family needs. It’s no surprise that the pressures of life can weigh heavily on our minds.

  • Over 600 individuals participated in a recent survey.
  • The predominant professions impacted relate to healthcare and social assistance.
  • Transactional responsibilities stack up as professionals strive to care for others.

Among these professions, it’s heartbreaking to see dedicated healthcare workers experiencing financial difficulties. After all, shouldn’t those who care for us be less burdened by financial woes?

Debt and Emotional Distress

“Debt can feel like a weight that never lifts, affecting every aspect of life.”

This quote resonates deeply with many. The connection between financial strain and emotional well-being is alarmingly clear. For many, the overwhelming financial burden can lead to feelings of isolation or stress. It’s no wonder that 68% of those surveyed reported carrying significant debt—over $20,000 in many cases.

Understanding the Reasons

What drives this financial struggle? A variety of factors come into play. The survey identified:

  • Job loss or income reduction—cited by 44%.
  • Living beyond means, acknowledged by 42%.
  • High housing market costs affect 26%.

These struggles don’t just put a dent in finances. They seep into every facet of our lives, impacting sleep, health, and relationships.

Visualizing the Stress

When we look at the data surrounding stress and debt, the picture becomes clearer. Here’s a simple chart to illustrate the emotional impact:

Group

Percentage

Experience Moderate to Extreme Stress from Debt

91%

Majority in Healthcare and Social Assistance

Majority

These figures highlight a significant concern in our society—especially as the very individuals responsible for caring for others face mounting financial pressures. We must acknowledge these disparities in both personal and professional settings.A woman sitting in a small boat in very choppy waters to represent the emotional stress of too much debt.

The Root Causes of Consumer Debt: More Than Just Overspending

When we think about debt, many of us might immediately imagine reckless spending. But what if I told you that overspending is just the tip of the iceberg? Recent research sheds light on some surprising facts that might change how we view personal debt.

Primary Causes of Debt

According to this recent study, the leading causes of debt aren’t always what you would expect. Here are some key findings:

  • Job loss/reduction in income: Cited by a staggering 44% of respondents as the primary cause of their debt. This shows just how fragile our financial situations can be.
  • Living beyond means: An astonishing 42% admitted to overspending, which often leads to debt spirals. It’s scary how quickly small costs can add up.
  • Housing costs: 26% pointed to high housing costs as a significant challenge. Rent and mortgages can consume a large portion of our income.

Putting it all together, it’s clear that a combination of these factors plays a significant role in creating financial struggles. This indicates that debt isn’t just a personal failing. It’s often influenced by systemic issues around us.

The Overlooked Emotional Burden

Have you ever felt isolated because of your financial situation? You’re not alone. The same study found that 30% of respondents mentioned feeling alone due to their debt struggles. That’s a significant emotional toll!

“Financial strain isn’t just about bad choices; it often stems from inevitable life circumstances.”

Doesn’t this resonate? It emphasizes how we often forget the multifaceted nature of debt. Many factors, including economic instability and job insecurity, weigh heavily on our mental health.

Tackling the Stigma

It’s easy to blame individuals for their financial woes. However, understanding these root causes can shift our perspective. People often face circumstances beyond their control. The stigma attached to overspending can make it hard for people to reach out for help.

Addressing these issues isn’t merely about personal choices; it’s about recognizing the broader economic forces at play. I’m hopeful that by discussing these topics, we can foster greater understanding and support for those affected by debt.

As we navigate through our finances, let’s remember: that counsellingpersonal choices matter, but circumstances often shape our decisions. We must be compassionate towards others and ourselves in this complex financial landscape.

Coping Mechanisms and Strategies for Managing Consumer Debt: Finding Your Way Through the Fog

We all know that money can be a source of stress. Have you ever laid awake at night, weighing bills against your dwindling bank account? Most people have at one stage or another. The anxiety about financial matters can easily cloud our minds, affecting sleep, work, and even relationships. In exploring these feelings, it’s clear that many of us are not alone. Over 91% of people report experiencing stress due to debt, according to a recent survey.

Finding Balance: Financial and Emotional Health

The intricate relationship between financial strain and emotional well-being is powerful. For instance, I found out that 55% of people have taken a proactive approach by creating strict budgets to handle their expenses. Budgeting is like being a captain of your ship—you’re charting a course through stormy seas. It keeps you grounded and helps you reach safer shores.

Many individuals also turned to professionals for help. Approximately 48% consulted licensed insolvency trustees to navigate the complex waters of debt management. Seeking help is not a sign of weakness; it’s a courageous step toward recovery.

“Taking control of finances starts with understanding where you stand.”

Understanding the Data

We need to take a moment to understand the numbers behind our struggles:

Financial Strategy

Percentage

Implemented strict budgeting

55%

Struggled with insomnia due to debt

52%

This table reveals more than just numbers—it highlights the sheer impact of financial stress. Most notably, 52% of individuals reported struggling with insomnia related to their debt. This overlap is a wake-up call for each of us.

Coping Strategies: Proactive vs. Reactive

As I reflect on these figures, it becomes clear that coping strategies vary. Some people adopt a proactive approach, like budgeting. Others might respond reactively to ongoing stress, often leading to potential burnout.

  • Proactive Strategies:
    • Implementing strict budgets
    • Prioritizing Debt Repayments
    • Exploring Debt Consolidation Options
    • Seeking help from professionals such as a credit counsellor or licensed insolvency trustee.
  • Reactive Strategies:
    • Resorting to isolation.
    • Neglecting mental health.

We tend to overlook mental health awareness in financially stressed populations. Yet, the discussion surrounding this topic is essential. Reportedly, 97% of those surveyed had no knowledge of support services for financial stress. Imagine the difference that education could make!

We’re not just facing challenges; we’re fighting to reclaim our peace of mind. By discussing our financial journeys, we can illuminate the path for others who feel lost in the fog. Is there a strategy you’ve implemented that has worked for you?A woman sitting in a small boat in very choppy waters to represent the emotional stress of too much debt.

The Dark Side of Debt: Unhealthy Coping Strategies

Debt can feel like a shadow, lurking in every corner of our lives. Have you ever laid awake at night, your mind racing with worries about bills? You’re not alone. A staggering 52% of people suffering from debt report struggling with sleep. It’s alarming how this financial stress impacts our physical and mental health.

Understanding the Impact

When we think about debt, we often consider the financial aspects first. However, the reality is much broader. Money troubles seep into our lifestyle and health. Here are some facts that might resonate:

  • 30% of individuals turn to isolation, avoiding friends and outings due to financial worries.
  • 44% experience changes in their eating patterns, often leading to unhealthy choices.
  • Shockingly, a vast 97% of people are unaware of the mental health support services available to help them cope with financial stress.

As I dive deeper into these statistics, I can’t help but feel how insidious debt can be. In fact, it seems to breach not only finances but also our emotional well-being.

“Debt has a way of creeping into every aspect of life, including your health and happiness.”

Breaking Down the Stress

So, what exactly leads to such disheartening statistics? Many might think the main culprit is overspending, but job loss or a reduction in income accounts for 44% of debt-related issues. As I reflect on this, it makes sense—those of us facing uncertain economic times often find ourselves in financial traps.

The Human Cost of Coping

The coping strategies people adopt can sometimes be harmful. Here’s a deeper look:

  • While budgeting (made popular by about 55%) offers a solution, it represents just one way to cope.
  • Isolation and unhealthy food choices create more significant issues than they address.

As we recognize these patterns, it’s clear that the hidden costs of dealing with debt are immense. The emotional toll taken by financial stress can be debilitating.

Addressing the Stigma

We must discuss these struggles. The stigma around mental health, especially when intertwined with finances, can prevent us from reaching out. Imagine facing an uphill battle while feeling you can’t talk to anyone. We must normalize these discussions.

Awareness is key. Understanding that help exists outside of our immediate surroundings can change the narrative for many. This isn’t merely about managing debt—it’s about reclaiming our mental well-being.

In sum, life with debt can feel like a never-ending cycle of stress. Recognizing the unhealthy coping mechanisms I’ve shared is the first step in breaking that cycle. Here’s hoping we all find healthier paths amidst financial challenges.

A Path to Recovery: Transformation Through Seeking Help

Life can be a winding road. Along that road, many of us face unexpected hurdles. One significant challenge is debt. It’s not just about numbers, but how it affects us mentally and emotionally. Well, did you know that there are real success stories out there? After the insolvency process, such as bankruptcy or consumer proposal, many individuals have emerged stronger. An astounding 63% reported noticeable improvements in their mental health.

Success Stories: The Road to Recovery

Some people refer to an insolvency filing as a way out. It’s become a pathway to freedom for many. Imagine waking up one day to find that your debt is reduced to below $10,000 through a consumer proposal. This transformation not only results in financial stability but also enhances overall well-being. Isn’t it encouraging to hear such success stories? These individuals dared to seek help, and their courage paid off.

The Hidden Burden of Financial Distress

However, we must discuss systemic issues that contribute to financial distress. The numbers tell a story. The leading reasons for falling into debt often stem from job loss or reduced income. It’s not that people are reckless; it’s the circumstances that lead them to this point. And when financial strain hits, the emotional toll can be overwhelming.

Help-Seeking: A Sign of Strength

We often hear about the stigma surrounding asking for help.

“Asking for help is not a sign of failure; it’s a testament to your courage to change.”

In today’s world, reaching out is essential. Seeking assistance from licensed insolvency trustees can guide individuals through complex financial waters. So, let’s talk about how powerful it is to recognize the need for support.

The Longer View: Mental Health Benefits

The journey toward financial recovery often brings hidden benefits. Addressing these financial issues can lead to long-lasting mental health improvements. With 63% reporting better mental health after their debt challenges were met head-on, it’s clear that a brighter future exists beyond the struggles.

In summary, the relationship between debt and mental well-being is intricate. More than just financial burdens, they shape our everyday lives. There’s hope in the stories of recovery. Individuals can overcome their situations while we emphasize that seeking help can be one of the strongest things you can do. The road to recovery may be challenging, but it’s a road worth taking.

Visual Representation of Impact

Outcome

Percentage

Reduced Debt Below $10,000

Varies by individual stories

Mental Health Transformation

63% successfully improved

 

A woman sitting in a small boat in very choppy waters to represent the emotional stress of too much debt.Consumer Debt and Mental Health: FAQs

1. What is consumer debt and what are its most common types?

Consumer debt refers to money borrowed by individuals to cover everyday expenses and purchases. It is generally unsecured, meaning it’s not backed by collateral like a house or a car. Common types include:

  • Revolving debt: This allows ongoing borrowing and repayment, such as credit cards and lines of credit.
  • Instalment debt: Involves fixed payments over a predetermined period, such as personal loans, auto loans, and mortgages.
  • Open-ended debt: Offers flexibility in borrowing and repayment amounts, like lines of credit and credit cards.

2. What are the major contributing factors to high consumer debt in Canada?

Several factors contribute to rising consumer debt:

  • Rising cost of living: Increasing expenses on essentials like housing, food, and healthcare make it difficult to manage finances.
  • Economic pressures: Job losses, reduced income, and economic uncertainty during events like the COVID-19 pandemic add to financial strain.
  • Overspending and living beyond means: This can quickly lead to debt accumulation, especially with easy access to credit.

3. How does consumer debt impact mental well-being?

Debt can have a significant impact on mental health:

  • Stress and anxiety: Constant worry about bills and repayments can lead to overwhelming stress, anxiety, and sleep disturbances.
  • Depression and isolation: Financial struggles can trigger feelings of hopelessness, depression, and social isolation.
  • Unhealthy coping mechanisms: Some individuals might resort to unhealthy coping mechanisms like overeating, substance abuse, or social withdrawal.

4. What are some common signs of debt-related stress?

Be mindful of these signs:

  • Difficulty sleeping or insomnia due to financial worries.
  • Increased anxiety and irritability, often stemming from financial pressure.
  • Changes in appetite or eating habits, either overeating or undereating due to stress.
  • Social withdrawal and isolation, avoiding social events due to financial constraints.

5. What are some proactive strategies for managing consumer debt?

Take control of your finances with these steps:

  • Create a strict budget: Track your income and expenses to identify areas where you can cut back and save.
  • Prioritize debt repayments: Focus on paying off high-interest debts first to reduce the overall cost of borrowing.
  • Explore debt consolidation options: Combine multiple debts into a single loan with a lower interest rate to simplify repayment.
  • Seek professional help: Consult a licensed insolvency trustee or credit counsellor for personalized advice and debt management strategies.

6. Why is seeking help for consumer debt important?

Seeking help is crucial because:

  • Professional guidance: Licensed insolvency trustees can provide expert advice on debt management options like bankruptcy, consumer proposals, and debt consolidation.
  • Stress reduction: Addressing debt with professional help can significantly reduce financial stress and improve overall well-being.
  • Tailored solutions: Professionals can create personalized plans that suit your individual circumstances and financial goals.

7. What are some potential benefits of seeking help and recovering from debt?

Recovery brings many positives:

  • Financial stability: Successfully managing debt leads to improved financial stability and a sense of control over your finances.
  • Improved mental health: Reducing financial stress can lead to significant improvements in mental health, including reduced anxiety and depression.
  • Increased confidence and well-being: Overcoming debt challenges often results in increased self-esteem and a more positive outlook on life.

8. Where can I find resources and support for dealing with consumer debt?

Reach out to:

  • Licensed insolvency trustees: They can provide personalized advice and guidance on debt management strategies.
  • Credit counselling agencies: They offer free or low-cost counselling services to help you manage your debt and improve your financial literacy.
  • Government resources: Many government websites and agencies offer resources and information on financial assistance programs and debt management options.

Consumer Debt: Conclusion

Remember: You’re not alone on this journey. Change is possible, and support is available. If financial distress is weighing you down, don’t hesitate to seek help. You deserve a brighter tomorrow.

I hope you enjoyed this consumer debt Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring due to distressed real estate or other reasons? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding the bankruptcy process. We can get you debt relief freedom using processes that are a bankruptcy alternative.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.A woman sitting in a small boat in very choppy waters to represent the emotional stress of too much debt.

Categories
Brandon Blog Post

CANADIAN CREDIT CARD DEBT: A COMPREHENSIVE GUIDE TO UNDERSTANDING AND TO GET OUT OF THE MENACING PROBLEM

canadian credit card debt
canadian credit card debt

Canadian credit card debt: Introduction

Due to the holiday buying season, December has traditionally been connected with a surge in Canadian credit card debt. Nonetheless, with the start of the COVID-19 pandemic in 2020 and the surge in case numbers, celebrations, travelling, and in-store holiday shopping pretty well stopped, resulting in an extraordinary reduction in Canadian credit card debt.

Fast forward 2 years to December 2022, and Canadian consumers have returned to their traditional pre-pandemic period of extravagance in holiday purchasing. With the pandemic’s hold loosening, Canadians have eagerly ushered in the holiday spirit, leading to a rebirth of the fad of maxing out credit cards. As a result of that, and other factors I will discuss below, Canadian credit card debt is once again growing.

The escalating issue of credit card debt in Canada is gradually becoming a matter of concern for individuals and the nation’s economy in general. In this Brandon’s Blog, I will delve deeper into the Canadian credit card debt predicament, the reasons behind its growth, and plausible solutions to tackle it.

Canadian credit card debt: What is it and why could it be a problem?

The outstanding balance of credit cards of Canadians at any specific point in time is what is described as Canadian credit card debt. It is built up when people utilize their credit card to make purchases, and afterwards, carry a credit card balance from one month to the next, rather than paying off the balance in full when due.

As this financial debt begins to grow, it can trigger a lot of stress and anxiety and make it hard to stay up to date with monthly expenses. Credit cards are well-known for having high-interest rates, which means that the longer a balance is carried, the more interest the borrower will be paying, making it even more difficult to pay down the amount owed.

Furthermore, excessive credit card debt can significantly harm a person’s credit rating, which can make it harder for them to get new loans or credit in the future. This can bring about missed payments or even default, both of which will, even more, harm their credit score.

If you don’t handle your Canadian credit card debt properly, it can lead to some serious financial problems.Canaacanadian credit card debt

The current state of Canadian credit card debt

According to recent reports by Statistics Canada and Equifax Canada, people’s credit card balances are on the rise. And it’s not just a one-time thing either – Equifax Canada’s report and the government statistical agency report both states that it has been going on for the past year. Actually, by the end of 2022, Canadian credit card debt had risen by 13.8% contrasted to the previous year, leading to an overall outstanding debt of $93.4 billion.

What’s specifically concerning is that this rise in credit card debt is striking lower-income households the hardest. With high inflation, lots of people in this group are turning to high-interest credit cards to cover important rising costs like food prices, medication, as well as rent. It’s clear that we need to do even more to sustain these Canadians and also help them resolve this problem of inflation causing extra costs for Canadians.

Credit card debt can be worrisome in Canada for a few reasons. One of them is that credit card companies tend to charge pretty high-interest rates here – around 20% or more! That’s quite a bit more than other kinds of debt you might have, like a car loan or a mortgage.

Another thing to keep in mind is that Canadians’ savings are low, due to many of the same reasons that Canadian credit card debt is rising – the main one being inflation. So if something unexpected happens, like a drop in income or an unexpected expense, some folks might not have much in the way of savings to fall back on.

All in all, it’s important to keep an eye on your credit card debt in Canada – it can pile up pretty quickly!

Canadian credit card debt: Why do Canadians have so much credit card debt?

Numerous factors contribute to the excessive credit card balances among Canadians. Among the primary reasons is the effortless accessibility of credit cards. Credit card companies aggressively market their products to Canadians, luring them with attractive incentives like sign-up bonuses, cashback rewards, and low introductory interest rates.

Canada’s high cost of living is another significant reason for the country’s high credit card debt. Canadians encounter steep housing costs, surging food and gas prices, and escalating expenses of every type and description. With income failing to keep up with expenses, many resort to credit cards to bridge the gap, leading to elevated debt.

When faced with unexpected expenses like vehicle repairs or other emergencies, many Canadians lack the necessary savings and turn to credit cards to bear the costs, further increasing their reliance on credit.

Finally, a considerable number of Canadians lack the financial literacy to fully understand the trap they are falling into by continuing their credit card usage with no hope of ever repaying the balance owed.canadian credit card debt

Canadian credit card debt: Common mistakes people make when it comes to credit card debt in Canada

Signing up for too many credit cards: This can make it challenging to stay on top of monthly payments and may even lead to overspending.

Neglecting to regularly review credit card statements: This can result in harmful errors or unchecked fraudulent charges, which can add up and cause undue stress.

Making large purchases: Using credit cards for a major expensive purchase without having a clear plan to pay off the balance, can lead to hefty interest charges and long-term debt.

Applying for too many credit cards: Often enticed by sign-up bonuses or rewards, too many credit cards can lead to an inability to monitor payment schedules and overspending.

Failure to regularly review credit card statements: This can result in undetected errors or fraudulent charges. This may ultimately result in an increased balance owed or avoidable fees.

Financing large purchases: Buying major expensive items such as automobiles or vacations using a credit card without a clear plan for repayment can lead to high-interest charges and long-term debt.

It’s essential to be mindful of these pitfalls and take steps to avoid them to stay financially healthy.

Canadian credit card debt: How to tackle credit card debt in Canada

The following are 7 practical tips and strategies that Canadian individuals grappling with credit card debt can utilize:

  1. Establish a budget: The primary step towards addressing Canadian credit card debt is establishing a budget. This will let you understand your revenue and expenses while identifying areas where you can decrease expenses to free up finances for debt repayment. It’s essential to factor in all bills, taxes, expenditures, and debt payments while drafting your budget.
  2. Prioritize debt repayment: After developing a budget, prioritize debt repayment. Begin by repaying high-interest debt, such as credit card debt, and make minimum payments on other debts.
  3. Consolidate debts: Consider consolidating credit card debt into a single loan that charges a lower interest rate. This simplifies debt management and lowers the interest paid over time.
  4. Seek expert assistance: If faced with challenges managing your debt, consider seeking expert assistance. This could involve partnering with a community non-profit credit counselling agency or a licensed insolvency trustee.
  5. Reducing expenses: Scrutinize your expenditure and identify areas where you can cut back, such as dining out, grocery shopping, and utility bills. Every penny saved can contribute towards debt repayment.
  6. Increase your income: This could include freelancing, part-time work, or selling unused items. These avenues could provide the additional funds necessary to accelerate your debt repayment.
  7. Avoiding unnecessary expenses: Using cash or debit cards as the form of payment instead of credit cards makes you think twice about every purchase before you make it.

Learning and using sound financial habits is fundamental for avoiding future credit card debt. Here are several compelling reasons why:

It creates superior financial management skills: The adoption of good financial habits, such as meticulous budgeting, diligent tracking of expenses, and prudent saving for unexpected contingencies, equips one with enhanced financial management skills. When one is always aware of their financial standing, they are less prone to impulsive expenditures, and the possibility of succumbing to credit card debt is thereby minimized.

It engenders a robust credit history: Good financial habits, such as paying your bills by their due date in full are what establish a good credit score. This augments the likelihood of future credit approvals and can result in more favourable interest rates and terms.

It eliminates tension and apprehension: Debt can be a source of profound stress, causing anxiety and other psychological distress. The development of good financial habits, together with the avoidance of credit card debt, can eliminate such concerns,canadian credit card debt

Canadian credit card debt: Conclusion

To conclude, by implementing these measures, you can take charge of your credit card debt and gradually work towards becoming debt-free.

I hope you enjoyed this Canadian credit card debt Brandon’s Blog. Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.canadian credit card debt

Categories
Brandon Blog Post

IS CANADA IN RECESSION? MOST CANADIANS SAY YES TO AN INTENSE RECESSION

Is Canada in recession?

Statistics Canada recently released data showing that inflation rose to 7.7% year-on-year in May, up from 6.8% in April. This was the highest reading since January 1983 and well above the 7.3% expected by economists. The inflation index rose 1.4% from the previous month, with gasoline prices, hotel prices and car prices being the main reasons for the rise in May.

Many economists believe core measures are a better indicator of underlying price pressures, as it excludes food and energy costs. The recent average of this measurement, according to Statistics Canada, increased to 4.73% which is the highest level in the last 32 years! The worst news, their inflation expectations are not stopping.

In this Brandon’s Blog, I discuss is Canada in recession and look at what effect it might have on Canadians.

Is Canada in recession? What is a recession?

In the most basic terms, a recession is not only when economic growth is curtailed but is a period of economic decline marked by a contraction in economic activity. Most governments define a recession as two straight quarters in which the economy contracts by at least 1.5 percent. Economists define it as negative gross domestic product (GDP) growth. This definition doesn’t take into account consumer sentiment, but that’s an important metric to pay attention to since it affects consumer spending.

Fears of a recession have been rising in recent weeks as central banks around the world try to bring inflation down from the highest in decades by raising interest rates quickly. A new poll finds that nearly 8 in 10 Canadians believe the Canadian economy is in or near a recession. More than half of those Canadians are starting to cut back on spending to cope with the recession.

According to a recent survey of 1,517 Canadians by Yahoo and pollster Maru Public Opinion, a whopping 78 percent of respondents believe Canada is now in a recession or approaching a recession. Of those, 23% believe Canada will enter a recession within the next three months, while as many as 55% believe the Canadian economy is now in a recession.

is canada in recession
is canada in recession

Is Canada in recession right now? What the economists say

Canadian economists were surveyed by Finder on their inflation and economic recession expectations. Most said Canada has recession risk and is heading for a recession. They say we can expect it to happen anytime between 2023 and the first half of 2024. Most thought it would happen in the first six months of 2023, another quarter thought it would take a year to manifest. Economists have pointed to the pandemic, inflation and interest rate hikes as the reasons for the recession in Canada (isn’t the hot money only flowing into the housing market the reason for the recession?).

Finder explains how economists try to time recessions. Canada is headed for a normal summer as pandemic restrictions are lifted, but a new variant of the COVID-19 pandemic could emerge in the fall that could tip us into a Canadian recession by this time next year. What they cannot tell us is whether it will be a mild recession or a deep recession.

Why Is Canada likely to experience a recession?

In a single word – inflation. Inflation is rising and our federal government is doing nothing to quell the inflation expectations. This is causing the Bank of Canada to try to tame inflation by raising interest rates. This increases the risk of a recession. In fact, many economists told Finder they expect “aggressive” rate hikes in the coming year. Most of those polled believe there will be at least four more rate hikes this year.

Fears of a recession have been rising in recent weeks as central banks around the world try to bring inflation down from the highest in decades by raising interest rates quickly. The Bank of Canada is one of the central banks trying to restore soaring inflation to its target range of 1% to 3%. On June 1, the Bank of Canada announced a rate hike of 0.5%.

The timing of the recession is not easy to grasp, and much depends on what happens with Russia’s invading Ukraine. Murshed Chowdhury, an associate professor at the University of New Brunswick, expects the recession to continue into the first half of 2024. How long the supply-side problems will last and the escalation of the Russian-Ukrainian war will play a big role in deciding how things turn out.

The rise in prices causing inflation can be attributed to a number of factors, including poor fiscal management by the federal government. Other factors include record highs in commodity prices such as oil and wheat. Unfortunately, wage growth for most Canadians has not kept pace with inflation. Wages have risen 2.7% over the past two years, compared with inflation of 3.4% over the same period.

is canada in recession
is canada in recession

Is Canada in recession? What will happen to the economy of Canada?

Consumer prices in Canada accelerated to their highest level in 40 years, Bloomberg reported, adding pressure on the Bank of Canada to continue aggressively raising interest rates in the coming weeks.

Markets are almost entirely confident that the Bank of Canada will raise interest rates by 75 basis points next month, which will lift its policy rate to 2.25%. The rate is expected to be as high as 3.50% by the end of the year. The preferential loan interest rate offered by commercial banks is usually more than 2 percentage points higher than the policy interest rate.

Prime Minister Justin Trudeau’s government has also come under pressure from opposition parties and economists to do more to contain inflationary pressures and help households offset the cost of living, though the Trudeau government has been wary of any new measures.

Like other countries, Canadian households have been hit by record gasoline prices and soaring food prices. After a slight pullback in April, gasoline prices surged again in May, rising 12% for the month and 48% from a year earlier. Food prices rose by a smaller 0.8% in May but were up 8.8% from a year earlier.

Given that gasoline prices rose further in June, the 7.7% annual figure may not even be representative of the peak annual price increase. There were more signs that imported inflation was affecting domestic prices, with the cost of services rising 5.2 percent from a year earlier, the fastest pace of growth since 1991.

The cost of living is rising twice as fast as the average Canadian wage, creating significant headwinds for the economy. Unfortunately, the Canadian government and the Bank of Canada are treating this as if inflation is all caused by domestic factors when it is really global. Raising interest rates aggressively, an old tool, cannot solve a globally induced imported inflation spike.

The inflation we are experiencing now is a result of all the shocks to the Canadian economy: COVID-19, monetary policy-induced recession factors when the Bank of Canada kept interest rates at their lowest ever levels during the COVID-19 pandemic, the supply side problems because every major world economy effectively shut down for the better part of 2 years, the war in Ukraine causing shortages and therefore price spikes. None of it is a Made In Canada problem, yet the Bank of Canada and the federal government are treating it as if it was homegrown.

Is Canada in recession? What happens if we experience a recession?

Canadians’ purchasing behaviour is already beginning to change. A poll conducted by Nanos Research for Bloomberg News indicates:

  • 52% of Canadians surveyed say they have adjusted their spending habits, set stricter priorities and started consciously spending less in the past month.
  • The majority of Canadians expressed concern about the state of the economy, with 62 percent of Canadians believing that the Canadian economy was on the wrong track.
  • Rising prices have led 32 percent of Canadians to believe they are in a worse financial position than they were the previous month. Only 8 percent of Canadians said their situation had improved.
  • Regionally, the poll showed that residents of Atlantic Canada and Western Canada are particularly concerned about the economy.
  • In the Atlantic region, 75% of respondents believe the Canadian economy is heading in the wrong direction; in Manitoba and Saskatchewan, 77%; in Alberta, 66% of people hold this view.
  • 41 percent of Canadians said they were in a worse financial position today than they were last year. This is the second-highest reading since 2008.

This consumer sentiment, runaway inflation and the Bank of Canada and the federal government using old tools to fix a new problem will have negative consequences for Canadian businesses. Consumer spending which previously fueled the Canadian economy, now reduced consumer spending, this will most likely place is Canada in recession.

Lower company sales will lead to job losses and our record low unemployment rate will increase possibly to a new high when the current job market changes for the worst during a recession. Business investment will be reduced and what investment is made, will be more in systems and technology than people. There will be a resultant drop in GDP. Certain asset categories will drop dramatically in price as capital flees places like the Canadian stock market for investments seen to be safer.

is canada in recession
is canada in recession

Is Canada in recession? How to protect yourself from a recession

Our spending and investing habits directly impact the economy. This year so far, it’s been a rough ride. However, the majority of how a recession affects us is within each of our own control. The rest of it, the minority is because of forces beyond our control.

The economy will vary from year to year. Our spending, saving and investing habits directly impact the economy. It is important for all of us to make smart financial decisions now so we can weather the storm when the economy dips. Is Canada in recession? Based on the above, not right now, but, it could be soon. Here are my tips on how to protect yourself from a recession.

It’s important to have an emergency fund

When a recession hits, you can get fired and the value of your investments can plummet. One of the best ways to protect yourself from financial distress or additional debt is to increase your emergency savings.

That way, even if there are unexpected expenses, or your income is affected, you’ll have a cushion to protect yourself and your family. I always recommend having an emergency fund that allows you to survive for a 6-month period.

Boost your employment prospects

When a recession hits, job security can be at risk. To safeguard your income, you should consider finding a side hustle in addition to your regular job. This can serve two key purposes—helping you grow your emergency fund and providing you with extra income.

You should focus on developing job skills that will help improve your chances of not being laid off. Time management, communication, and attention to detail are all important skills to focus on.

Budgeting

Look at your family household expenses. Cut back on anything that is not necessary spending. If necessary, use cash to pay for purchases and not a credit card. We tend to spend less when we have to count it out in cash rather than tapping or swiping a card.

That way your money will go much further. Remember, during a recession, cash is king!

Pay down debt

Do everything you can to pay down your debt before a recession hits. The more debt you have, the more of your money goes to interest payments. If you have variable rate loan debt, as the Bank of Canada continues to crank up interest rates, the cost of that debt increases.

If you have fixed-rate debt and it comes up for renewal time, say like your house mortgage, you will be forced to renew at a higher interest rate. So, by paying down debt, you are insulating yourself as best as possible against the negative effects of the recession on your outstanding debt.

The economy may or may not slip into a recession but based on what the economists believe, more likely than not, eventually, it will. Recessions can last for a long time, or they can end quickly. However, the more prepared you are, the lower your chances of suffering a prolonged financial shock in the aftermath.

You may also want to read 2 other Brandon’s Blogs:

Is Canada in recession? What if your debt is too much for you?

I hope you found this is Canada in recession Brandon’s Blog interesting. Among the many problems that can arise from having too much debt, you may also find yourself in a situation where bankruptcy seems like a realistic option.

If you are dealing with substantial debt challenges and are concerned that bankruptcy may be your only option, call me. I can provide you with debt help.

You are not to blame for your current situation. You have only been taught the old ways of dealing with financial issues, which are no longer effective.

We’re passionate about permanently solving your financial problems with you and getting you or your company out of debt. We offer innovative services and alternatives, and we’ll work with you to develop a personalized preparation for becoming debt-free which does not include bankruptcy. We are committed to helping everyone obtain the relief they need and are worthy of.

You are under a lot of pressure. We understand how uncomfortable you are. We will assess your entire situation and develop a new, custom approach that is tailored to you and your specific financial and emotional problems. We will take the burden off of your shoulders and clear away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We realize that people and businesses in financial difficulty need a workable solution. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost consultation.

is canada in recession
is canada in recession
Categories
Brandon Blog Post

DEBT AND UNPOPULAR INTEREST RATE HIKES, HOW IS THE ECONOMY FARING?

What is the definition of debt?

Debt is the money that a person or company owes to others. That is the simplistic definition. It is really one of life’s most stressful parts. Some people grow up in debt. For them, it’s just part of their lives, and they can make it work. Others live from paycheque to paycheque and save little to nothing. For them, it is crippling and can consume their lives, making their existence a daily struggle. For others, it is a parasite, feeding on their mind and their body. It can destroy their life, pulling them down and limiting their options and choices.

Consumer debt and household debt come from a number of places. Some source of debt is from emergency situations, and some of it is from buying expensive things but useful and worth the cost. That is how people have viewed real estate over the last decade, especially during the unprecedented pandemic. However, I also see some situations where high levels are just from bad decisions.

Business loans and corporate debt come in handy for a number of reasons. Perhaps you need some extra cash to get your business up and running. Or, maybe you’re looking to expand your operations by opening a new branch or purchasing new equipment. In any case, a business loan can provide the funds you need to reach your goals. Or, like in the last 2 years, perhaps the bottom has fallen out of the economy due to the COVID-19 pandemic and in order to survive, the business has had to take on government-support loans to increase the business debt load substantially.

All of these are now coming together in a perfect storm, as the Bank of Canada attempts to battle inflation and high Canadian real estate prices by beginning a pattern of interest rate hikes.

In this Brandon’s Blog, I look at how interest rate hikes, higher Canadian household debt and more Canadian business bankruptcies are the most recent signs of the Canadian consumer debt burden, as well as the major indicator of the current state of business in Canada.debt

Policy Interest Rate – Bank of Canada

The Bank of Canada’s primary business is to conduct monetary policy for the Canadian economy. This means that the Bank uses its tools of monetary policy to try to hit its target for inflation, which it does by adjusting the Bank of Canada’s policy interest rate. The Bank of Canada’s policy interest rate is the rate at which it lends money to financial institutions.

At the beginning of March, the Bank of Canada increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. This Fed interest rate hike was the biggest increase in two decades. The reason? To fight inflation.

The world’s biggest central bankers have long argued that ultra-low interest rates encourage spending and investment, helping to boost growth and employment. So at the outset of the pandemic with the world economies in tatters, all major central bankers, including the Bank of Canada, set borrowing costs at record lows. Those actions, amongst other things, contributed to the current state of inflation in the economy.

Macklem won’t rule out an inflation-driven, super-sized rate hike

The central bank predicts that inflation will remain high, averaging almost six percent in the first half of this year and remaining elevated in the second half of 2022. It is expected to ease in the second half of next year before returning to the two-per-cent target in 2024.

What are the factors causing this inflation? The global financial situation has become more difficult and unpredictable. Prices for oil, natural gas, and other commodities have risen sharply, contributing to inflation in many parts of the world. Supply disruptions resulting from Russia’s invasion of Ukraine have caused the prices of energy and other commodities to increase even further.

Looking to the future, Bank of Canada Governor Tiff Macklem stated that the Bank will be taking another 50-basis-point step which has already been baked into the financial markets. He believes that the economy needs higher rates and can handle them. It is evident that Macklem is dedicated to using Canada’s policy interest rate to bring inflation back to target. As inflation continues to surge to new highs, an even bigger interest rate hike may be on the horizon. Bank of Canada Governor Tiff Macklem indicated that further and faster rate hikes could be necessary to keep inflation in check.

The problem is that Canadian inflation is as much from a global impact as it is local. Raising interest rates may slow down home buying and mortgage growth. While it is true that mortgage debt is Canadians’ single largest obligation, increasing interest rates won’t fix the sky-high pricing at the gas pumps and the supermarkets.debt

As interest rates increase, so is household debt!

The latest figures from Statistics Canada, the agency responsible for collecting and disseminating statistics related to the economy of Canada, indicated that the total amount of household debt in the country increased by 0.5% in March 2022, up $14.4 billion to $2.69 trillion.

The increase of $13.2 billion came largely from debt related to the real estate market, such as mortgage borrowing and home equity lines of credit (HELOCs). This amount totalled $2.16 trillion outstanding. However, Statistics Canada also reported that credit card debt has increased for the second consecutive month, growing at a faster rate than mortgage debt!

Now as the Bank of Canada embarks on a hiking cycle that could go faster and further than before, and sky-high inflation squeezes household budgets, economists and capital markets are once again raising the red flag.

In a recent poll, 31% of Canadians polled say they already don’t make enough to cover their bills and required payments. Economists look at the rise in credit card debt and attribute it to a rise in personal spending. This is true. However, with prices rising much faster than wages, the increase could be a troubling sign that Canadians are spending on basics by using credit to replace the money they do not have and will not have to repay the new rising liabilities.

The rising cost of debt payments is already putting a strain on Canadians

If you’re borrowing money, interest is what you pay to your lender for using their money. It is your debt cost. If interest rates go up, the amount you have to pay each month for a mortgage, line of credit, or other loans with variable interest rates will increase. The minimum payment required each month on variable rate loan products will increase as interest rate hikes continue. At some point, you’ll also need to renew a fixed interest rate mortgage or loan. When interest rates are rising, the renewal rate on the fixed debt cost will be higher.

Raising borrowing costs to quell rising consumer prices may pose some risks, especially since Canada has a high level of household debt. In terms of household debt to income, Canada ranks 4th highest in the world.debt

What are the most effective ways to reduce your debt?

Paying down debt as much as possible will help counter the effects of a rise in interest rates and provide you with much-needed debt relief. Here are some of the best ways to reduce your debt burden thereby improving your credit score and credit rating:

  • Cut up your credit cards and only use cash for an extended period of time until things are back in control.
  • Make a budget and stick to it.
  • You should have an emergency fund to pay for unexpected expenses arising from external events out of your control.
  • Create a payoff plan. Look at your various categories of debt and make a plan that is most realistic for each type of debt.
  • Save money on interest by paying down the outstanding amount with the highest interest rate first.
  • Debt consolidation. Consolidate your liabilities with the highest interest rates into a single loan with a lower interest rate. By keeping your payments the same, and paying more than the monthly minimum payment, you’ll be able to pay it off faster and save money in the long run.
  • Avoid getting the biggest mortgage or line of credit that you’re offered.
  • Get a part-time job or begin a side hustle to boost your income.
  • Think first about how borrowing more money could impede your ability to save for future objectives.
  • Speak to a financial advisor or one from a wide variety of other financial professionals to find out how to teach you how to create a plan to be debt-free.

What will happen now with external debt and business bankruptcies?

As businesses continue to experience insolvencies, it’s important to note that the Canadian business bankruptcy rate is on the rise, according to a recent report by Statistics Canada and the Office of the Superintendent of Bankruptcy Canada. This increase underscores the importance of taking measures to protect your business from financial hardship.

Business bankruptcies in Canada increased by almost 34 percent year-over-year in the first quarter of 2022, which some experts warn could be the start of a growing wave of failures. This is closer to pre-pandemic levels. The number of business bankruptcies and proposals increased in the first quarter of 2022, with 807 cases compared to 733 in the previous quarter and 603 in the first quarter of 2021.

Business bankruptcies in Canada are increasing as government support comes to an end and businesses face a difficult post-pandemic recovery with high costs, supply chain problems and a shortage of workers. The financial support provided by the government through the COVID-19 pandemic assisted in delaying the surge in bankruptcies. Funding sources are becoming more expensive also.

Small business owners are feeling increased pressure from inflation in comparison to the average Canadian. With each budget line costing more, filing for bankruptcy is often the only option left. The data doesn’t capture the number of insolvent businesses that are forced to close without any formal filing, but the trend is now becoming evident.

Do you think that debt levels and bankruptcy filings will surpass pre-pandemic levels?

The state of the economy and how inflation and supply chain issues are managed will determine if the number of bankruptcy filings will rise in the coming months or not. As you can see, inflation, supply chain issues, interest rate hikes, household debt problems, business owners searching for more solutions and business bankruptcy filings are all now coming together in a perfect storm.

I hope this Brandon’s Blog on the current state of Canadian interest rates, household debt and business bankruptcies was helpful to you in understanding more about the corporate bankruptcy system in Canada.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life.debt

 

 

Categories
Brandon Blog Post

THE HOUSEHOLD DEBT-TO-INCOME RATIO: HOW COVID-19 CHANGED THIS 1 SIMPLE EFFECTIVE MEASURE

We hope that you and your family are safe, healthy, and secure during this coronavirus pandemic.

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

Household debt-to-income ratio: Understanding the debt-to-income (DTI) ratio

Your household debt-to-income ratio indicates how much of your gross monthly income goes toward paying off your debt. In order to find your DTI ratio of household debt percentage, multiply the result by 100. The debt-to-income (DTI) ratio is a measure of how much income a person or organization generates in order to service household credit market debt.

Based on income, the household debt-to-income ratio, or as it is also called, the household debt service ratio, measures a family’s ability to pay monthly debt obligations. Divide the monthly debt obligations by the gross income to calculate the DTI ratio.

When considering a mortgage or loan, the household debt-to-income ratio is a critical metric. You may find it more difficult to get a mortgage if your household debt-to-income ratio is high, or you may end up getting smaller loan approval. Your household debt-to-income ratio is calculated using your income, debt, and credit (mortgage) accounts.

I wrote a blog almost one year ago on the Canadian household debt-to-income ratio at that time. At the time of the COVID-19 pandemic, I discussed what happened to the household debt of Canadians.

I provide an update one year after discussing a recent report by Statistics Canada about the household debt-to-income ratio in Canada during the fourth quarter of 2021.

Household debt-to-income ratio: Debt-to-income ratio example

Here is an easy-to-understand example. Sally is looking to get a loan and is trying to figure out her household debt-to-income ratio. Sally’s monthly bills and income are as follows:

  • monthly mortgage debt payment (P+I): $1,000
  • monthly auto loan payments: $500
  • credit card debt monthly payment: $500
  • household gross monthly income: $6,000
  • Sally’s total monthly debt payment is $2,000:
  • Sally’s household debt service ratio is 0.33:
  • 0.33 x 100 = In other words, Sally has a 33% household debt-to-income ratio.household debt-to-income ratio

Household debt-to-income ratio: Pre-pandemic debt pressures

Prior to the pandemic, household debt Canadians carried increased steadily. During the last decade, more and more Canadian homes carried debt. Canadian household debt-to-income ratio was 150% in 2012, according to Statistics Canada.

In other words, the increase in debt was rising at a rate of $1.50 for every dollar of income. A DTI ratio of 175.4% was reached in the first quarter of 2020. Before the pandemic, Statistics Canada estimates the household debt-to-income ratio was 181.1 percent.

Debt increases can negatively affect a household’s bottom line, and the larger the debt, the greater the negative impact.

The impact of COVID-19 on the household debt-to-income ratio in 2020: The temporary income boom of 2020 supported Canada’s household debt.

Even if the federal and provincial government financial income support payments given to Canadians through the COVID-19 Economic Response Plan aren’t considered an income surge, it is an income rise.

Fndings released by Canada Mortgage and Housing Corporation (CMHC) in November 2020 showed that the government assistance did help Canadians cope with their household debt.

In the CMHC report, the following were the key findings in Canada:

  • By the end of Q2 2020, Canada’s household debt ratio is 17% lower than Q1’s 158%.
  • Likewise, the home mortgage DTI ratio fell from 115% to 105%.
  • A rise in household disposable income caused these declines.
  • The amount of outstanding household debt in Canada did not change.

Canada’s household disposable income increased by almost 11% between Q1 and Q2 of 2020 and by 15% year over year. The extra cash doled out by governments caused this. This new cash in bank accounts was not from greater household savings.

After the government temporarily transferred money to Canadian families, the household debt-to-income ratio declined to the lowest level since 2010.

Household debt-to-income ratio: Uncertainty in household debt during the second wave of COVID-19

During the second wave of the COVID-19 pandemic, the financial situation of Canadians had changed significantly. Especially in the financial real estate industry, the DTI ratio is an indication of financial obligations as a vulnerability.

The Canadian financial institutions stopped deferring mortgage payments at the same time. Even with the then extremely low-interest mortgage rates on mortgage loans, this obviously led to concerns about Canadians’ ability to make their mortgage payments. Other government assistance programs ended.

With the end of government support programs that temporarily boosted monthly household income, Canadians faced uncertainty about how they will be able to carry and pay down their household debt.

In the second quarter of 2021, the household debt-to-income ratio of Canadians decreased in all significant Canadian cities. Normally, such a decline would indicate a general improvement in families’ monthly income, their ability to afford monthly payments and pay off financial debt, be it mortgage debt service or consumer debt such as auto loans and credit card debt service.

Subsidies from the federal government effectively helped households to pay off debt. Canadians were more than likely able to lower their non-mortgage debt during those months. However, the mortgage component of Canadian household debt has increased in the majority of metropolitan areas while employment has decreased.

household debt-to-income ratio

Canada household debt-to-income ratio: What my predictions of financial challenges for 2021 were

I predicted that as the economy recovers from the economic effects of the Coronavirus, Canadians will be facing a great financial challenge. As a result of the COVID19 pandemic crisis, Canada’s economy pretty much stopped.

Many Canadian families have experienced extensive income losses as a result of this. For those who are heavily indebted, this is particularly true. A key concern with regard to financial stability is whether homes can keep up with their financial obligations. A financial crisis may very well befall highly indebted Canadians.

Bank of Canada was concerned about the financial challenges that Canadians will face in 2021. Can Canadian homes withstand the storm? The answer lies with:

  • household financial health as of February 2020;
  • the effectiveness of the Canadian Government’s recovery support measures and policy activities; and
  • the pace of the labour market’s recovery.

As the economy recovers, the Bank of Canada looks at a variety of household debt factors. Those with greater financial vulnerability are of particular concern. Some factors that will cause concern among the Bank of Canada are:

  • The homeowners with few financial safeguards.
  • Although it does provide a financial reserve, home equity lines of credit are also associated with increased borrowing.
  • Will the government’s fiscal policy help support Canadians until incomes recover to pre-pandemic levels or exceed them?
  • In some cases, unemployment rates may not be a reliable indicator of household revenue losses.

We have entered the first quarter of 2022, so let’s see how the economy and Canadians fared in 2021.

Statistics Canada says household debt-to-income ratio hit a record high in Q4

In the fourth quarter of 2021, household disposable income declined as housing prices, housing costs, and mortgage borrowing rose, according to Statistics Canada. As a percentage of disposable income, financial markets saw that household credit market debt rose to 186.2 percent in the fourth quarter, up from 180.4 percent in the third quarter. Credit market debt accounted for $1.86 of household disposable income for every dollar of disposable income.

Consumer credit market debt rose by 1.9 percent in the fourth quarter, while consumer disposable income decreased by 1.3 percent. Household debt increased by $50.0 billion seasonally adjusted in the fourth quarter. A total of $46.3 billion was attributed to mortgages, while $3.7 billion was attributed to non-mortgage loans.

Household debt service ratios increased in the 2021 4th quarter, measured as total obligated payments of principal and interest on credit market debt as a percentage of disposable income. The ratio stood at 184.7 percent in the third quarter of 2018, and the previous record high was 181.1 percent in the fourth quarter of 2019.

Canada household-debt-to-income ratio summary

I hope you enjoyed this household debt-to-income ratio Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today Call us now for a no-cost consultation We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are remaining safe, healthy and secure during this current pandemic.

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

household debt-to-income ratio

Categories
Brandon Blog Post

WILL AN INTEREST RATE HIKE IN CANADA BE NECESSARY AND WOULD IT BE EXCRUCIATING FOR CANADIANS?

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fullynt operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Interest rate hike in Canada: Introduction

The Bank of Canada Governor, Tiff Macklem, announced on December 15, 2021, that the slack in the economy caused by the Coronavirus pandemic has substantially decreased. It is a clear indication that the central bank will begin an interest rate hike in Canada process in 2022. In addition, he said the central bank was concerned about the rate of inflation, which was at an 18-year high of 4.7% and well above its control range of 1-3%.

Here is a Brandon Blog about why at least one interest rate hike in Canada is likely in 2022 and what that means.

Interest rate hike in Canada: Canadian borrowers prepare as U.S. central bank warns of 3 rate increases in 2022

The U.S. central bank will now direct its attention to battling inflation. As it slows down its bond-buying, the Federal Reserve may raise rates as soon as April 2022. U.S. central bank forced to end stimulus due to job creation, expanding economy, and soaring inflation.

Fed says it will end its pandemic-era bond purchases in March, signalling it has met its inflation target. Federal Reserve rate increases are inevitable for Canadian borrowers. In the event that the Federal Reserve was to wind down stimulus faster and hike rates more rapidly, rising rates would have a greater impact on the Canadian economy. Governor Macklem will be free to act without fear of damaging Canadian exports if the Fed decides to increase interest rates.

Inflation is too hot right now. That’s the message from both the US and Canada central bankers.

interest rate hike in canada
interest rate hike in canada

Interest rate hike in Canada: Higher interest rates are coming. Omicron is unlikely to change that

At the beginning of the pandemic, the Bank of Canada reduced its benchmark interest rate to the current low level of 0.25 percent. Generally, a central bank will elevate its benchmark interest rate to cool down an overheated economy and control inflation. To stimulate a cold economy, it will decrease the rate of interest, which will encourage individuals as well as companies to borrow and spend.

To bring inflation under control, various economists predict that the Bank of Canada will need to raise interest rates in 2022. The argument is that monetary policy is the best way to deal with permanent, sustained inflation. According to them, a series of rate increases is needed to deal with it. As the federal government has suggested, recent inflation acceleration won’t be transitory.

In spite of the current outbreak of the Omicron variant, economic data from as recently as December shows the economy continues to outperform.

Interest rate hike in Canada: No need to hike benchmark interest rate just yet, Bank of Canada says

It is now difficult to find a senior economist that believes interest rates won’t rise to bring ongoing inflation under control by the end of 2022. Despite repeated attempts from the Canadian Government, the public isn’t convinced that Canadian inflation is minimal.

Canada’s central bank is the Bank of Canada, a crown corporation. Statistics Canada’s Consumer Price Index (CPI) is used to make Bank of Canada decisions. With the inflation-control target introduced in 1991, the ideal range for annual inflation is 1% – 3%, with the midpoint of 2% as the common target rate.

The Bank of Canada now says that the labour market slack has been absorbed significantly. It says the interest rate will remain at record lows until the economic slack is sustainably abated, which is currently forecast for the middle quarters of 2022.

Until Q2 or Q3 of 2022, the Bank of Canada expects its policy interest rate to remain at 0.25%. Until the second half of 2022, CPI inflation is also forecasted to remain above 2%. Currently, the Bank of Canada is keeping its policy interest rate unchanged. Eventually, economic levers currently being used, such as quantitative easing, will no longer be enough.

interest rate hike in canada
interest rate hike in canada

Interest rate hike in Canada: Rate hikes don’t fix bottlenecks and can hurt Canadians

Current inflationary pressures are due to supply chain disruptions, pandemic-related supply bottlenecks and energy prices. Hopefully, the economy will be more healed in the second half of 2022 before central bankers hike rates.

Considering the amount of outstanding debt, Governor Macklem should be careful not to raise borrowing costs too quickly or too much. If the Bank of Canada waits too long to begin an interest-rate increase, the rate hikes will have to be more dramatic, and Canadians aren’t ready for dramatic increases.

As the market rates are already preparing for a higher rate outcome, the average Canadian doesn’t need to prepare for the level of interest rates itself. Canadians will be affected by the pace of rate increases, in my opinion.

The current low-interest rates are designed to help borrowers weather the pandemic caused economic storm. In addition, since the outbreak of the pandemic, real estate prices have risen significantly, possibly creating a housing bubble in Canada. The Bank of Canada and the government are under pressure to lower stimulus because of asset bubbles in real estate and other assets.

Interest rate hike in Canada: How Will Higher Interest Rates Affect Me?

As a result of supply constraints resulting from Coronavirus-related events, low-interest rates will eventually end due to inflation. Meanwhile, there are concerns about another strain of this pandemic causing more economic damage. With no indication that the pandemic will ease any time soon, the Bank of Canada is inclined to gradually raise rates to avoid shockwaves reverberating throughout the entire economy.

Some Canadians may be affected by higher interest rates. In the long run, the Bank of Canada will have to make every effort to maintain a stable economy.

As Canadians struggle to get back to normal, they are concerned about the impact of a rate hike. A higher interest rate could lead to less consumer spending and job losses, according to some economists. Variable-rate mortgage debt holders will have higher interest costs. The same goes for those with fixed-rate debt, such as mortgage debt, whose term is set to expire. They are concerned about having to renew their mortgage debt at a higher interest rate. Business borrowings with a variable interest rate pegged to the financial institution’s prime rate will also cost more.

The one thing we know for sure is that many Canadians are concerned about the future and what changes in interest rates may mean for them. Nonetheless, the Bank of Canada will not raise interest rates overnight. It typically takes the central bank several months to set interest rates.

Whenever the Bank of Canada decides to raise rates, it will carefully consider how it will affect different groups of Canadians, such as those with mortgages and those without homes. In the case of mortgage holders, the Bank of Canada wants to ensure that they can afford their mortgages when interest rates rise.

In order to maintain the economic recovery, the Bank of Canada must manage the risks associated with rising interest rates.

interest rate hike in canada
interest rate hike in canada

Interest rate hike in Canada: Summary

I hope you found this interest rate hike in Canada Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you to be able to afford it, even if there is an interest rate hike in Canada, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

interest rate hike in canada
interest rate hike in canada
Categories
Brandon Blog Post

THE RISING COST OF LIVING IN TORONTO AND ELSEWHERE: WILL YOU BE PUSHED INTO HUGE DEBT?

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Cost of living in Toronto and elsewhere: Canada’s rising annual inflation rate is a cost-of-living crisis

Two articles about living costs for Canadians were published this week. According to a recent Angus Reid poll, many Canadians’ quality of life is further diminishing as more debt is accumulated and the pandemic continues. Then Statistics Canada announced that the annual inflation rate reached its highest level since February 2003 in September.

When you hear the term “cost of living“, it’s often accompanied by the phrase “rise” or “have risen”. Recent data shows that Canada as a whole has experienced an increase in the cost of living. In this Brandon Blog, I describe how the rising cost of living in Toronto and elsewhere has the potential to create more debt and therefore more stress on Canadians.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: What is the Consumer Price Index?

Consumer Price Index (CPI) is a national measure of prices based on living costs across major cities in Canada. As the most quoted measure of living costs today, the CPI shows how costs have changed from year to year and illustrate that not everything is as cheap as it once was.

It is inflation that tells the whole story. A rising cost of goods and services reduces the purchasing power of the dollar. Cost increases are measured by this indicator. A CPI calculation represents the average cost of an accepted basket of the standard of living items, such as:

  • food prices;
  • cost of housing;
  • transportation costs; and
  • medical costs

How does inflation affect our daily lives? Inflation increases food, gasoline, and utility costs, reducing savings and discretionary spending. Price increases create economic inequity. They are tough on the middle class, and even harder on the lower class.

What is behind the rise in prices? The federal government, via Statistics Canada, reports that the consumer price index in September was up 4.4 percent compared to last year. In August, the reading grew by 4.1% year-over-year. Last month, consumers paid 32.8 percent more for gasoline than in September 2020. This increase in gas prices is what drove most of the increase.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: The negative side of the cost of living increases

As the cost of living and the inflation rate rises, Canadians are often caught short by unexpected financial burdens that can quickly devour their earnings. At the same time, the cost of day-to-day living, like food and housing, is increasing, which makes it hard for Canadians to save money for the future. Research shows that for low-income families, housing, food, transit and child-care costs generally are all increasing at a faster rate than incomes. This can easily push poorer households below the poverty line.

All of us have heard about the cost of living increases, and so far it has been a controversial topic. We haven’t reached a consensus regarding this issue. Some say we shouldn’t worry about it, while others say we need to act.

The surge in inflation highlighted the failure of Prime Minister Justin Trudeau’s economic policies, said Erin O’Toole during the recent federal election. How did PM Trudeau respond? In his view, monetary policy is not one of the top priorities for his government after the election. He continued:

“When I think about the biggest, most important economic policy this government if re-elected, would move forward, you’ll forgive me if I don’t think about monetary policy. You’ll understand that I think about families.”

Canadians were encouraged by Erin O’Toole to vote out the government. Well, that did not happen!

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: How the rising Consumer Price Index affects you

Researchers at Angus Reid Group conducted an online poll of 2,015 Canadians in September to determine the affordability of living in Canada. The survey found 26% of respondents had incurred at least one new debt, with 72% reporting that this debt has negatively affected their lives. The most common type of new debt was credit card debt.

In a previous Brandon Blog, I reported that many households were able to pay off higher-rate credit card debt during the lockdown while receiving payments from federal government COVID-19 pandemic support programs. After a return to normal, however, that will look, those same households run the risk of increasing their credit card balances again. The reality is that most people used their credit cards as a supplement to their income to pay for living expenses and/or lifestyles due to insufficient income.

According to the new survey, Canadians have now started taking on new credit card debt. As a result, their quality of life is further diminished as more debt accumulates and the pandemic continues. Canadians’ savings have also been impacted by increased spending on essentials, job loss and lower-income, according to the survey.

High real estate prices are forcing many Canadians to delay home ownership, according to the survey. Meanwhile, we have seen that the one thing the pandemic couldn’t stop was the booming real estate market in large Canadian cities. Even areas not typically associated with significant price increases are showing growth in real estate prices now that more big city dwellers are opting for a more flexible lifestyle by working remotely. Based on these results, it is clear that there is a larger gap between those who can afford to buy a home and those who cannot.

60 percent of Canadians said they would prioritize saving for an emergency fund or nest egg. In other words, Canadians’ priorities have shifted in 2022, with most thinking about saving for emergencies, retirement, and a major purchase like a house, car, or cottage.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere: Tips to combat the financial hit of rising living costs

If we spend $10 at a coffee shop every day, what should we do differently ahead of time so that we’re not tempted to spend that $10? All of these things become habits, and habits are hard to break.

Regular readers know that in prior blogs about household debt and spending, I have stressed the importance of household budgets. Every source of family income and every expense must be considered. You need to look critically at all family expenses and separate the wants from the needs. Attempt to cut every expense you have (yes, every single one!) with the aim of saving 10% – 50% right now. Also, consider creatively if you can earn extra income in any other way.

There is no doubt that rising inflation, ongoing economic challenges worldwide, and the risk of interest rates going up are causing many Canadians to feel stressed and stretched to the limit. But it is still possible to spend less and build savings, even as your living costs rise.

As you do so, here are a few tips to help you stay on top of your finances and avoid debt in spite of rising costs:

  • Even though restaurants reopen, that doesn’t mean you have to buy most of your meals there. You can buy food at grocery stores instead.
  • Take advantage of what’s on sale or can be purchased at a discount when planning your meals.
  • If you can, buy bigger packages when they’re on sale for a lower price than smaller packages.
  • Analyze all your household and utility bills to find savings.
  • Savings are possible in many areas, including the bank account, cell phone, and internet plans.
  • Those $10 a day you spend at coffee shops add up to $170 a month if you do it 4 days a week.

When you’re looking forward to preserving your overall well-being through a sound money management plan, it’s easy to remember why you’re making frugal choices.

cost of living in toronto
cost of living in toronto

Cost of living in Toronto and elsewhere summary

I hope you found this cost of living in Toronto and elsewhere Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

cost of living in toronto
cost of living in toronto

 

Categories
Brandon Blog Post

CANADA’S DEBT BURDEN: CANADIAN WEALTH SOARS RELATIVE TO DEBT

canada's debt burden
canada’s debt burden

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

If you would like to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Canada’s debt burden growing for Canadians: 2021 Edition

Canada’s fiscal policy faces many challenges, according to the Fraser Institute. The federal and many provincial governments face serious financial challenges due to budget deficits and increasing accumulation of debt. As interest payments increase, there will be less money left for tax cuts, education, and social services. In the aftermath of COVID, the federal and provincial governments must develop long-term plans to address Canada’s growing debt problem.

Canada’s debt burden continues to be the talk of the town in this age of global statism. It’s always cited by statists that Canada’s federal debt is 100+ percent of GDP compared with 80 percent in the early 1980s. It’s even considered a threat to Canada’s sovereignty, a moral hazard, and a burden on future generations by some. However, individuals’ personal share of Canada’s debt burden may not be growing. I will explain some interesting Statistics Canada reporting in this Brandon Blog post.

Canada’s debt burden: The coronavirus is why provinces need financial assistance now

In 2020, the Premier of Newfoundland and Labrador wrote to Justin Trudeau, saying that his province faced an “immediate and urgent financial crisis” and was unable to raise short- and long-term funds.

During the critical period, the letter explained, the government has no alternative methods of funding provincial government operations, including its health care system. The Bank of Canada offered to buy 40 percent of all new provincial bonds four days after the letter was sent.

The province has been hit with a public health crisis of unprecedented proportions, and their provincial peers, who have similar debt-to-GDP ratios, are not far behind. It is likely that the government can do the same for provinces and municipalities that have to shoulder heavy coronavirus-related costs if it can provide zero percent loans to small businesses.

By law, it can.

canada's debt burden
canada’s debt burden

Is Canada’s debt burden a cause for concern?

Following a federal budget deficit of $354.2 billion last year, the Trudeau government budget documents show that the Feds anticipate a deficit of $154.7 billion in 2021/22, and deficits of at least $30 billion for another four years thereafter. There has been a significant increase in debt accumulation. During the next two years, the country’s net debt-to-GDP ratio is expected to rise to 55.3 percent. In spite of low-interest rates, government program spending in 2021/22 is expected to increase by more than 40 percent over 2019/20. Despite the prime minister’s vague promise that a balanced budget will be achieved at some point, there is no timeline for that.

Can Canadians expect a bout of inflation to continue rising? Can we expect an increase in interest rates? Do you expect a depreciation of the exchange rate? Is it possible that the government will default at some point? Are there any limits on the size of the debt?

Over the years, various economists have noted that federal government debt is not the same as “debt” in the way that the term is commonly understood. Even if it means working harder or cutting back on our spending, we expect to have to pay back debt at some point.

Unlike a government, a household has a finite lifespan. The government, however, can, in principle, refinance (rollover) its debt indefinitely while a household must eventually pay off its debt. Governments do not have to worry about involuntary defaults when they finance themselves with convertible debt.

As a burst of inflation has already begun, we should prepare for possible temporary spikes. Governments borrow money because they don’t spend all of their income right away. Some of it is saved until later. Therefore, future tax revenues can be increased without increasing current taxes. Thus, as real incomes increase, consumer spending increases, which in turn generates additional tax revenue. Therefore, the economy grows more rapidly than it would ordinarily.

How does the government handle overspending? Governments need to reduce spending sooner than later when they run up a level of borrowing that is unsustainable. If it does not, then raising taxes is the only option left. Those who are old enough to recall the 1970s know that high taxes tend to slow down economic growth.

Although prices haven’t risen too much so far for Canadians, their rise is inevitable and the end does not seem too close right now. Inflation concerns seem to be making daily headline news. Nonetheless, many people fear that living costs will continue to rise forever.

So that is the government. What has happened to individuals and their contribution to Canada’s debt burden over the last 18 months?

Canada’s debt burden: Canadian Debt To Assets Falls To Nearly Two-Decade Low

According to Statistics Canada, family financial debt is at its lowest level in the last two decades as a percentage of the overall household assets. Throughout the last twenty years, the debt-to-assets proportion has actually never ever been below its long-term average as it is now.

Therefore, Canadians are less likely to file for bankruptcy than in the past. This is supported by statistics on bankruptcies over the past 18 months. David Madani, senior director at Capital Economics, called it rather remarkable.

According to CNBC, Canadian consumer credit rose 0.5%, but non-financial corporate borrowing of business loans declined 1%. Lending to consumers is up. Consumer lending annual growth is primarily fueled by a substantial increase in mortgages and home equity loans, as I mentioned in previous Brandon Blogs. Debt on credit cards has steadily reduced during the pandemic. Three billion dollars more than expected was borrowed by non-financial companies.

canada's debt burden
canada’s debt burden

Canadian Household Wealth Soars, Canadian’s Debt Burden Drops Amid Pandemic: Statistics Canada

I will now turn my attention to the household wealth side of the ratio now that I have discussed the debt side. What’s behind the rise of wealth? The rise in wealth can be attributed to a number of factors:

  • prices for stocks and houses soaring;
  • a generous income support program from the government for jobless individuals;
  • during lockdowns, there are fewer things to spend money on.

Households have saved an estimated $90 billion as a result.

Amid the worst economic downturn in decades, Canadian households are seeing wealth hit a record high while debt burdens shrink relative to income. That is really the entire rise in household wealth story.

Compared to debt, Canadian wealth soared, but the bank executive warned that this might only be a mirage

Debt-to-assets fell to their lowest level since the early 2000s. In response to this, a Bank Exec at the National Bank of Canada believes it produces a “wealth effect” whereby consumers feel wealthy and then spend more. Why not get a new expensive truck for your driveway if you live in a million-dollar house?

Although Canadian banks are warning about the inevitability of rising interest rates and slowing economic growth, some economists say Canadians may be feeling wealthier than ever before. This could mean consumers will start spending again after years of saving for retirement or paying off debt. Capital Economics senior economist David Madani stated, “We’re seeing an increase in wealth.” Consumption is likely to pick up.” He says higher-priced items like cars and houses have also taken over.

Statistics Canada data shows household assets have soared this year. The housing boom created significant equity with little actual financial contribution from owners. When it comes to Canada’s debt burden or a family’s household debt, it’s important to look at the right statistics. It’s also important to remember the most important point about debt is not the debt itself. It’s the ability to pay it back.

canada's debt burden
canada’s debt burden

Canada’s debt burden: Where the heck does my money go?

This is a common question we always hear from people who come to us with financial problems.

I hope this Canada’s debt burden Brandon Blog was informative. With too much household debt and not enough wealth, you are insolvent. You can choose from several insolvency processes. It may not be necessary for you to file for bankruptcy.

If you or your business are dealing with substantial debt challenges, you need debt help, and you assume bankruptcy is the only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

canada’s debt burden

Categories
Brandon Blog Post

LOWEST CREDIT SCORES RATING: THESE CANAD1ANS LED GIGANTIC CREDIT CARD DEBT REPAYMENT

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

Canadians with the lowest credit scores rating led a wave of pandemic credit card debt repayment

Statistics Canada reported on August 23, 2021, that Canadians with the lowest credit scores rating repaid the most credit card debt in the first year of the pandemic. Over the period of the pandemic to January 2021, the mortgage debt of Canadian households increased by a record amount of $99.6 billion, driven by rising home prices, especially for single-family houses. Over the same period, non-mortgage debt fell by a record $20.6 billion, mainly due to a $16.6 billion decline in credit card debt.

In this Brandon Blog, I look at the area of people with credit scores rating and discuss how and why these lowest credit scores rating Canadians were able to pay down their high-interest debt.

Credit scores rating: Credit report and score basics

Credit scores are three-digit numbers derived from your credit report. An individual’s credit report summarizes their Canadian credit history. The Canadian credit reporting bureaus are Equifax Canada and TransUnion Canada. These private companies are credit reporting agencies that collect, store, and share information about how you use credit. As your credit report changes over time, your credit score will change as well. The more responsibly you manage your credit, the more points you get. According to a review of Borrowell Canada members, even a single missed payment can lower credit scores by 150 points.

Your credit score calculation is based on information in your credit report. A credit score between 660 and 900 is generally considered good, very good, or excellent credit scores.

The credit score model has credit score ranges from 300 to 900 that is used to determine creditworthiness. People always ask if there is a “magic number” to obtain better loan rates. This is an age-old question. Different lenders may focus on different aspects of your credit history. So, I cannot give you one number that unlocks the door to the best loan rates.

credit scores rating
credit scores rating

Credit scores rating: How to check your credit report

Getting a credit card, getting a car loan, or applying for any loan will result in a credit file being opened up on you. The report keeps getting updated over time. Your borrowing history and borrowing experience are all taken into account.

The report contains information about every loan you have taken out in the last six years and whether you pay on time or not, how much you owe, what your credit limit is on each, as well as a list of creditors who are authorized to access your record.

You can get a free credit report on yourself yearly from each credit bureau. You need to submit your ID and background details to prove you are the person entitled to make the request. You can make sure that your credit history report is error-free. Any errors will be corrected by each credit bureau based on the evidence you provide.

A credit rating of R1 is the best. That means you pay within 30 days of receiving your bill, or “as agreed.”

Anyone who wants to grant you credit or provide you with a service that involves you receiving something before you pay for it (such as a rental apartment or phone service) can get a copy of your credit report so they can make a credit decision about you.

R9 is the lowest credit rating.

Average Canadian credit scores rating improved during the pandemic, Borrowell study finds

With Borrowell, a fintech company, you can get your credit score every week for free. From Q1 2020 to Q1 2021, they analyzed credit scores and credit reports of 1,015,369 Canadians, including those in 20 of Canada’s largest cities, to investigate changes in credit scores and missed payment trends across the country.

The Borrowell study came up with several very interesting findings:

  • Government relief measures, lifestyle changes, and financial shifts have impacted credit scores and bill payments over the past year – sometimes revealing the divergence in how COVID-19 affected different segments of society’s financial future.
  • In spite of the coronavirus pandemic, credit scores for Canadians actually improved.
  • The average number of people with missed payments decreased from 3 out of every 10 consumers to 2 out of every 10 people between the first quarter of 2020 and the first quarter of 2021.
  • From Q1 2020 to Q1 2021, Borrowell members’ average credit scores increased by 18 points, rising from 649 (under the average) in Q1 2020 to 667 (fair).
  • The risk of missing paying bills on time is 432 times higher for consumers with low credit scores rating.

    credit scores rating
    credit scores rating

The Statistics Canada study: Canadians with the lowest credit scores rating led the wave of pandemic credit card debt repayment

The new StatsCan study, “Trends in household non-mortgage loans: The evolution of Canadian household debt before and during COVID-19“, examines how Canadians reduced non-mortgage debt and debt levels during the pandemic.

During the pandemic, households began to see their disposable income rise, partly due to the limited spending opportunities during lockdowns, as well as the government’s monetary assistance, such as CERB or enhanced Employment Insurance. This was an opportunity for many households to pay down their expensive non-mortgage debt, with unsecured credit lines and credit card balances being paid down at record levels.

Prior to the pandemic, the outstanding balance on credit cards was $90.6 billion in February 2020, compared with $74 billion just a year later. During the two decades prior to the pandemic, the outstanding balance carried on credit cards had increased on average by 20.7% per year.

Debt reductions were greatest among Canadians with the lowest credit ratings, suggesting that those most vulnerable to financial hardship used savings prudently during the pandemic. Home prices increased, especially for single-family houses, as I indicated at the outset, driving a record increase in mortgage debt for Canadian households of $99.6 billion.

For me, this is a mixed blessing. You may be pleased to hear that many Canadians with low credit scores have been able to save money and reduce their household debt. In my opinion, mortgage debt is highly unlikely to have been accumulated by the same people.

People with low credit scores were not the ones filling out mortgage applications. It was rather people with good and excellent credit who either moved up and/or refinanced in order to do renovations, improvements and/or to pay off debt with a high-interest rate. Furthermore, it shows that people with low credit scores can earn more money staying home and receiving government COVID-19 assistance than they could make at their normal job. That is a very sad comment.

Minimum credit scores rating for mortgages in Canada

You can either be approved or declined for a mortgage based on your credit score. It can affect your mortgage interest rate, the type of mortgage available, as well as the mortgage lenders that you can choose from.

A mortgage requires a minimum credit score of:

  • in the case of major banks, 600;
  • for B lenders, 550;
  • private lenders have no minimum requirements; and
  • for CMHC mortgage default insurance mortgages, 600 points are required.

For a mortgage with bad credit, your only options are B lenders and private lenders, and they may require a large down payment or equity in your home. A lower credit score is generally associated with a higher mortgage interest rate. Low mortgage rates require a credit score of at least 680.

Having a credit score above 600 is good for getting a mortgage in Canada, as it opens up more options. In most cases, CMHC mortgage default insurance is not available to people with credit scores below 600. When you have a low credit score, your mortgage loan application may be denied, your mortgage rate may be higher, or you may be limited in the amount of money you can borrow.

A credit scores rating must be 680+ to qualify for the low-interest rates advertised in the media. CMHC mortgage default insurance is another issue some borrowers need to be concerned about. As long as you have sufficient income and property value to service the mortgage, a low score may suffice, however, the private lender will charge you higher fees and interest rates.

credit scores rating
credit scores rating

Credit scores rating summary

I hope that you found this credit scores rating Brandon Blog. Credit scores do not always properly reflect people who have problems because they are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

credit scores rating
credit scores rating
Categories
Brandon Blog Post

CREDIT CARDS MAXED OUT: THAT SCARY CRUSHING FEELING WHEN CANADIAN INSOLVENCY AT HIGHEST LEVEL

credit cards maxed out

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

How do credit cards maxed out affect your credit score?

Your credit score is one of the most important things you have to offer anyone who is seeking to lend you money, whether it’s from a bank, a different credit card issuer, or even a landlord. Your credit score is a sort of credit health report that measures how much you owe, how much you owe on different kinds of credit, and how likely you are to default on payments.

Credit cards can be a convenient and effective way to manage your finances. However, the best use of a credit card may not be the best use when it comes to your credit score. Lenders consider one or more credit cards maxed out as a reason for your credit score to decline.

Right now we have a very unique situation when it comes to consumer debt. The average Canadian’s monthly credit card balance is lower today than it was 2 years ago. People’s credit card balance for months has declined. So it is not the case right now that credit cards maxed out. Yet, a recent poll shows that Canadians’ stress levels about their potential insolvency are the highest ever.

In this Brandon Blog, I look at the issues and provide some tips as to what positive things you can do if you are concerned about insolvency. Let’s look at the issues.

Changing habits as pandemic adds to debt load

There has actually been a surge in total Canadian consumer debt. It came mainly from financial debt growth in home mortgage debt and also automobile loans. Home mortgage balance increases originated from both refinancings of existing home loan debt and brand-new mortgage applications.

The thinking with vehicle financings is that it arose from Canadians acquiring vehicles that they had actually intended to purchase earlier. Concerning home loans, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a brand-new higher home mortgage amount, at greatly reduced rates of interest.

Throughout the last 18 months approximately of the COVID-19 pandemic, Canadians have actually partially paid for or totally repaid their high-interest-rate consumer debt by turning it into low-rate debt from bigger home mortgages along with residence equity credit lines. They have used their real estate to obtain a debt consolidation loan.

Now that the Canadians have in fact done that, the Ipsos survey discovered that 50% of Canadians are now more worried about not having the capability to repay their financial obligations than they used to. Yet one-third of respondents say they will spend more as the economy resumes.

As the economy slowly resumes, many Canadians are looking at a great amount of debt incurred during the pandemic and are stressed over making ends meet without taking on even more financial obligations. They have maxed out the possibility of getting even more cash from their homes.

The reasons are that either there is no more asset value to borrow from and/or their income cannot sustain any more financial obligations. So where is one of the most likely areas this brand-new financial debt is most likely to come from? Paid down credit cards are going to increase once more and many will sooner rather than later have credit cards maxed out from additional credit card debt.

credit cards maxed out
credit cards maxed out

Canada on verge of widespread insolvency and restructuring surge in COVID-19 new normal

Statistics Canada recently reported that overall household debt increased by 0.8% for the 2nd straight month to over $2.5 trillion. Mortgage debt and also home equity credit lines made up $1.98 trillion of that total amount. Over the initial 5 months of 2021, households had $57.5 billion in home mortgage financial obligations, compared to $34.3 billion over the exact same time period in 2020.

At the same time, non-mortgage debt climbed by 0.4% in May to $786.2 billion. Growth in credit card debt as well as other personal loans was the main driver. While charge card debt rose for the third month straight, it was still down by 3.3% from May 2020.

These statistics seem to bear out my thoughts that Canadian consumers now have no more room to borrow against their homes, so now, they will need to turn back to their credit cards and increase their credit card debt in order to fund their expenses. This will not turn out well in the long run. I foresee people having maxed out the amount they can borrow against their homes and then once again having their credit cards maxed out.

Lots of people do not understand how financial problems are created pushing individuals to seek out a remedy such as bankruptcy or a consumer proposal to restructure. The majority think that people get into financial trouble because they can’t properly handle their money. However, in most cases, it is because of an unforeseen trigger. Divorce, job loss, illness and the present pandemic are examples of triggers.

People in financial trouble feel shame and unfortunately, stop them from connecting with us early. Reaching out to a licensed insolvency trustee early is so important.

Credit cards maxed out Is a bad idea

By maxing out your credit cards you’re boosting your credit utilization ratio. This accounts for 30% of your credit score. As such, a maxed-out credit card can adversely impact your credit rating.

Theoretically, yes, you can pay off your credit card by just making the minimum payment. However, it can take you years to pay it off if you are only making the minimum payment. Your interest charges will be higher than your minimum monthly payments.

Your credit utilization ratio and therefore your credit score will suffer. Many people try to solve this problem by just applying to the credit card issuer for an increased credit limit. This may work once, but it does not make any sense. You cannot eliminate debt by increasing it!

Furthermore, you’ll be carrying that debt and paying for it at a very high rate of interest. On the other hand, if you make your repayment by the due date, or make big routine payments to pay it off, you will certainly pay no or extremely little in interest.

credit cards maxed out
credit cards maxed out

Are your credit cards maxed out? Here’s some personalized tips for paying off credit card debt

What can you do trying to be credit card debt-free? My 4 step strategy can help you get there.

1. Credit cards maxed out: Take control

It isn’t simple or comfortable to take a hard look at your finances, but it is essential. Analyze your household expenses, as well as the interest rates linked to every resulting financial obligation. Track your monthly expenses to really understand what your credit card purchases get you on a monthly basis.

This is the first step in understanding your expenditures and cutting down on the ones that are not needed. To recognize where you are going, you need to recognize where you have in fact been.

2. Credit cards maxed out: Minimize interest rates

The normal rate of interest on a bank card is about 19 percent. That’s rather high, so you may wish to think of doing a balance transfer by moving your credit card debt to a card with a minimized or zero-interest offer to assist in paying it off a lot faster.

A word of care: you’ll probably require to pay a transfer fee in doing so. Likewise, you will need to repay the debt in full before that promotion price finishes. Otherwise, the remaining balance on your new balance transfer card will again attract a greater rate of interest, possibly the very same or higher than the card you moved the debt from.

Although I do not hold out a lot of hope, you can ask your credit card firms if they will lower your rate of interest.

3. Credit cards maxed out: Credit counselling as well as debt paydown approaches

If you merely cannot make sufficient earnings to fund your debt repayments, consider a non-profit credit counselling service. At no charge to you, they can get you into a Debt Settlement Plan. Bear in mind that as soon as you are in such a strategy, your charge cards will certainly be cut off.

Do not go to any one of the financial debt settlement services that market often on television or social media. All they do is charge you a fee to take down basic information that a certified non-profit credit counselling agency or a licensed insolvency trustee would certainly do for no cost. After that, they run you through their “program” charging you a lot more fees until you can pay no more. After that, they send you to a qualified bankruptcy trustee.

There are 2 regular financial debt settlement strategies– avalanche method and also snowball method. The avalanche technique of getting out of the credit card financial debt is you initially put all your available cash to pay down your highest interest rate debt. As soon as that’s cleaned up, you start settling the following most costly debt. You keep repeating this up until all your consumer debts are gone.

Sometimes, the snowball technique offers a great deal of extra motivation. With this method, you settle the tiniest financial debt initially, to improve your mood. You use that power to resolve what is the next tiniest debt and so on. You are grabbing steam like a snowball rolling downhill.

It does not matter which strategy you utilize. The vital thing is that you start now and stick with it.

4. Credit cards maxed out: Adhere to it.

Remember your single focus should be reducing debt, not new non-essential spending. So do not prepare any kind of sort of travel getaways or big purchases in the meantime. You could backslide or strike some road bumps yet do not let that distract you or depress you.

Now for the challenging part. When possible, save some money to assist with unpredicted expenses that you would typically place on your credit card. This will certainly minimize the amount you would have to borrow by paying with real cash.

It’s an incredibly lengthy as well as agonizing trip to fully pay off your credit cards maxed out. It also can be an extremely lonely one. People don’t get into the bank card debt trap overnight, so you can’t leave it without some effort.

Credit cards maxed out summary

I hope that you found this credit cards maxed out Brandon Blog interesting. I wrote this now because I fear the trend I see from both the Ipsos survey and the Statscan report shows that now that Canadians have done their debt consolidation and credit card balances are low, the credit cards are now being run up again. The end result will be higher debt than the average Canadian started with.

Problems will arise when you are cash-starved and in debt, especially with a maxed-out credit card. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

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

credit cards maxed out
credit cards maxed out
Call a Trustee Now!