CAUTIONARY TALE: Do You Know Your Household Debt?

CAUTIONARY TALE: Do You Know Your Household Debt?

CAUTIONARY TALE: Do You Know Your Household Debt?

“You must gain control over your money or the lack of it will forever control you.”  ― Dave Ramsey

Canadians have been able to avoid a record high household debt largely due to the increased home values seen across many parts of Canada.  According to the Bank of Canada, for every $1.00 of disposable income, Canadian households possess $1.70 in total household credit market debt.  What does “household credit market debt” really mean?  This type of debt includes consumer credit  (all types of credit cards including stores), mortgage and non-mortgage loans.  It means that many of us are adding to our debt to maintain a standard of living that is simply not aligned with our earning ability.

What has changed?  For many Canadians, we are buying into the notion that our credit cards reward us for our thrifty actions.  A lot of consumers use credit cards like debit cards – whether it is to buy a coffee at Tim Horton’s or groceries.  If we use our credit cards, we earn “reward points” that can be used for things that we often want (but likely don’t need).  What most people don’t realize is that unless you diligently pay off your credit card in full each month, the potential “reward” from using your credit card is overshadowed by the excessive interest charges that continue to accrue.  Credit card companies market a lifestyle to consumers that is false and can be dangerous to your finances and relationships.

Life happens, and we can’t predict all of the curveballs (such as Global News reporting this morning that 51,000 jobs were lost in August) that seem to come our way. However, it is important to recognize that 92,000 part-time jobs were lost, while full-time jobs in Canada actually increased by 40,400.  As I have said many times, it is important to read the “rest of the story” before assuming a news headline to be accurate, and not designed to elicit an immediate emotional response by a reader.  Before you start packing up your home and moving out of B.C., keep in mind that Ontario was the hardest hit and Stats Canada reported that 80,100 jobs were lost in that province – and almost all of them were part-time.

Can you benefit from the lower interest rates and stronger real estate market?  Absolutely.  For investors, they are looking at a longer term performance for their investments so they are locking into 5 or 10 year mortgages so that they can ride any economic wave that might arise, and realize that rental properties are in demand with the higher housing costs.  Homeowners can really benefit from these type of market conditions.  With lower mortgage payments (due to interest rates), they can use the extra money they would have paid towards their home and use it to pay down their credit cards or other consumer debt.  Another option is to pay the same amount as you would have normally paid when interest rates were higher and overpay your mortgage.  This can shave years off a mortgage without any extra effort!

A very insightful exercise that Gary Neuman, author of “In Good Times and Bad”, suggests is to complete a question called “The Meaning of Money”.  Simply answer this one question – “What does money mean to you?”  Common answers include: control, power & strength, being able to care for others, fun, social acceptance, health, diversion from other issues, feeling better than others, safety and being right. If someone considers money to mean safety and security, then they are more apt to buy a home within their means and probably pay it off as soon as possible, thereby fulfilling their need for safety and security.  However, if someone views money as representing success, then they might be more inclined to purchase an executive home with higher-end finishings and feel that it is better to pay a little more for a home that they truly feel represents their tastes and accomplishments.

Whatever your views on money are, make sure that you really understand your household debt as this can create a lot of issues for families, especially with housing and related costs consuming a large part of a family’s income.  Consider it…a cautionary tale worth considering.

Best Regards,
Brian McCullough and Myles McCullough

SELLING? If you are interested in selling your home or property, please feel free to contact us to get a FREE market evaluation of your home and learn the current value of it in today’s market. This is completely at NO COST to you and you are under NO OBLIGATION to list your home. However, like any investment, it is wise to know the value of your home so that you can make informed decisions when making any changes to your investment plan or portfolio.
BUYING? If you are interested in buying or investing in real estate, view some of our featured listings on my website at Feel free to call McCullough Marketing anytime at 250-751-1223. We look forward to hearing from you.
McCullough Marketing is dedicated to assisting our clients and providing professional advice and guidance throughout each step in the real estate process. Don’t forget to “LIKE” us on Facebook. Here is an easy link to our McCullough Marketing Facebook page:
If you would like a FREE, No Obligation Current Market Evaluation of your home or property, please contact our McCullough Team at 250-751-1223. View all of our listings and projects at

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