TW Viewpoint | Canada's Personal Debt Crisis

April 24, 2019 | Michael Heykoop

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Speaking at the Chamber of Commerce in Yellowknife, Stephen Poloz, Governor of the Bank of Canada stated it succinctly, "For most Canadians debt is a fact of life, at least at some point" ("Canada's Economy and Household Debt: How Big Is the Problem?", May 1, 2018). Canadian household debt has surpassed $2 trillion. That's more than $54,000 per person. This is Canada's Personal Debt Crisis.

$2 trillion can be difficult to fathom. It is often broken down and described in terms easier to comprehend. Comparing debt to disposable income (how much income is left after taxes) can help paint a clearer picture. Canadians, on average, owe roughly $1.70 for every dollar of disposable income. Poloz describes this figure as "A Canadian record, and up from about 100 per cent 20 years ago" (ibid.). A rise of 70% in 20 years should be enough to give everyone pause. Of course, there are some who are debt free, and others who have their debt well under control. Consider that more than 20% of that $2 trillion in household debt is owed by only 8% of Canadian households.

A recent Global News article highlights just how little financial wiggle room many Canadians have: "For 10 percent of Canadians, the margin of error when it comes to household finances is even thinner, at $100 or less. But those with anything at all left at the end of the month were in better shape than many: A whopping 31 percent of respondents said they already don't make enough to meet all their financial obligations" (Erica Alini, "Over half of Canadians are $200 or less away from not being able to pay bills,", May 8, 2017.)

It is not surprising that the current economy is affecting the way Canadians live their day to day lives. Several factors including a skyrocketing housing market, the failure of wages to keep pace with inflation and increased personal debt have collaborated to greatly impact quality of life. Homeownership used to be a life milestone that was looked at as almost a foregone conclusion. One would graduate, get a job, get married and buy a home. In August 2017, Maclean's Magazine ran a headline which bluntly stated the new reality. "For many young Canadians, home won't be a house" (Kevin Carmichael,, Aug. 14, 2017).

The article goes on to say: "A generation of Canadians that took space for granted is now discovering that their future will be measured in 900 square feet or less. That needn't be a big deal, except ... it is a big deal for a lot of people" (ibid.). In order to escape debt, many Canadians will need to delay, or even forego, the dream of owning a home.

Research has verified what most already know to be true. Being in debt greatly affects the important decisions in life. Those with significant debt are far more likely to put off marriage or having children ("How Student Debt Affects Personal Choices of Young People,", June 8, 2016). It remains to be seen just how many aspects of life will be affected as debt continues to soar.

Debt is not a place most people would like to find themselves. Breaking free from debt requires taking a close look at our activities, our habits and our priorities. It is important to note that there are factors beyond one's immediate control that affect their debt situation, purchasing power and quality of life. Not every debt is the result of poor decisions. Yet the fact remains that much of the debt people find themselves burdened with is the result wanting the latest piece of technology or the bigger house, the faster car and designer clothes.

King Solomon wrote about the folly of materialism. "He who loves silver will not be satisfied with silver; nor he who loves abundance, with increase" (Ecclesiastes 5:10). For many, enough is just never enough. If your priorities are material, ask yourself if those physical items are really the key to a productive and happy life. Debt and stress often go hand in hand. That momentary rush from a new purchase may quickly be replaced with anxiety, worry and fear if it results in greater debt.

While it is not the only factor at play, one of the keys to escaping debt is to learn to be content. Contentment does not mean we don't strive to improve ourselves or our economic situation. It means learning to find happiness that is not dependent on the material aspects of our life. Learning to be content is vital to escaping the personal debt crisis.

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