Household Debt: Not Just an American Problem

Household debt…it has been the bane of American families for the last few decades. Though it’s tempting to point to Fifth Avenue and Hollywood influence, household debt is not only an issue in the USA.

Nearly all developed countries are struggling with household debt. Canadians, for example are generally known to be a conservative bunch when it comes to spending. It’s true they managed to avoid the sub-prime mess, but Canadian household debt levels haven’t fared much better than their American neighbors to the south. Unfortunately, financial education is lacking throughout most of the debt-ridden developed world.

Household Debt in Canada

A new study by the Vanier Institute of the Family in Ottawa shows some sobering statistics about Canadian household debt. There has never been a higher debt-to-income ratio in Canada.

As of 2009:

The average Canadian household debt has grown to $96,100.
They found the highest ever debt to income ratio of 145% in Canadian households.
59% of those surveyed said that household debt was high enough that they would be in trouble with even a one week delay in getting their paychecks.
The increase in household debt has contributed mortgages that are three months or more in arrears. 50% more compared to 2008.

The report suggests that by 2011, 1.3 million households in Canada could have enough household debt to be at a dangerous level. Debt is not just an American problem. All over North America and anywhere credit is readily available, household debt is undermining economies and must be reigned in in order to move forward.

Can we expect governments to take care of household debt for us?

How well are governments doing with their own “household debt”? Many countries are printing and spending at unprecedented levels. The combined household debt of everyone in America is nothing compared to the amount of money that governments are borrowing and spending.

The same economic policies that prolonged the great depression seem to be prevailing…and household debt in the late 1920′s was no where near the levels of households today. Economies and governments are in precarious financial situations all over the world. Expecting that they will be able to take care of any of your needs in the future is a stretch, especially household debt.

Household Debt: Take Control

Household debt is our responsibility…which means we have to find solutions for our own household debt problems:

Forget about keeping your household on par with the Smith’s household next door.
Stop getting into debt situations that will bury your household if interest rates rise.
Learn enough about your finances to make intelligent decisions about your debt.

The good news is that there are good debt solutions if you know where to look. The bad news is that there are certainly a lot of ‘bad’ debt solutions as well.

To control your household debt properly, it takes more than just a quick consolidation loan. More often than not, consolidation can be a bad idea. It can cost you a lot more than you think and leave you open to the possibility of accumulating the same kind of household debt you had before. It’s amazing how many people fall into this trap.

In order to take proper care of your household debt, you have to take the time to learn about your finances and investments. The problem is that most mainstream financial advisors need to learn as much as you do.

Find a company that specializes in household debt solutions. Someone that can how you concrete ways to eliminate your household debt in eight to twelve years…mortgage included. It is possible with the right plan.

One of the main reasons for the recent recession and the precarious state of economies all over the world has been the escalation of household debt in North America. If we each make an effort to take care of the debt in our own households, we’ll create stronger economies for our kids and theirs for many generations to come.

Roderick MacKenzie is a Top Tier Financial Education Consultant and Financial Investment editor at BusinessTM. One of his company’s specialties is accelerated elimination of household debt. Number two in his “Fortune-7: Steps to Financial Freedom” series.

Written by: Rod 02/19

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