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Who Do You Owe?

Everybody owes. Graduating students, ostensibly enlightened, are increasingly burdened by banks or Alma Mater. Mortgage-poor is a modern malady more common than mumps and measles combined.

By Kevin Somers
Published November 04, 2008

I see, I covet, I get, I debt, I regret, and then I fret. If this is a recurring theme in your life, you’re not alone; debt loads have grown exponentially in Canada. Some talking heads tell us were OK because we haven’t stooped sub-prime, as the Americans have, but we’ve stooped pretty low. Household debt reached 100.4% of disposable income in 1999. An English proverb, which I subscribe to, states debt is the worst kind of poverty.

The wrath is (coming) here, too.

Everybody owes. Graduating students, ostensibly enlightened, are increasingly burdened by banks or Alma Mater. Mortgage-poor is a modern malady more common than mumps and measles combined.

As with any issue, there are varying perspectives and many experts maintain there is little to fear by the pay-eventually mentality Canadians have developed. They argue the value of assets (particularly in real estate), better pensions, and lower interest rates offset the burden of debt.

Their opinions are usually predicated on a stable economy and continued buoyancy in real estate prices, however. The economy is in the tank and if you drive through any combination of small, medium, or large city, town, village, or hamlet in this country, you’ll see a new subdivision. I’m no expert, but I’d say the market is flooded.

In Ontario, where the manufacturing sector is rapidly vanishing, the only thing we make anymore, it seems, is expensive houses of poor quality and box stores. How is that sustainable?

Canucks spent about $39 billion using Visa or MasterCard 1990, but, by 2004, that figure had risen to $170 billion. This wouldn’t be bad news if balances were cleared at the end of the month, but increasingly, that’s not the case. Between a third and half of credit cards carry a balance and many users are unable to pay the monthly minimum.

Credit cards were only introduced to Canada in 1968 and it was civilized arrangement then; banks issued cards to reward good customers who would pay off the charges faithfully.

Obviously, the industry changed, most dramatically in the 1990s, and there are now hundreds of institutions issuing credit to anything: in 2004, Canadians received almost 192 million credit card offers in the mail, about six per man, woman, or child. In Many stores, desperate people try to give them away. From cradles to cremations, it all goes on plastic.

With lenders and retailers competing ruthlessly for business, standards have dropped like pants. Borrowing money is easy. The rub is paying it back.

Fallout from the lending and spending spree is obvious as personal bankruptcies hit record numbers. Debt servicing, debt management, collections, credit counseling, and repossessing have all become major industries.

I remember reading a New Yorker article years ago about an American who made a billion, lost it, then made another billion (the first person to do so). He’s in the cheque cashing and payday loan industry.

The details are sketchy, but I’ll never forget his shameless quote about his business. It is, he said, “Screwing the wheels off the poor.”

In Canada, limousine liberal, Stan Keyes, is proud to represent the industry as a lobbyist. What a party.

Even if your situation isn’t dire, nearly every expert agrees that reducing debt is a good idea and it’s not as difficult as it seems.

Stanley J. Kershman, an Ottawa lawyer and specialist in bankruptcy and insolvency law, is the author of Put Your Debt on a Diet; A Step-by-Step Guide to Financial Fitness.

Kershman, who grew up in a one bedroom apartment and started working in his parents’ dry-cleaning business when he was eight, puts his professional and life experiences into a well-written book that could change your life, without hyperbole. It provides easy-to-follow steps to reduce debt – and stress – load with a clearly explained rationale for each step.

For example, Kershman encourages readers to write down all expenses for a month; every single penny spent. “If you’re like most people, it’s quite possible you’ll be shocked at the difference between what you think you spend and what you actually do spend.”

Education always makes a difference. If you have a credit card, line of credit, or creditor calling in a loan, read something like Put Your Debt on a Diet.

If you learn how to use budgets and credit wisely, it’s inevitable you’ll be better off. You owe it to yourself.

Kevin Somers is a Hamilton writer.

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By Cityjoe (anonymous) | Posted November 09, 2008 at 00:55:01

What do I currently owe? $385.42, & I'm o.k. with that. :-)

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By A Smith (anonymous) | Posted November 12, 2008 at 15:53:52

There is no doubt that debt is one of those temptations in life that probably causes more harm than good.

Rather than use other people's money to make our life better, we should harness the power of our desire to get our own wealth.

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By Ryan (registered) - website | Posted November 12, 2008 at 16:21:09

Taking on debt is perfectly reasonable when it is used to amortize capital purchases over time (e.g. a home).

It becomes a problem when it is used to pay for unaffordable consumer non-durables.

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