Increasing debt shapes up for a grim future

(BELLEVILLE, Ont. 06/16/11) Delima Whittle stands in front of K3 Credit Counselling in Belleville where she is the credit counselling coordinator. Photo by Jennifer Bowman

By Jennifer Bowman

More people in debt and fewer people saving money will lead to financial hardship in the future, says a local financial advisor.

“There will be more bankruptcies,” said Delima Whittle, credit counsellor coordinator of K3 Credit Counselling, “and when it’s time to retire, a lot of people will be living on the bare bones. There’s going to be nothing to fall back on.”

Whittle was voicing her concern for Belleville residents in light of a recent survey done by the Certified General Accountants Association of Canada. According to the survey, household debt in Canada has reached a record high of $1.5 trillion. More than half of indebted Canadians are borrowing just to make ends meet with day-to-day living expenses.

The problem in Belleville is credit card debt, said Whittle. Many people come in with a fixed income and some have difficulty making ends meet, but mostly they see people who are able to pay the bills, but can’t make creditor payments.

Credit card debt accounts for 65-70 per cent of the cases K3 credit counsellors deal with. For some there’s no hope of getting out of debt.

Ten to fifteen per cent of the cases they deal end in bankruptcy.

“People come to us too late, and there’s not a lot we can do or help them with,” said Whittle.

People hope to fix the problem on their own, said Whittle. They use all their savings and RSPs. If they’re out of work, they hope for work before funds run out, and when the funds do run out, they either they haven’t found work, or they find a minimum wage job.

Baby boomers are the fix-it-yourself generation who wait the longest to ask for help, and the older generation often gets a family member to call because of the stigma attached of not being able to take care of themselves. The younger generation asks for help sooner.

Age is not a limitation or requirement for debt.

“Nobody is exempt,” said Whittle. “We see all age groups. We see the young right up to the seniors.”

Everybody suffers, she said. Increased debt means there will be a decrease in lending as well as a decrease in retail sales. Like the recession in 2009 when people stopped buying, a lot of places went under.

According to the national survey, there are certain groups that are worse off including single-parent families, retired Canadians, and those with a household income of less than $50,000.

In Belleville, it mostly affects those who earn $25,000 or less in a year, regardless of their situation – single, married, with or without children.

The best method of prevention is to have a back-up plan, said Whittle.

Her prevention tactic is to prepare. Prepare for annual expenses such as car repairs, vacations, and gift giving. Figure out want you spend on these things each year and break it down to a monthly amount. The important part is tucking it away in a savings account until you need it for the purpose it was intended for.

Saving is decreasing in popularity though.

Fewer individuals have a retirement plan or savings of any kind, said Whittle. Some have used their savings in order to get out of a financial bind, including cashing their investments. Many have minimum wage jobs, so there are no funds to tuck away.

It’s a national trend too. Twenty-seven per cent of non-retired Canadians are not saving anything for their retirement.

“People just have to be more conscious of their spending habits,” said Whittle. ”They’re going to have to distinguish between needs and wants. In the long term people are going to have to change their lifestyle.”