By Sheila Walkington, Co-founder and CFO Money Coaches Canada
How would you react if I told you that many of your friends are in debt? You probably wouldn’t be shocked. You’d probably nod your head in agreement, and say something like, who isn’t? Because the likelihood is you are probably in debt too. According to Statistics Canada in 2012 71% of all Canadian families had some debt. Gradually the stigma around debt that our grandparents would have felt has softened into an irritating, but accepted side effect of the good life.
The odd thing is, you would think that the less money you made the more likely you would be to be in debt. Not so. According to a recent May 2015 article by Theresa Tedesco in the Financial Post; “Today, households with at least $100,000 or more in total income account for 37 per cent of all debt in Canada. Households with income of at least $50,000 but less than $100,000 represent 38 per cent.”
I think there are two factors at work here; rising expectations, and hefty demands on time.
Entitlement often brings up images of a spoiled child demanding something for nothing, so it doesn’t feel like entitlement when we work hard, earn a good living and want to have the things our culture tells us are the fruits of success. But expectations are so high, for cars, vacations, home renovations, designer fashion, and ever updating technology, that when even an excellent income can’t keep up, a sense of entitlement or expectation to have it anyway, creeps in and debt starts to rise.
Debt has many people working harder and longer, but most people don’t mind. Most high earners enjoy their careers. They also enjoy life; eating out, attending sporting events, cruises, tropical beach holidays, yoga classes, going to the gym, training for a marathon, taking kids back and forth from activities, hobbies, entertaining friends, going to movies, concerts, and plays. Everyone is really busy. Who has time to think about the long term effect of debt? Who even wants to think about debt at all? If everyone is in debt, it can’t be too bad can it? It will all work out, won’t it?
But the hard truth is that interest rates won’t stay low forever. Debt that seems manageable now could become a hardship or worse, it could compromise your financial future.
As a nation we are also modelling unreal expectations for the next generation by acting like it’s possible to have it all without any hard choices or trade-offs. Because most of us know it’s smoke and mirrors. Many people with debt may look lighthearted as they confirm their flight time on their iphone in an upscale restaurant, but as debt mounts so does a quiet dread that often gets pushed aside.
What I like people to know is that it isn’t a choice between enjoying life or giving up the perks and pleasures of your hard work and income. Most people with debt are not enjoying life as much as they could. Many people with debt would trade the things they thought they couldn’t live without in exchange for peace-of-mind around finances. The first step in turning things around is being honest with yourself about how much debt you have and what impact it’s having on your financial, physical and emotional health.
Debt is stressful either consciously or unconsciously. It often creates marital and family conflict and is definitely not a necessary side effect of living well. When we don’t have a plan to have our money support our goals, we run the risk of supporting our whims instead.
I enjoy sitting down with clients and helping them get very clear on what they really want, now and in the future. Once they know their goals, setting up a spending plan that sets them on a course to meeting those goals and to becoming debt free, creates far more excitement and focus than another dinner out or new tech gadget ever could.
If you are tired of normalizing debt in your life, contact one of our coaches for a free consultation.
