The much hyped “Great Recession” seems to have lost much of its steam with more and more prognosticators announcing its end, or, at least, its imminent demise. The debate amongst economists and politicians will likely go on for some time about how bad it really was, but chances are some new flu epidemic, or other news event will soon capture the headlines and the recession will soon fade from our collective memory. But should it?
The big question is whether or not we learned anything from the past year. Remember the fear, the doubts, the insecurities? Were the promises to save more, spend and invest more prudently, plan better, get out of debt, all a waste of time? Do we now blithely go about our business with a continuing binge of unsustainable spending and indebtedness that impoverishes us both financially and spiritually?
I recently came across a report from the Vanier Institute of the Family called, The Current State of Canadian Family Finances, by Roger Sauve that reinforced my concern that the average Canadian is not out of the woods with more pain to come.
Here’s where “the Jones” are at:
Net worth:
- The average household net worth is now $393,000 –up from $240K in 1990
- This increase is largely due to real estate growth
Income and Spending:
- The Good News: Average income is $65,000 — up 11.6% since 1990
- The Bad News – Spending increased twice as fast (up 24%)
- More bad news: Debt increased more than 6 times faster than income (up 71%)
Savings:
- We save 3% of our disposable income in Canada. (This compares to 1% in the USA, and 10%+ in France, Germany & Australia.)
- Only 27% of Canadian tax filers contribute to RSPs in 2008
Debt:
- Average household debt is $90,000
- The ratio of consumer and mortgage debt to disposable income is at 127%. This is just marginally lower than the USA (and exactly the same as in the USA in 2006 just before the US housing bubble burst)
- About 50% of people with incomes between $30,000-$80,000 struggle to keep debt under control
- Insolvencies are expect to be around $120,000+ in 2009 — almost 3 times the number in 1990
- The number of insolvencies in the 55+ age group are climbing fast than in other age brackets
- The #1 reason for insolvencies in the over 55 group? Overextension of credit
Credit cards:
- There are more than 64 million Visa and MasterCards in circulation. Canadians hold an average of 2.6 cards each
- The number of credit cards transactions increased by 60% from 2002-2007, with debit card usage only going up 15%, and cheque writing declining by 15%.
Tough news is never what we want to hear. As Canadians we really need to take a hard look at how we spend, save and use debt. And despite what we might like to believe, we’re not much better than the US when it comes to savings and debt.
Guess these days keeping up with our neighbours isn’t so great after all. – Karin Mizgala
Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.
