A recent survey conducted by Ipsos on behalf of MNP LTD highlights just how debt-reliant many British Columbians have become.
When asked, 50% of British Columbians with consumer debt said they believe they would need a significant increase in their household income in order to live debt free.
On average, that increase would ideally hover around the 35% mark.
“It used to be that people would save for big purchases and have some money tucked away for emergencies,” said Grant Bazian, President at MNP LTD, Canada’s largest insolvency practice.
Now, he said, “Canadians look straight to HELOCs (home equity line of credit) or credit cards or other forms of debt when it comes to paying for unexpected car repairs, home maintenance, and even basic household expenses.”
Contributing to this problem are factors such as a lack in personal savings and increased reliance on debt.
The survey asked British Columbians who they blame for the amount of consumer (non-mortgage) debt that they currently have.
A total of 45% of respondents blamed themselves. However, 18% said that others are to blame for the debt they currently have, pointing the finger at their spouse (12%) and government taxation (7%), among others.
“People who blame themselves often feel like they have to deal with the debt alone,” said Bazian. “The shame and guilt prevents them from taking action or asking for the help that they might desperately need.”
The survey results are particularly troublesome for Canadians already struggling financially, he added.
Across Canada, lower income households and those who are technically insolvent said they would need to make 49% more income in order to live debt-free.
“When debt becomes a financial survival tool it makes people particularly vulnerable to exploitative and high-cost lending,” said Bazian. “They have to spend more to service their debts – particularly as interest rates rise – so they have less money to make ends meet. And so begins the vicious cycle of debt.”
He added that while taking on more debt might seem like the fastest, easiest solution, “it is not always” the most appropriate.
“Lenders are telling you how much you can likely borrow, not necessarily how much you can comfortably afford,” he explained. “It’s important to assess your overall financial situation carefully before taking on more debt and, if in doubt, speak to a professional.”