It Cant Happen To Me Stop Living In Debt Denial

2018-05-07   minute read

Randy Kobbert

Debt Solutions

Lifestyle Debt

Mental Health Week is an initiative of the Canadian Mental Health Association. Taking place annually during the first week of May, it is a time for people from all walks of life to reflect, learn, talk and engage others about all issues relating to mental health.

Person looking at their computer in an office

Rich, poor or somewhere in between, financial wellbeing is an integral part of everyone's mental health. People who feel financially secure tend to feel more confident, less stressed and better equipped to perform to their potential in their daily lives. Conversely, those who feel financially insecure tend to feel the opposite — hopeless, despondent, constantly worried about how to make ends meet.

Too often, our emotions play a central role in our decision-making and bad debt is often the result.

We use spending and the (temporary) joy of buying new things to make us feel better when we're down. Shopping becomes an escape from the constant grind of daily life. When we're dealt a bad hand — job loss, relationship breakdown, increased living expenses — we try to offset the chaos by exercising agency and control over anything we can. Our credit cards are often the first and easiest victims.

Half of Canadian adults have been in debt since they were old enough to secure a credit card or loan.

There's a difference between good and bad debt. Understanding the difference is a crucial step toward breaking the struggle and taking charge of your financial wellbeing.

Good debts are those accumulated for the conscious effort to earn income and / or acquire assets within one's risk tolerance and ability to repay over a reasonable timeframe. Bad debts, on the other hand, are the result of spending beyond your disposable income to purchase goods and services you can't afford without a clear ability of plan to repay the resulting debt and interest charges.

Debt is extremely common in Canada and continues to get worse.

It's been all over the national media of late — the Bank of Canada and pundits across the country worry excessive consumer debt will negatively impact the likelihood of a sustained economic recovery. Rising interest rates over the past year have driven borrowing costs higher, especially for those with variable mortgages and lines of credit. Household debt has risen six percent over 12 months to more than $1.8 trillion. Excluding mortgages, the average Canadian owes $22,837. Including mortgages, they owe $1.70 for every $1.00 earned.

Safety in numbers or baseless optimism?

At the same time, consumers remain largely unconcerned about their ability to (at some point) repay the principle value of their debts. Citing confidence in a declining jobless rate and a continuation of near historic low interest rates, many are flirting with danger by ignoring the red flags.

Understand the warning signs of financial difficulty.

If you're experiencing one or more of the following warning signs, you may want to reconsider your relationship with debt:

  • You're spending more than you earn
  • You're facing legal action such as wage garnishment
  • You're using credit cards for necessary purchases (e.g. groceries, utilities, prescriptions, etc.)
  • You're at risk of losing your credit card privileges
  • You're receiving harassing collections letters or phone calls
  • You're experiencing significant stress due to financial problems

It's time to be proactive. Don't live another day in denial of your debt.

There are several available options to resolve your financial problems. Even taking small steps to improve your situation can offer peace of mind and an improved quality of life.

If your difficulties are not yet severe, you may consider creating a budget with line items built in for the systematic repayment of debts. You may also consider selling some assets to pay down your debts, working out an informal settlement with your creditors or obtaining a bank consolidation loan to secure a lower interest rate and limit the number of debts you need to pay.

If your problems have progressed beyond informal solutions, a Licensed Insolvency Trustee offers a Free Confidential Consultation and is specifically qualified to help. They can review your financial situation and help you navigate among the various legal options, including Consumer Proposal and personal bankruptcy.

The first step toward peace of mind is recognizing that your debt is controlling you and may in turn be affecting your mental health. From there, there are Life-Changing Debt Solutions to help you move forward.

Consultation icon