“Statistics Canada reported Friday that the ratio of household credit-market debt to disposable income, the key measure of the debt load, rose to 165.4 per cent in the final quarter of the year, …..That means that at the end of the year, households held more than $1.65 in debt for every dollar of annual disposable income” (Parkinson, 2016).
THAT IS A LOT OF DEBT……In 1996 the debt to disposable income ratio was a lot lower at 94.3%.
A little bit of debt isn’t going hurt, right? So many consumers first thoughts. But that is just where it starts. Before they know it, they have thousands of dollars of credit card debt. Everyday Canadians seem to keep piling on more debt.
DEBT IS BAD, IN SO MANY WAYS
It is stressful
Can compound on itself, generating more debt without you even spending money
You pay way more than the initial purchase price of any given item
It prevents you from creating savings
It can hurt your credit score
It Traps you
IT TRAPS YOU
IT TRAPS YOU
A lot of people are terrified at the thought of losing their job. Why? Because they have bills to pay of course! No job, No money, No way to make payments. Bad news. How would it feel to be in a position where you could leave your job at the drop of a hat with no worries of having to find a new one for a few weeks, or a few months, or a few years? Add up all your monthly bills, the necessary ones. The ones you would have to keep making payments on even if you quit your job. Mortgage, utilities, credit cards, line of credits, groceries, ect. Do not include things like, cable, phone bill, internet. These are things that you could potentially cut if need be. After you have added all that up, take that number and divide your total available cash with it. Savings account, chequing account, tfsa, ect.
So, let’s say you have calculated total monthly payments of $3,000
And let’s say you have $30,000 of saved money.
$30,000 / $3,000 = 10………You have 10 months of TIME.
The number you get is the true definition of how wealthy you are. Measured in TIME. Because time is the most valuable thing in the world.
3 years and 3 months. This is my wealth. What is yours?
Now the real question. How do we acquire more TIME?
There are many different ways that you can increase your wealth. But for now, we will focus on one. ELIMINATE DEBT. As you start eliminating debt, it reduces your total monthly payment, and in turn, immediately adds to your total amount of time.
Here is a great article on some ways to start eliminating your debt.