Canadians are falling further into debt, data shows

Year over year a growing number of Canadians have fallen into debt.

Many Canadians are living pay cheque to pay cheque, but new data suggests it’s even worse for a growing number of families that are falling behind every month.

“It’s no longer pay cheque to pay cheque; it’s bill to bill and when people are in financial difficulty a lot of times it’s a pick and choose what bill you are going to pay,” says Paul Ihnatiuk, BDO Canada vice president.

Ihnatiuk explains that data shows more Canadians are missing loan payments at a faster rate than taking on new debt.

“Consumer debt in Canada has hit $2.55 trillion and the average nonmortgage debt rose to $21,859. In the Maritimes, amongst Nova Scotians, the nonmortgage average sits at just over $21,000 and that’s an increase of three percent,” says Ihnatiuk.

He explains that delinquencies in Nova Scotia are also up 5.2 per cent. New Brunswickers are falling even further behind with delinquencies being up nine per cent compared to last year.

P.E.I. saw the largest increase in nonmortgage debt being $24,000, which Ihnatiuk explains is higher than the national average.

Tina Powell, a licensed insolvency trustee with MNP Debt, adds that the number of Maritimers living in debt increases year over year.

“About 86 per cent of people are being cautious about taking on new debt because they don’t have the ability to repay it,” says Powell.

She explains that many are facing mortgage renewals and rent increases, both having substantial impacts on their monthly budget.

“While many have made necessary adjustments to their budgets and to cut out unnecessary items and decrease their living expenses, many don’t have a cushion to deal with these increased costs,” adds Powell.

Doris Asiedu with Credit Canada says she knows people are living pay cheque to pay cheque even prior to the interest rate hikes.

She has spoken with a number of clients who are experiencing inadequacies in their income.

“I see about six or more clients a day and about two out of the six would say things are tight and one pay cheque away from a disaster,” says Asiedu.

She explains that there are a number of reasons why people are struggling but a lot is to do with cost of living and incomes not keeping up.

“Not having adequate income to sustain their families, people are working hard but the paycheque isn’t enough, and there is an underlying reason for lack of financial literacy,” adds Asiedu.

Ihnatiuk also explains that debt is growing faster in Canada than incomes are.

“Household debt is now at a rate of 173.9 per cent. What that means is on average when Canadians earn a dollar of disposable income, they now owe a $1.74 in debt,” say Ihnatiuk.

Ihnatiuk states it’s even more concerning that Canadians are struggling to manage their debt.

“Nonmortgage delinquencies are at a level that we have not seen since 2009, in fact 2009 is when we had the great recession,” says Ihnatiuk.

Compared to what BDO saw last year, Ihnatiuk says Canadians are struggling and falling further into debt and they just can’t maintain their payments anymore.

“They’re taking debt from one credit card so they are taking a cash advantage and they are paying it for a minimum on another,” explains Ihnatiuk.

These experts say it’s important for people to budget the best they can and if they need help not to be ashamed to ask for it because they are not alone, and many are going through the same struggles.