
Many Canadians are living on credit rather than staying within their means - geodel
https://thewalrus.ca/canadas-middle-class-is-on-the-brink-of-ruin/
======
geetfun
There's good debt and then there's bad debt.

Good debt is one where you use other people's money to build your own wealth
in appreciating assets.

Bad debt is where you borrow on credit to buy yourself a momentary
satisfaction, like a trinket.

Most people think they're richer than they actually are. Which is why it's so
common for people to "spoil" themselves. Learning to live cheaply is a skill
and takes a bit of pride swallowing as the people around you live more
lavishly on less income.

Unfortunately there a lot of people who are quite a bit overconfident about
their financial state due to swollen housing prices.

~~~
bluGill
It is hard to live within your means when you see everyone else around you get
nice things. I know that when I retire (possibly early) I will be glad I saved
all my life as I can afford more nice things when I have time. However there
is the desire for now.

Worse, nothing is guaranteed. I knew people who died young. All my savings
will be wasted if it turns out I'm one of those who don't make it to
retirement age. The best thing to do could be charge my credit cards to the
max and enjoy life as best I can now - letting my estate be bankrupt. We have
no way of knowing until after I die what I should have done.

~~~
J-dawg
I know exactly what you mean. I've been slowly moving towards a "Mr. Money
Mustache" style of frugal living, but I still wonder whether I'm doing the
"right" thing. Maybe I'm missing out on all sorts of opportunities to enjoy
life and grow as a person.

I do, however, look at friends who make significantly more than me and see
that their lifestyle has grown proportionately with their income. Many of them
could probably retire early if they embarked on 5-10 years of MMM-style
extreme frugality, which to me seems like a missed opportunity.

~~~
Chris2048
> Many of them could probably retire early if they embarked on 5-10 years of
> MMM-style extreme frugality

Depends on where the wealth comes from, and if it's related to the spending of
money (networking in expensive bars, for example).

There's another argument: what is retirement? Time spend on 100% leisure? But
in this case we live frugally (100% work) in order to get that retirement. the
reason we take so long to retire if we _don 't_ live frugally, is that we
split time among work and leisure - i.e. we are partly doing what we'd do if
we retired anyway.

~~~
nunez
Exactly what I've been saying.

I actually enjoy working. I don't see myself _not_ working when I retire. It
will probably be more casual work at my own pace, but I'd still like to be
useful.

Many of the "retire early" people I've interacted with on /r/personalfinance
are doing it because they hate their jobs and want to spend their life
travelling or otherwise not working. To do that, they spend as little as
possible (and save as much as possible).

Many people are okay with that. I'm not. I tried simulating that again for the
first few years out of college to pay down some student loan debt. I stopped
the minute I was able to refinance all of my existing debt into one with lower
interest.

I think I dislike living frugally so much because I grew up poor and being
poor sucked.

~~~
J-dawg
I understand what you mean. For me "retirement" would be about having enough
FU money to provide a basic income, so that I could choose to work on things I
find fulfilling.

Then again if you already find your work fulfilling and expect to continue to
do so, I understand that there wouldn't be the same urgency to retire (with
the caveat that everyone should save _something_ for retirement as well as
having an emergency fund).

------
mabbo
It's not surprising that people get into debts like the ones described in the
article. Credit card companies _want_ you to be terribly indebted to them.

I had an uncle who suffered brain damage from an aneurism that left him unable
to handle money- memory issues, disorganization, etc. He was never going to be
able to pay back credit cards and my mother (his PoA and lawyer) informed the
credit card companies of this. They sent the cards anyways. They wanted him to
go into debt, hoping that his family would bail him out.

There's more profit in taking advantage of people than there is in being a
decent person. Unregulated free markets cannot account for that reality. We in
Canada have some regulations, but clearly not strong enough ones to prevent
this kind of predatory lending.

~~~
turc1656
Unregulated free markets? The banking/loan industry is a heavily regulated
industry in both Canada and the US.

Yes, predatory lending exists and it may be immoral, but it still requires the
other side to agree to it. And keep in mind that the other side frequently has
no intention/ability of paying. That is at minimum acting in bad faith and is
usually against the law, even if there is no misrepresentation of income,
assets, etc. In many jurisdictions, merely taking out an unsecured loan
without the intention of actually paying it back (regardless of what the
lender says or does) is technically illegal.

~~~
josephdviviano
Implying people are actually rational.
[https://www.theatlantic.com/business/archive/2013/01/the-
irr...](https://www.theatlantic.com/business/archive/2013/01/the-irrational-
consumer-why-economics-is-dead-wrong-about-how-we-make-choices/267255/)

~~~
turc1656
I didn't mean to imply people were rational. Not only are people frequently
not rational, there is also an information asymmetry that is involved with
most financial/legal/medical decisions that would make people elect choices
that are not in their own best interest.

I wasn't trying to say they were rational, merely that they are still required
to agree to the terms of the predatory lending and they should still be
considered responsible for their choices. Also, I wanted to point out that
they frequently are not the innocent victims that they are made out to be.
Many times they are just as bad as the lenders simply because they don't
intend to pay. The lenders are just far better at inducing payment than
crooked borrowers are at getting away without paying the money back.

Look at student loans. Nearly half of all students think that their loans will
be forgiven eventually. Maybe they are right, maybe they aren't. No one knows.
But the point is that they are taking on the loans because they don't expect
to be held liable for and required to pay back in full.

------
Taylor_OD
"Around Christmas, they decided to take the children to Mauritius to visit
with family. That trip cost them $12,000, ­shaving their nest egg down to
$9,000. Kervin wasn’t worried."

Just starting the article but... It seems like this is a pretty big issue. I
couldn't imagine taking a 12K vacation. Especially if it was going to bring
the total savings for my family down to 9K. That's just poor financial
planning.

~~~
dghughes
Everyone I know goes south every single year. The Dominican Republic, Cuba,
Mexico but also Thailand, Australia. All they do is sit on a beach and drink
until blackout drunk.

I have never gone on a trip to any of those places or anywhere else because I
save my money (I'd rather Rome or Tokyo). Yet people with absolutely no money
or on unemployment, a dozen kids etc. It seems everyone goes no matter the
cost and every single year.

I know people say "travel now while you can" but I don't want to be 65, poor,
an alcoholic, and with with blond hair, bald and blue eyes I'd probably end up
with melanoma.

This is the same crowd that goes to Timmies two or three times a day yet poo
poos Starbucks.

~~~
olegkikin
They do it to escape from reality. Day-to-day grind is unbearable.

~~~
daxorid
Labor has never had it easier than it does right now in 2017, in a G8 country.

The mental gymnastics required to tell a 1930s sharecropper, an 1890s coal
miner, or a 1770s battlefield medic that writing javascript in an air-
conditioned cubicle for 45 hours a week is "unbearable".

Vacations are absolutely a luxury. A luxury that is increasingly "required" by
modernity with Facebook and Instagram posts convincing people that their lives
are less than that of others.

~~~
jacquesm
Truck driver I know in Canada does 12 hour shifts. It's _just_ enough to make
ends meet at minimum wage.

Labor has it easy when you have marketable skills. If you don't you will end
up with a real problem.

~~~
miguelrochefort
Fortunately truck drivers are well paid.

~~~
jacquesm
Haha. That's so funny. $11.40 / Hour driving a dump truck on the local beat.
Most people on HN would not even get out of bed for a wage like that.

~~~
miguelrochefort
> The 2016 full-time average hourly wage rate for transport and heavy
> equipment operation and related maintenance occupations, which includes
> truck drivers, is $21.00. The 2016 corresponding median weekly wage rate is
> $950, giving an approximate full-time annual salary for this employment
> group of $49,000.

~~~
brewdad
So significantly less than the median wage. How exactly does that make truck
drivers "well paid"?

~~~
miguelrochefort
Median income is less than $40,000.

------
ktzar
I'm sorry, but people not having just a basic understanding of how debt works
is not 'the system's problem.

After reading the article I can identify a few things that would've raised a
huge red alarm in my head if it was me: \- Don't spend $12k in holidays right
after you're fired and have a couple kids. \- C-Sections are quite normal
these days... It'd great that you want to be with your wife and the new
babies... If you can afford it! Most people can't. \- Using loans that have an
interest of 590% APR... Sorry, you have to be quite ignorant to sign that.
Even the worst credit cards have an interest that's a fraction of that. That's
definitely not _cheap_ credit.

I know many Canadians... And people with that little financial knowledge is
definitely not that common. And yes, most people take more debt than what they
should, but the case portrayed in the article should give way to a very
different headline "Couple chains badly financial decisions".

~~~
sbarre
This ties back to something I've been saying for years: High School should
include a basic course in financial education.

Understanding budgeting, interest on loans & credit card debt, how a mortgage
works, saving for retirement, etc...

So that once you get into the real world, you aren't learning this stuff
through trial and error.

~~~
sebtoast
We used to have that in Quebec when I was in high school (in the 90s) but they
took it out a couple of years ago.

I remember doing budgets and figuring out how much it would cost to leave your
parent's place, rent an apartment, buying fridge, furniture, etc. to help you
prepare for being an adult.

They're talking about adding it back now.

~~~
ferdbold
Yes! It was called Family Economics, and was by far one of the best classes
I've ever had.

They even taught you basic cooking and sewing. Our final cooking exam
consisted of every team of 2 students being given 20$ and an hour and a half
to go to the grocery store across the street, buy ingredients for a pizza and
then cook it, without assistance from the teacher. You were graded on budget,
teamwork, time taken and the quality of the cooking.

I still think that is a genius idea for an exam.

~~~
sebtoast
That's it, "Économie Familiale". We didn't have a grocery store near our
school and don't remember that well but I think out school provided the
ingredients, or maybe we brought them from home?

If you can read French, I found these documents that are interesting while
researching the subject:

[http://collections.banq.qc.ca/ark:/52327/bs1561252](http://collections.banq.qc.ca/ark:/52327/bs1561252)

[http://collections.banq.qc.ca/ark:/52327/bs41338](http://collections.banq.qc.ca/ark:/52327/bs41338)

The second one says it's approved by the Catholic and protestant counsel for
superior education...?
[http://cse.gouv.qc.ca/FR/Historique/index.html](http://cse.gouv.qc.ca/FR/Historique/index.html)

------
jacquesm
This should surprise absolutely nobody. Canada's middle class gets to bear the
brunt of the costs of running the country, it would take a much larger
population to be able to do so responsibly, on top of that your average
Canadian spends far more on consumer goods than is probably wise given their
income. In places where the future arrived a little early you can already see
this, I've known people to burn up their furniture and inner walls of their
house to stay warm in winter. Todays middle-class has a fair chance of ending
up in the poor house or on the streets when the final bills arrive. Some parts
of Canada make Northern Michigan look good by comparison. Just drive around
Northern Ontario for a bit if you want to have an idea of what poverty in a
first world country looks like.

~~~
throwaway99951
> _Just drive around Northern Ontario for a bit if you want to have an idea of
> what poverty in a first world country looks like._

As someone born and raised in Northern Ontario, I have no idea what you're
talking about.

You want to know what modern poverty looks like, go to San Francisco.

~~~
bungie4
I work in Tech (programmer) in Sudbury.

Their is far more money here than appears on the surface. Years of 10,000+
miners making 100K+ per year + nickel bonus saw to a rather well off
retirement community and thriving big ticket item market. Yup, lots of them
borrowed to get there quickly. But it was also paid off quickly.

Now, that being said, Sudbury is a very different place 15 years later. The
vast majority of the mining jobs are gone, the infrastructure is falling
apart. But I wouldn't even come close to calling it poor. Is the future bright
here. Nope. But I wouldn't call lots of the major centers to the south
prosperous either.

Myself. I never had a CC until I was in my 40's. Even then, they are rarely
used, and, paid off immediately. Despite what I think is an artificially
inflated local housing market, I manage to save a significant chunk of my
income every month. The root cause of the debt problem, I think, is the lack
of education. Schools haven't taught 'money' in ages. Managing a household is
no different than managing a small business. People have been purposely NOT
taught how to manage their money by our education system, it borders on the
negligent.

~~~
jacquesm
Sudbury is kind of special on account of a certain comet landing there.

~~~
bungie4
Doesn't matter if its a nickel delivered from space, or timber or diamonds or
gold. What matters is that it's a resource based economy that has been sold
and sold resold to different companies

Anecdotal evidence of money issues is my buddy who does repo's and is baliff.
Just before the economy goes into the tank as a whole, he's called it each
time because repo's and defaults shoot way up just before.

Unfortunately, he's very busy at the moment.

~~~
jacquesm
I'm very sorry to hear that. I spent 5 years in all in your beautiful country,
have spent many days in and around Sudbury and the Timmins area.

------
dgudkov
The story looks to me like an example of family budget mismanagement full of
red flags. Expensive trips, two kids in day care while 1 unemployed parent
stays at home, two cars, and very expensive payday loans on top of it.
Honestly, I have little sympathy here.

PS. If there is a problem with middle class in Canada this story is not a good
example of it.

~~~
prawn
The day care thing puzzled me. Surely either parent in between jobs could be
at least 0.6 FTE home with the children? Is the father assuming that's not
their role or being lazy about it? Schedule job interviews for the 1-2
days/week the kids are being cared for.

I'd also be cautious about trying to live away from family and friends who you
can rely on for spot support with childcare, emotional support, etc. I know
it's not feasible for all, but that cost would add up.

------
geodel
I see the same pattern in so many nations. Marketers have triumphed all places
where people have or don't even have any money to spend.

~~~
opportune
Not only that. Rising wealth inequality and cheap credit is pricing the middle
class completely out of asset ownership. Disposable income is staying constant
while asset prices (and related things like rent) continue to rise. This isn't
just a US phenomenon.

~~~
J-dawg
This is what leads to the "avocado toast" situation [0].

I'm conflicted on what to think about this. He comes across as arrogant, and
made a very poor choice of item to illustrate his point, given how many
avocado toasts you'd need to forgo to save a deposit for a house. It's also
true that lack of affordable housing is mostly a political failure.

But I look at young people in the UK and kind of see what he means. Home
ownership (and any sort of real, sustained _wealth_ ) seems like such a
distant prospect that people would rather just indulge themselves now.

[0]
[https://www.theguardian.com/lifeandstyle/2017/may/15/austral...](https://www.theguardian.com/lifeandstyle/2017/may/15/australian-
millionaire-millennials-avocado-toast-house)

~~~
TheCoelacanth
Where the "avocado toast" narrative fails is that young people now are
actually spending a smaller portion of their income on eating out than
previous generations did at the same age. The categories they are spending
more on are things like healthcare, housing and education.

------
jessriedel
The anecdote about one individual's credit problem the author uses to lead the
article is particularly long and meandering. I can't fathom why anyone thinks
this is an effective way to learn about anything.

~~~
cjf4
Not to mention that it is a couple living in the most expensive part of Canada
making pretty basic yet big impact financial mistakes.

------
hunterjrj
Financial literacy should be a mandatory topic in a high school curriculum.

~~~
digitalengineer
But then the students would realize how much in debt they will get by going to
the university. No joke, see this unsustainable trend:
[https://en.wikipedia.org/wiki/Student_debt#/media/File:Stude...](https://en.wikipedia.org/wiki/Student_debt#/media/File:Student_loan_debt.png)

~~~
GhostVII
That is from the US, Canadian universities are much more affordable.

~~~
refurb
That doesn't seem to impact debt levels much. Average US student debt is
$37K.[1] In Canada it's $26K.[2]

I would have guessed it was much lower in Canada.

[1][https://studentloanhero.com/student-loan-debt-
statistics/](https://studentloanhero.com/student-loan-debt-statistics/)
[2][http://www.ibtimes.com/student-debt-2016-canada-graduates-
wo...](http://www.ibtimes.com/student-debt-2016-canada-graduates-wont-have-
repay-loans-until-their-income-hits-2439522)

~~~
GhostVII
26k seems pretty good to me, plus if you convert the 37k USD into CAD, it's
more like 50k. If you are in a good program, I think 26k is perfectly fine,
it's the students going into debt for programs that don't get them a job who
are the issue.

~~~
refurb
Why would you convert the currency? Canadians pay for things in CAD and
Americans in USD.

~~~
emilecantin
Yeah, but prices in CAD !== prices in USD. Much of the stuff in stores is
imported, and a weak CAD means higher prices (e.g. gas is around 1.15$ / L at
the moment, so ~4.36$ / gal, which you might find expensive).

------
carsongross
We need to bring back a long lost concept in economics:

Usury

------
gthtjtkt
Seems to be down (giving me 503), hopefully this Google cache link works:
[https://webcache.googleusercontent.com/search?q=cache:7E6mLP...](https://webcache.googleusercontent.com/search?q=cache:7E6mLP92gQwJ:https://thewalrus.ca/canadas-
middle-class-is-on-the-brink-of-ruin/+&cd=1&hl=en&ct=clnk&gl=us)

Maybe this text-only version is better:
[http://webcache.googleusercontent.com/search?q=cache:7E6mLP9...](http://webcache.googleusercontent.com/search?q=cache:7E6mLP92gQwJ:https://thewalrus.ca/canadas-
middle-class-is-on-the-brink-of-ruin/&num=1&hl=en&gl=us&strip=1&vwsrc=0)

mirror, archive (for ctrl-f)

------
vinceguidry
One generation builds wealth, the next does everything they can to tear it
down. Seems like the way of the world. I stopped worrying about the middle
class when I realized that they are the architects of their own ruin.

~~~
chrisbennet
There is a difference be creating wealth and _capturing_ it. The fellow who
builds something creates wealth. The fellow who invests in assets generally
does it to capture wealth i.e. make money off other peoples labor.

~~~
beaconstudios
and there's nothing wrong with that, if investing means that more people can
build wealth for themselves. Starting a business ain't cheap.

------
jksmith
Modern economies depend heavily on a middle class. Any currency not based on a
fixed supply depends on the middle class to launder money for it.

~~~
stephen_g
I don't think that really stacks up. A lot of the really interesting research
into non-mainstream monetary theory (i.e post-Keynesian/modern monetary
theory) is saying the opposite - that the size of the money supply is actually
hugely important, and not having enough at certain times has caused as many
problems as other times when there has been too much.

The money supply really needs to be flexible to account for the amount of
goods and services produced by the economy. Too much and you have inflation,
too little and you get stagnation.

So I don't believe that a currency based on a fixed supply of money would ever
actually be workable long term (and unsurprisingly gold and other commodity
backed currencies have never lasted).

~~~
jksmith
Not suggesting merits of either system. Just saying that if the supply is not
based on some gold standard scheme, then for all intents currency is just
paper when it's printed. It assumes value when paid in wages, loaned, etc.
Effectively, it has to be laundered. The middle class is best at laundering
because their ratio of earning power to debt to spending power. If the middle
class shrinks, a money system that depends on it will lose value.

------
randomgyatwork
As a Canadian making a decent wage, but not living outside my means, I guess
this article explains why I feel like I'm being left behind.

I had a coworker who got a condon and was paying 45% of his income for it, it
made no sense. So I keep renting and wasting my money as people say, but at
least I wouldn't go bankrupt if something bad happens.

------
ChuckMcM
This is a scenario that plays out repeatedly. It always ends badly.

------
curioussavage
So does Canada still have the highest household debt in the western world?
Higher than their GDP?

Do a search and all you see are articles downplaying it. Really shameful,
looks like Canadian publications are just as shady as ours.

Does this hurt the assumption that subsidized health care and college was
supposed "fix" this?

~~~
nathanvanfleet
Your last statement is kind of incoherent. I guess you are just trying to
justify USA's lack of that.

"Canada has a problem with credit, haha, looks like their... subsidized
health-care didn't help them out of that one as they thought it would!"

~~~
refurb
Maybe I'm wrong, but I'm assuming the OP is referring to the common claim that
American bankruptcy is so high because of medical costs.

It would seem like even with healthcare for all, bankruptcy is still a problem
for people.

