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Hello, my name is Brittany and I have chosen the topic debt traps. A debt trap is a debt that is difficult/impossible to repay due to high interest rates for example. In this padlet you can expect to learn to about debt traps and how they affect Canadians.

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This video is about how Canadians are affected by the government raising interest rates. In the video they discuss how higher interest rates can affect Canadians ability to pay their debts. They also address some important facts about how it is important for Canadians to track their finances and stop overspending.

I chose this video because I think it is important to understand how things like interest rates can affect our debt. I also chose this video because it is about the Canadian government so it has relevance to something we should be following. Also because it shows the importance of understanding interest rates to help eliminate debt.

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Canadians in 'debt trap' due to rate increases

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A new survey finds that 33 per cent of Canadians say that rising interest rates could push them to bankruptcy.

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This video shows how many Canadians are affected by debt and how easily debt can happen to you. This video also covers how the Canadian government rising interest rates can influence Canadians car loans and house loans.

I chose this video because I liked how it showed how Canadians take on too much debt and that we need to be smarter with our money. It is important to not take on too much debt so that you don’t end up owing money at the end of every pay cheque. I also chose this video because it show how regular Canadians can find their selves in serious debt problems, especially when the Canadian government decides to raise interest rates.

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Canadians are swimming in more than $2 trillion of debt | Debt Nation

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In this video they interview a couple of young adults to discuss their debt trap experiences and they discuss debt trap Canadians find themselves in with credit cards. It talks about the importance of making payments on time and how when you don’t it can cost you to pay more. Also, in the video you can learn about how students’ loans can also affect your debt.

The reason I chose this video is because is shows how young adults are easily affected by debt traps and how east it is to catch yourself owing a lot of money to the bank

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In this video they discuss how two Toronto women found themselves in huge debt and how they got out of it. It shows how they had to work hard in order to pay off the money they owed.

I chose this video because it shows how two Canadian women overcame debt. They had to learn how to be smarter with their finances and how to make a living that isn’t pay cheque to pay cheque. I decided to include this video because I think it was a good way to show that there is a way out of debt traps.

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Getting into and out of deep debt | Debt Nation

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This picture is suggesting that the Canadian agriculture is falling into a death trap. I chose this picture because it shows how farm debt is rising. I found this informative because if farm debt goes up this could have a negative affect on Canada.

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This picture shows that Canada debt is rising. I chose this photo because I was shocked at how much it a risen since 1961. I think this is important to know because out governments debt can have an affect on Canadians.

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On this website you will learn about how to avoid debt traps. It is really informative and useful for your everyday life. It discusses how limiting your credit card usage and planning you spending can have a positive affect on your income.

I chose this website because I think it is important to know how to avoid debt traps to remain debt free. Knowing this information early on can really help Canadians avoid finding themselves overwhelmed in debt. Understand how to budget and plan spending can really be a useful skill and that is why I picked this

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BEFORE YOU KNOW IT THE DEBT TRAP CAN SNAP YOU UP

The debt trap is so easy to fall into that many people aren't aware they are in it until they cannot keep up with the bills nor balance their budget.

Last night while waiting for Mrs CBB to wander around the kitchen section at Canadian Tire I was hanging out with our son in the seasonal department.

We were testing out the various deck furniture that they had set up when I watched an older couple stroll by with a full shopping cart of goods.

Insert The Debt Trap

In an instant, a credit card rep for Canadian Tire swoops in and stops them with a credit card promotion.

They were intrigued not so much about the credit card but more about the 10% discount they would get off what they had in their cart.

The gentleman let his wife do the talking and joined my son and me in the garden furniture where we chatted about buying a $400 fire pit.

In the meantime, his wife had signed them up for a Canadian Tire MasterCard in minutes and they were on their way.

Perhaps it doesn't bother them to get the credit card just for the discount of the day even if they don't use the card.

I know some people who don't mind the added credit that will affect their credit score since it is all accounted for.

Credit Card Responsibility

The problem is when people fall into traps like the credit card bonuses and continue to use the credit card when they can't afford to do so.

Its times like these when consumers need to ask themselves how having extra credit on their plate will affect their financial situation.

The above is only one situation where you can easily fall into a debt trap without even knowing it.

It's so easy to be persuaded by savings, coupons and discounts that we always have to dig deeper to find out what's in it for them.

For credit card companies they bank on you not paying your bill in full earning them far more than that measly savings promo they initially offered you.

They win but if you're responsible with your credit card, you win.

How to Avoid The Debt Trap

Thankfully the only debt we've had during our marriage was our mortgage which we successfully paid off in only 5 years.

Although the speed of which we paid our mortgage is excessive for many we followed 5 simple rules so we didn't get caught up in the debt trap that plague Canadians today.

Canadian household debt as a share of income, a measure closely watched by policy makers, slipped to 173 per cent in the first quarter from 173.7 per cent in the fourth quarter but is still near record levels, Statistics Canada said. Source: Canadian Household Debt Globe and Mail.

With the price of everything going up including the cost of living and pay cheques not budging it's easy for people to fall prey to anyone offering them something that is too good to be true.

While you may be working with a lean budget it's important to remember it's far better to have little than to fall into a debt trap where you are strapped even further for years.

1. Limit Credit Cards and Loans

Credit card debt and bank loans are the worst types of debt to get involved in and the easiest type of credit to get.

Whatever your reasons are for getting a credit card or loan you must pay it back and in some cases with interest.

For example, a school loan, mortgage or any other loan to help you pay off debt or consolidate other loans will cost you money.

If you own a credit card only charge what you can afford to pay in full each month otherwise you're just increasing debt.

Never take cash advances from your credit card as they are too costly and never miss a credit card payment.

If you think that your credit card limit is too high ask your credit card company to lower it and maybe even ask for a better interest rate.

2. Create a Budget

I'm a huge advocate of using a budget and that's because we saw what a budget did for our finances over the past 11 years of marriage.

The last thing we wanted was for money problems to come between our relationship which happens more often than not for couples.

If I didn't believe in budgeting so much I wouldn't be using one nor wasting my time on this blog telling you to use one.

The 3 main components of budgeting are;

Understanding how much money you net or earn.

Where your money is going.

How much money you have left after all your bills are paid.

If you are spending more than you earn you will know it because the numbers never lie.

In the least, you will have the opportunity to swoop in and do your best to fix your financial situation before it gets out of hand.

You can download our free budget spreadsheet after reading our mini budgeting series to get started using a budget.

3. Plan Spending

Before we leave to go shopping we have always had an idea of what we were going to by since we plan our spending.

There is no way we would make a big purchase without first knowing whether we had enough money that month to pay it in full.

Any time we grocery shop we have a grocery budget we follow and list although this is one area we've been working on improving over the years.

We also never put fun-stuff, vacations or anything we should be saving for in full on credit including renovations, home improvement or decor updates.

The moment you rely on something else to pay for a purchase it has a hold on you.

If you want to avoid something having a hold on your finances avoid giving them that power to do so.

4. Buy Used

I know that some people are not fans of second-hand shops, online buy and sell sites or garage sales but they all have financial benefits.

Buying used has saved us thousands of dollars off retail prices over the years which attributed to us saving more to pay off our mortgage.

Depending on what your goals are if you can lean towards buying used instead of retail to help you save money to put towards your debts you'll see how fast you crush it.

5. Avoid Showing Off

This is one area we've never been in because we avoid it at all costs since it comes with consequences, consumer debt.

Over the years we've known many people who buy houses bigger than they can afford and cars way out of their financial zone.

It's easy to get credit to fund all the bling but it's hard to pay it all back which is why people can live pay to pay.

Related: How to catch up with a late payment

Avoid trying to show your friends that you are successful when you are not and live the life you can afford.

They would rather see you happy than living under a pile of debt.

Don't Let The Debt Trap Get You

If you're finding yourself in a debt trap that you want out of first evaluate your debt to income ratio and then create a payback plan.

Discussion: What ways do you avoid falling prey to the debt trap? Leave me your comments below.

CBB Posts You May Have Missed

These are the blog posts I've written the past two weeks that you can catch up on if you've missed them.

If you don't already please subscribe to the blog and you will get my posts to come straight to your email.

Mr CBB's Motivational Corner

Frugal Recipe Find

I made my way over to Just So Tasty by Fiona because I wanted to know more about her Chewy Coconut Cookies.

Growing up I was a huge fan of eating coconut macaroons because they were easy to make and I love coconut.

I've yet to make a coconut cookie that is chewy with a bit of crunch and I thought this might be the perfect recipe.

My plan is to take her inspiration and turn it into a keto coconut cookie.

Stay tuned for that one! Click the link above to read Fiona's full recipe instructions.

Garage Sale Finds

If you have some awesome deals you'd like to share from your garage sale outings this Spring and Summer email me your photo and tell us what you found and how much it cost you to be featured.
Today's Garage Sale Deals:

Like new booster seat $3 (asking was $5)

Two microwave egg cookers (something Ken has been looking for to take to work) $.50

3 pack of men's shaving gel $4 (asking was $6)

15lb weight $1

A large bottle of bubbles $1

10 squeeze/fidget balls and game $2 (for kids at work)

Chalkboard brush - free!

Kids sweater, jeans and track pants $2 (asking was $3)

Total spent: $13.50
Thanks, Jen P.

Home and Blog Update

Every two weeks I update you on what's been happening around the CBB house and on the Blog.

Over the past year, I've been working on increasing subscribers to the blog in hopes of building solid relationships with my readers.

Thank you all for being here.

Mr.CBB

Home Update

As you can see from the photos above our 2019 garden of herbs are coming along nicely.

We've just recently in the past week had our wild strawberries turn red and the mulberries on our mulberry tree turn purple.

This week the plan is to start picking the mulberries before the birds eat them up and turn it into mulberry jam.

I may even share the recipe on the blog if anyone is interested. Who doesn't like jam?

Actually, it would be a great jam to layer in between my mum's British Sponge Cake recipe.

Bathroom Renovation Update

I'm well into our bathroom renovation and have stripped it down to the studs.

While lurking behind the drywall I found what no homeowner wants to see, mould, mice poop and dead mice from years ago.

I found the problem and thankfully I ripped it all up before just installing a new bathroom.

This was all the builder's fault for not sealing the wall which left a gap for rodents to get in.

Trust me when I'm done with this house I don't think I will want to move and do this crap all over again.

You can't trust any builders because there's always some doughnut trying to cut corners.

That's my update and mini-rant for the week.

I'll keep you in the loop moving forward but for now, things are on track and I'm awaiting shipment of our tub.

Blog Update

Not too much has happened on the blog since my last update however we will be adding password protection to our Downloads page so it is only available to subscribers only.

I will let current subscribers know what that password is once we have it up and running.

Favourite Blog Read

This week Mark from My Own Advisor talks about Retirement at Age 60 on a lower income and whether that is feasible.

One of his readers sent in their investment portfolio asking Mark for his feedback in regards to his retirement plan.

We've been in talks with our financial advisor this past month discussing retirement income and honestly, we don't really know how much we will need.

As Mark points out most of what is planned is all based on assumptions.

We aimed for a higher number but for some people like my mother-in-law who is a low-income earner with only government pensions she is walking a fine line in her retirement years.

Saturday Search Term Giggles

Every week I get tens of thousands of people who visit Canadian Budget Binder because they did a search online and found my blog.

Yes, I can see your search terms and sometimes they are funny.

Canada, How Are You Notified Of Jury Duty? - I read it like, Alexa, How Are You Notified Of Jury Duty? Haha!

How to wright a resignation letter?- Definitely with spell-check.

If there is no price on an item is it free? - Think about that.

My husband is a rich miser- Might as well be broke

If you see the acronym (SIC) next to a word that means I've copied the text exactly as it was typed in Google and it has spelling errors.

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Avoid The Debt Trap With My 5 Best Tips : The Saturday Weekend Review #283 - Canadian Budget Binder

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The debt trap is so easy to fall into that many people aren't aware they are in it until they cannot keep up with the bills nor balance their budget. Last night while waiting for Mrs CBB to wander around the kitchen section at Canadian Tire I was hanging out with our son in the seasonal department.

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This website discusses the severity of debt and how badly deb your traps can affect finances.  This website will show you the statistical affects of how debt affect Canadians. It also talks about how Canadians are paying off debt with more debt.

I chose this website because I think it is very informative. I liked how it talked about Canadians are forced to borrow more money in order to pay off their debts just to get by. Therefore their debt will never end because they are just borrowing more money from the government.

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Amid mounting financial burdens, fully two-fifths of Canadians believe that they will never escape debt in their lifetimes, according to a recent analysis by the Credit Counselling Society.

Citing figures from Statistics Canada, the study warned that the household debt ratio now sits at 175.9%.

An Ipsos poll on behalf of Manulife Bank also found that 45% of Canadians are spending more than their incomes. As much as 40% indicated a belief that their debts will outlive them, while 67% assumed that everyone else is undergoing the same hardships.

"Unfortunately, these statistics do reflect the financial situation of many Canadians we speak with, who struggle to balance the high cost of living with paying down debts and managing their household budget," Credit Counselling Society president Scott Hannah said.
A significant proportion of the annual increase in household debt during Q3 2019 came from mortgages, according to Equifax Canada.
On average, Canadians each owed around $72,500 in debt at the end of September, with the amount increasing by 2.1% annually. The mortgage market grew by 4.5% year-over-year to $1.32 billion, while overall consumer credit shot up by 4.1% to $1.966 billion.

Furthermore, 94% of those polled by Ipsos admitted that the average Canadian household is shouldering too much debt, and 84% agreed that paying this debt off is a top priority.

"With so many Canadians relying on credit cards and other means of lending, the stress of being in debt has simply become a normal part of life. Carrying overwhelming amounts of debt and having limited means to pay them down, it's understandable that many consider it an impossible situation to resolve," Hannah added.

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Many Canadians signal hopelessness in severe debt traps

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Amid mounting financial burdens, fully two-fifths of Canadians believe that they will never escape debt in their lifetimes, according to a recent analysis by the Credit Counselling Society. Citing figures from Statistics Canada, the study warned that the household debt ratio now sits at 175.9%.

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In this website the author discusses how Canadian homes became debt traps. The author writes about a women names Ann who finds herself in a debt traps to mortgage fees and rising living prices. On this website you can learn how these rising living fees had a effect on people across Canada

I included this website because it sheds light on how important it is to have knowledge about mortgages and how to properly budget your finances in order to avoid debt.

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In 1998, Ann bought a one-bedroom condo in the Kitsilano area of Vancouver. Gainfully employed at a printing company, she found the monthly mortgage payments were within her budget (Ann and others quoted in this story asked that Maclean's not use their full names). The building was on the older side, and eventually she got the itch to update the decor. She intended to replace only her bathroom sink; she ended up renovating the entire bathroom. "I remember thinking, 'Well, now that I've started...' " The kitchen came next, then the living room and finally the bedroom. Ann thought the renos, funded partly on credit and spaced out over a few months, would boost her condo's value. She also wanted to keep up with her neighbours. "Everyone was doing something," she says.

Finances became tight afterwards, and she only paid the minimum on her credit card each month. Every year, her condo fees rose while her salary at the printing company (where she still works) stagnated. She began relying on credit for everyday expenses, and later took out a second card.

Soon, one of her banks began calling with a solution to help manage her debt. She ignored the inquiries, preferring not to think about her finances, but she started to feel desperate: "I just wanted to do something, and that was the only thing coming my way." The bank offered a loan at a low rate to pay off her high-interest credit card debt, and she ended up taking out a second mortgage for $80,000. The interest rate still wasn't manageable. "It was a huge mistake," she says.

READ MORE: After weathering the Great Recession, can Canada avoid a debt crisis?

Saddled with two mortgages, rising condo fees and a flat income, she continued relying on credit cards. Surprise expenses, such as dental work, added to her debt. Embarrassment kept her from seeking help. Three years ago, she decided to sell her condo. Despite Vancouver's booming market, the sale didn't solve Ann's financial problems. She moved in with a friend and was able to pay off her mortgages, but she couldn't make much of a dent in her credit card debt.

In 2017 year, Ann turned 64. She was carrying $70,000 in debt, and knew she couldn't work another decade to pay it down. That realization prompted her to seek help, and she eventually met with an insolvency trustee. Ann's trustee filed a consumer proposal on her behalf. Less severe than personal bankruptcy, a proposal is an offer to all of an individual's creditors to pay a portion of debt under a strict plan over a maximum of five years. The remainder is discharged. Creditors typically agree to these arrangements since they are guaranteed to recoup at least some of their money. For Ann, filing a proposal came as a relief. "I actually feel like I can breathe again," she says.

Other Canadians are still suffocating. In early 2017, the household debt-to-income ratio hit another record of 167.8 per cent. A long period of abnormally low interest rates has enabled Canadians to carry massive debts, since monthly payments appear manageable. Further, in cities with rising home values, particularly Toronto and Vancouver, homeowners can secure a home equity line of credit (HELOC) to pay other debts or simply fund their lifestyles. In spring of 2016, the Financial Consumer Agency of Canada warned that the increased use of HELOCs "may lead Canadians to use their homes as ATMs, making it easier for them to borrow more than they can afford."

Insolvencies, though, are rare. As of the end of July [2017], there were nearly 123,000 consumer proposals and personal bankruptcies filed by Canadians in 2017, a decline of 1.2 per cent from the same period in 2016. That might be a sign of fiscal prudence, but it's also the result of record low interest rates that ease debt-carrying costs. Scott Terrio, an insolvency estate administrator and president of Debt Savvy in Toronto, calls this phenomenon "extend and pretend." Canadians can extend their debt repayment terms and pretend to live a lifestyle they can't otherwise obtain. He sees it all the time-couples with decent jobs carrying large mortgages, and putting daycare, cars and vacations on credit.

RELATED: Canadians pile up debt faster than anyone in the world

Some reach a trigger moment when they can no longer pretend-a job loss, say, or divorce or illness. But lately Terrio has noticed a change in his business. More clients are coming in because they're simply tapped out. As with Ann in Vancouver, there is no trigger. "It's a gradual realization for some people," Terrio says. "They can't do it anymore." Lana Gilbertson, an insolvency trustee in Vancouver, has seen the same change. "Nowadays, they have jobs, they're making money, they're plugging along, but they're just in over their heads," she says.

The cost of borrowing is set to rise, adding strain to households. The Bank of Canada hiked rates twice in 2017, signalling more could be coming-depending, in part, on whether households can handle it. Economists at TD Bank Group believe two more rate hikes are likely next year. That will cause rates on everything from lines of credit to car loans to mortgages to tick up. At the same time, house prices are not rising as quickly as they once were in many Canadian cities. RBC Economics forecasts home prices in Canada will increase 11.1 per cent in 2017-and just 2.2 per cent in 2018. Canadians won't be able to pull cash out of their homes so easily to get themselves out of trouble. "The insolvency business is cyclical, and we're at least a year overdue for shedding blood in the system," Terrio says. "If ever we were poised to hit that right on the head, it's now."

For some Canadians who struggle with debt, the problem can be traced back to real estate. In a survey TD released in September 2017, 56 per cent of respondents from across Canada were willing to exceed their budget by up to $50,000 to purchase a home. At the same time, 97 per cent of homeowners said they wished they'd factored in other obligations before buying, such as property taxes, maintenance costs and "overall lifestyle expenses."

The problem is not confined to Toronto or Vancouver, where huge price gains have enticed buyers to stretch themselves for fear of getting permanently priced out. In Regina, Joshua and his wife purchased a house in 2014 when expecting their first child. Both 24 years old at the time, they carried about $35,000 in debt between them, mostly tied to student loans. "We rushed into getting a house because we just thought it would be the right thing to do," Joshua says. "It almost felt wrong to be renting and having a kid." (Joshua's mom pressured them to buy, too.) In one weekend, they viewed 16 houses. The very last one felt right. They put down five per cent and moved in.

But the couple was blindsided by maintenance costs. Their furnace needed repairs, and they later had to replace the water heater, which set them back hundreds of dollars. After expenses, the pair has virtually no cash to put toward their debt. Joshua's card is maxed out, and his wife's card is close to the limit. Joshua says they're frugal (splurging means going to Subway) and live paycheque to paycheque. The situation became worse this year. His wife is on maternity leave with their second child and their variable mortgage rate ticked up. "Just the way the rate is fluctuating is killing us," Joshua says, who works in sales at a telecommunications firm. "It can't keep changing like this."

Staring down tens of thousands of dollars in debt, rising mortgage costs and no foreseeable way to substantially boost their incomes, the couple decided to sell their house and rent. They're not expecting a windfall. A while back, their basement flooded and they used the insurance money to repair the foundation. The basement had been finished, but there's no cash to renovate it, so it will be sold in "as is" condition. The market in Regina is also soft, and the average home price is down slightly from 2014. Joshua hopes to at least get his down payment back, and their financial situation should improve when his wife returns to work as a massage therapist. "We'll be able to really hack away at our debt," he says, "but it's going to take years."

While real estate has led to financial distress for some Canadians, it's been a saviour for others. The home equity line of credit has allowed millions of households to borrow against their properties, providing cash for everything from renovations to investing to debt consolidation. HELOCs have been around in Canada since the 1970s, but in the mid-1990s, lenders started marketing them to a wider swath of consumers. Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20 per cent.

The pace of growth has slowed since then, but balances still hit $211 billion in 2016. Lenders have been all too eager to dole out HELOCs, creating the perception of instant, easy money. An animated commercial for Alpine Credits, a lender in B.C., features a room full of employees rubber-stamping loans-even for a client who wants to install a four-storey waterslide. (The employees celebrate by cheering while one pops open champagne and another tears off his shirt.)

RELATED: Praying for a real estate crash

One common use of HELOCs is to pay off higher-interest debt. In 2016, according to Scotiabank, Canadians used $11.6 billion (or 28 per cent of HELOC withdrawals) for debt consolidation. Doug Hoyes, a founder of licensed insolvency trustee Hoyes, Michalos & Associates, has witnessed the shift. The firm has offices across Ontario and in 2011, roughly one-third of the firm's clients owned a home when they filed for bankruptcy or a consumer proposal. Last August, just six per cent of insolvent consumers were homeowners. "You don't need to file a proposal to pay off your debt," he says. "You just go out and get a second mortgage."

If the pace of home price appreciation slows down-or worse, prices drop-there will be consequences for households that have been piling on debt. The slowdown in the southwestern Ontario real estate market is already creating stress. Hoyes recently saw a couple who purchased a home four years ago and accumulated $70,000 in unsecured debt. They bought furniture, hired landscapers and borrowed to finance a swimming pool. Before the slowdown, the couple might have earned $100,000 by selling their home. Now they might get $70,000, which would barely cover their debts. They're also reluctant to sell and move to a different neighbourhood. And because of the softening in the market, they haven't been able to find a lender willing to issue them a HELOC large enough to cover their unsecured debt. Their solution? Convince one set of parents to take out a second mortgage, and borrow from them. "It's the bank of mom and dad," Hoyes says.

And while debt consolidation is an effective strategy if consumers don't fall back on bad habits, Terrio says recidivism is a problem. "They go ka-ching out of their house and pay off their credit card debts, but they go and run up their cards again," he says.

Borrowing against her home wasn't enough for Charis Sweet-Speiss to pull herself out of debt. A registered nurse, she divorced and moved from Ottawa to Oliver, B.C., a town south of Kelowna, in 1998. Her then-boyfriend (now husband) wasn't working at the time, and the couple used the divorce settlement to start building a new life; they bought a used car, a place to live and furniture. "Then that money was gone, so I just started using credit cards," she says. "And it was so easy." Their debt started building, and their income wasn't sufficient to pay more than the minimum. New credit cards she'd never asked for arrived in the mail, and Sweet-Speiss started using them. She had 13 on the go at once, and eventually they were all maxed out. "I've always been employed. I make a good salary. But just paying the minimum every month was a lot of money," she says. Every six months, she phoned each credit card company to wheedle them into reducing her interest rate. She caught some breaks, but never enough to make a big difference: "It was a horrible way to live."

Sweet-Speiss says she wasn't frivolous with her spending, but in retrospect, she made questionable decisions. When her daughter would run up a large balance on her own credit card, Sweet-Speiss sent her money-even though it meant sinking deeper into debt herself. Sweet-Speiss borrowed against her home at one point and withdrew money on two separate occasions to consolidate her debt, but was still left with $40,000 on her cards, and it built up again.

After more than a decade of amassing debt, Sweet-Speiss turned to the Credit Counselling Society for help ridding herself of nearly $67,000 spread across 13 cards. Once enrolled, her interest payments stopped and she was put on a plan to pay down principal. She completed the program this in 2017. She still has a mortgage and a line of credit, but is finally free of high-interest credit card debt.

Sweet-Speiss says her mortgage would have been paid off a decade ago had she never borrowed against her house. Indeed, one of the problems with home-equity loans is that they cause debt persistence. HELOCs are marketed with little or no obligation to repay in a timely manner. For years, one of the main advantages of owning a home is the forced saving effect-paying the mortgage, combined with rising property values, builds equity. A HELOC undermines that dynamic, tempting consumers to access cash now rather than build wealth over the long term.

It marks a fundamental shift in the way Canadians think about homeownership. "Whatever happened to getting to the end of a mortgage and owning your home?" says Gilbertson, the trustee in Vancouver. "It's less about truly owning our homes today and more about having another revenue stream to fund our lifestyles."

VIDEO: How to keep from drowning in credit card debt

That Canadians are carrying record amounts of debt is not in dispute. But the magnitude of the problem is contested. "I think the fears are overstated," says Paul Taylor, CEO of Mortgage Professionals Canada. "Canadians are incredibly prudent, and history will show that." As the head of an industry association for mortgage lenders, brokers and insurers, Taylor isn't exactly impartial on the issue. But he points to a report from the Parliamentary Budget Officer released in 2017 showing that, since 2009, the debt service ratio-a measure of income spent to pay debt-has remained steady at around 14 per cent, not much higher than the long-term average. That's a sign that even though we have more debt than 20 years ago, we're not overextending ourselves, Taylor says.

But the same PBO report projects the debt service ratio will rise to an all-time high of 16.3 per cent by the end of 2021. Taylor says the premise is a "little bit flawed" because it presumes Canadians will make no changes to their finances owing to higher interest rates. "I'm certain people will become prudent again to ensure they retain that [historical] expense ratio," he says. Already, brokers have been fielding calls from Canadians about locking in their mortgages to guard against future increases, for example.

Bank of Montreal chief economist Douglas Porter also contends that too much emphasis is placed on the debt-to-income ratio. "We have long been of the view that much of the commentary on this topic has been overwrought," he wrote in a research note this month. The savings rate is close to the 25-year average of five per cent, which doesn't point to a consumer debt apocalypse. Rather, Porter expects spending to "gradually moderate" as borrowing costs rise.

Still, numerous surveys show Canadians are worryingly close to the edge. A report from MNP Ltd., an insolvency trustee, released in October 2017 found 42 per cent of Canadians said they don't think they can cover basic expenses over the next year without going deeper into debt. An earlier survey this summer found 77 per cent of respondents would have trouble absorbing an additional $130 per month in interest payments. And as organizations such as the IMF and the OECD have constantly warned, high household debt renders the country far more vulnerable to economic shocks.

When a downturn does hit, even a high income won't necessarily provide enough protection. Gene moved from the U.S. to Calgary 12 years ago to take a job with a major oil company, earning more than $300,000 annually. He purchased a home for close to $1 million and supported his wife, two kids and mother-in-law. In 2015, Gene lost his job when the price of oil crashed, and was out of work for nine months. He took out a home equity loan for $30,000 to make ends meet, and eventually found another job at a pipeline company, but for half his previous salary. A six-ﬁgure income would be more than enough for most Canadians, but Gene and his family were accustomed to their lifestyle. The kids were enrolled in extracurricular activities, and housing costs added up to $4,100 every month.

A year later, Gene was laid off again. "It was just devastating for us," he says, adding that he began questioning his self-worth if he was unable to provide for his family. He eventually found another job, but at a still smaller salary. On top of the mortgage and the line of credit, Gene had another $20,000 loan. When he first purchased his house, he didn't quite hit the 20 per cent down payment threshold; his bank offered him a loan to cover the difference. He had a couple thousand in credit card debt and a small, high-interest loan from EasyFinancial he'd taken to cover an unexpected medical expense for a family member. Finally, he faced a $90,000 tax bill, since he opted not to pay after he lost his job. Gene sought help from an insolvency trustee in 2017. "I just wasn't making enough money, and I had to protect the family," he says. Gene submitted a consumer proposal, but one of his creditors rejected the terms. In October, Gene filed for bankruptcy-just over two years after making a salary most Canadians can only dream of.

This sort of precariousness worries some experts, who fear wider implications for the Canadian economy. "We continue to see the household sector as accident-prone, with a complacency toward debt which could prove disruptive to the economy," wrote HSBC Canada's chief economist recently. The result is Canada is at "some risk" of a balance sheet recession-a period of slow growth or decline caused by consumers saving and paying down debt rather than spending. David Madani, an economist with Capital Economics in Toronto, doubts the growth Canada has seen in exports recently will be enough to offset the decline in consumer spending. "Canadian policy-makers have allowed household debt to rise above the disturbingly high levels reached in the U.S. in 2007, raising the risk of a similar potentially disastrous deleveraging down the road," Madani wrote.

Statements like that could be dismissed as fear-mongering, but the reality is Canada hasn't been in this situation before, and the outcome is impossible to predict. Canadians ignored warnings from policymakers about piling on debt for years because low interest rates were too enticing. Now households will have no choice but to dial it back. The only question is how bad the fallout will be.
RELATED: MORE ABOUT DEBT:

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How Canadian homes became debt traps - Macleans.ca

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In 1998, Ann bought a one-bedroom condo in the Kitsilano area of Vancouver. Gainfully employed at a printing company, she found the monthly mortgage payments were within her budget (Ann and others quoted in this story asked that Maclean's not use their full names).

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On this website they discuss the top 5 reasons why Canadians are in debt. This website is very informative because it also gives tips on how to avoid debt traps.

I included this website because it is important to understand what the mains are causes of debt and how to avoid them. Canadians are spending way more than we can afford and we need to learn betters’ ways to budget out finances. Also, a lot of younger adults will abuse credits cards, easily forgetting about the debt repercussions.

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If you're like many other Canadian consumers, you likely have some debt on your plate. The average Canadian owes $8,500 in consumer debt, and that's not even including their mortgage. And about 12% of Canadians have consumer debt over $25,000, while another 14% have debts between $10,000 and $24,999.

That's a lot of cash to owe to creditors, especially when you're talking about debt that's attached to a high-interest rate. Which means those numbers will continue to climb, making it increasingly difficult to pay down debt, especially when expenditures continue to occur.

In fact, credit card debt is an ongoing problem in Canada, considering how easy it is to pay with plastic rather than with cash. And considering the sky-high interest rate that typically comes with credit cards, it can be incredibly difficult to pay down such debt as it mounts.

So, what's the real reason why debt in Canada is so high? Here are some of the more common reasons why Canadian consumers find themselves in debt.

Abusing Credit Cards

We've already briefly touched upon the credit card issues, but it is certainly worth mentioning more than once. Perhaps the most prevalent and common reason for consumer debt is the overuse and abuse of credit cards. While credit cards are meant to make it convenient to spend money without having to access cash - as well as all the rewards and perks that come with them - they can also put you in financial trouble if you're not careful with them.

Credit card debt can be very difficult to climb out of, especially when you take into consideration how high the interest rate can be on this type of debt. Credit card interest rate can be as high as 22% or more, and when the outstanding debt load increases, the interest amount paid can be astronomical.

Unless you get a handle on this debt and pay it down religiously, you could wind up with credit card debt that is a lot more than you can handle.

Missed Payments

Even one missed payment can put you in a precarious situation with your finances. With each missed payment, your outstanding debt load will continue to inch higher, bringing your debt load to a point that will make it much more difficult for you to pay down. And with every missed payment comes a late fee that's tacked on to what you already owe, bringing your debt even higher than it was before.

Spending More Than You Can Afford

This sounds pretty obvious, but it's worth mentioning. If you spend more money than you actually bring in, you can certainly expect your debt load to mount. Unfortunately, many Canadian consumers find themselves in this position, which is another common reason for mounting consumer debt in Canada. People like to have nice things, go places, and travel. But not everyone can necessarily afford what they want, but they spend like they can anyway.

If you spend more than you make, you can definitely expect your debt to rise.

Not Having A Financial Cushion to Fall Back on

It's always wise to have a little bit of money saved and tucked away somewhere in case of a rainy day. The unexpected can always happen, and it's always important to be prepared. If you're not, you could be scrambling to take out payday loans with exorbitant interest rates, borrowing money from friends or family, or racking up your credit card to cover unexpected expenses.

Not Being Disciplined With Your Money

When it comes to money, you absolutely need to be self-disciplined and responsible with every dollar you have in your pocket. More specifically, credit cards tend to be the source of troubles for consumers who are compulsive spenders with little self-discipline. If you're not responsible with your money and your credit cards, you can quickly and easily see your outstanding balance grow to the point of no return.

How to Avoid These Debt Traps

So, now that you know what can get you into financial trouble, how can you avoid getting stuck in these predicaments? Here are a few suggestions.

Only spend what you have in the bank. This is particularly relevant when it comes to using credit cards. It might be easy to whip out the plastic in order to pay for items, but you could find yourself in a sticky situation once the bill comes. Only spend up to an amount that matches what you have in the bank - or much less, preferably.

Don't spend any more than 30% of your credit limit. It's widely suggested that consumers not spend the entire credit limit amount. Doing so will not only make it much more difficult to pay down the balance (as well as the interest portion on top of that), but it could also negatively impact your credit score.

Keep your down to make it easier to pay off your credit card bills in full every month while also credit utilization keeping your credit score in check.

Make your bill payments on time. Forget about having to pay late charges on missed payments. Instead, make sure every bill is paid on time and in full every month. Not only will this help you stay on top of your debt, but it will also help to keep your credit score healthy.

Save for an emergency fund. Having a financial cushion to fall back on can be a real lifesaver when the time comes. Try to save up about three to six months worth of all the bills you usually have to pay every month just in case you lose your job, you suffer a medical emergency, or your car breaks down, among other things.

Final Thoughts

There's a trend across Canada when it comes to growing household debt. Don't be part of this trend, as it will do nothing but bury you in debt that you'll find extremely difficult to climb out of. If you are currently having trouble dealing with your debt, Loans Canada can help . We've helped thousands of Canadians just like you, pay down their debt and get back on track to a healthier financial future.

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The Top 5 Reasons Canadians Are in Debt | Loans Canada

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If you're like many other Canadian consumers, you likely have some debt on your plate. The average Canadian owes $8,500 in consumer debt, and that's not even including their mortgage. And about 12% of Canadians have consumer debt over $25,000, while another 14% have debts between $10,000 and $24,999.

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What I learned most about this topic is how easy it is to find yourself in a debt trap, unable to ever pay off your debt. This topic is relevant to me because I have owed money for my credit and I have didn't pay in time once so I ended up owing more. I think the most important information to pass after learning about debt traps is the importance of budget planning.