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How Much is Your Debt?

We’ve spent the last so far looking at debt all around the country. First we looked at Canada’s public debt, then Ontario’s, and then Toronto’s. We had already planned to talk about personal debt today as the fourth installment of our debt miniseries, when the news hit that our debt to income ratio has been wrong all along; and Canadians actually owe much more than was previously thought.

Up until Monday, Canadians along with Finance Minister Jim Flaherty and the Bank of Canada, had been concerned about the amount of debt Canadians were in. That debt, until this week, was usually quoted at somewhere around $150.60 of debt for every $100 of disposable income Canadians bring in. That number was high. Too high. And so the government set out on a mission to help us lower our debt, by doing things like tightening mortgage rules four times in four years. Now though, new stats show that although that number was high, we might have been kidding ourselves about the amount of debt we’re actually in.

The new stats show that, as of the second quarter of this year, Canadians actually hold a debt to income ratio of $161.70 for every $100 of disposable income that we bring in. That number is dangerous simply because of how it is. But it’s also right around where the number was in the U.S. before their economy crashed in on them.

So how did it get so high so quickly? Especially when it sat somewhere around $150 in the quarter before?

The problem is that it didn’t; and that there’s no telling when the last time was that we were actually at $150 of disposable income. This is because it’s not that Canadians have gone out and racked up immense amounts of debt in the second quarter. The process for gathering facts and figures has just been off the entire time.

That’s because up until now, organizations such as churches, charitable organizations, non-profit daycare centres, and other non-profit institutions were all included in the statistics – including their profits. This pushed up the number for the wealth of Canadians, and put a serious skew on the data. Now, these institutions are no longer going to be included in the stats, just as most other countries leave them out of the household figure as well.

Scared yet?

We wouldn’t blame you if you were. We’ve posted some pretty frightening stats in the past week regarding Canada’s debt, Ontario’s debt, and now, your own. But there is help. Come back and see us tomorrow, when we wrap up the miniseries with a look at things you can do to start paying off your debt, such as debt consolidation, and how you can get rid of it faster.

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