Canada: What will all this personal financial insecurity lead to?

Is it accurate to consider ourselves a first world country with over half the population within $200.00 of not meeting their monthly financial obligations?

I guess like everything, the definition of words like “first world” can just simply be changed to keep the masses felling good.  We’ve been told feelings matter above all else, even reality itself!  It’s the new western cultural norm.  Where such thinking has lead us over the last decade and a half doesn’t appear to be leading us to that fabled utopian place that policy makers believe exists.

Down through human history, when most people within a society consider themselves as prospering and moving forward, society maintains its stability, and along with it, rising living standards.  We’re not sure if 52% of Canadians being $200.00 or less from not being able to meet their financial obligations at month end meets this standard.  Who knows what’s in store for us.

Our friends at MNP has provided us with some much needed reality in their recently released Consumer Debt Index since groceries and rent can’t be paid by feelings any more than one can be successful making prudent credit decisions in running their business based on feelings.  Reality really does matter. 

Also keep in mind this survey was done prior to the Bank of Canada raising its benchmark rate to 5% and Canada’s big banks increasing their prime rate to 7.2% earlier this month.

Highlights of the July 2023 MNP Consumer Debt Index

Following a significant improvement last quarter, the MNP Consumer Debt Index has resumed the pessimistic theme that defined most of 2022. The Index marks its fifth anniversary with a six-point decline. The current benchmark of 83 points is well below the historical average and reflects ongoing affordability concerns, regret about the amount of debt households have taken on, and a bearish near-term outlook.

Highlights from this quarter’s survey include:

  • More than half are now $200 or less from not being able to meet their financial obligations at month end (52%) — a six-point jump from April.
  • More than a third already don’t earn enough to cover their bills and debt obligations (35%) — a five-point jump from April.
  • Three-quarters (73%) say their weekly spending on essentials has increased by at least $100 compared to one year ago.
  • More than half of Canadians regret the amount of debt they’ve taken on in life (52%) — a staggering nine-point jump from April.

With a return to interest rate increases in June, The Bank of Canada has signalled it is willing to continue to raise borrowing costs as necessary to tamp down stubborn inflation. With two-thirds (63%) of survey respondents saying they will be in financial trouble if rates go up much more — it’s possible this foreshadows further trouble to come.

Read the full report here.