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Almost Half Of Us Are Living Paycheque-To-Paycheque. How About You?
September 6, 2012
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A new survey about the state of Canadians' finances features some good news: more of us are putting money aside for retirement, and 66 per cent of us are trying to save more.

But not everything looks so bright. 47 per cent of those surveyed by the National Payroll Association said they would be in serious financial trouble if their pay was delayed for only a week.

Still, that's better than last year's survey, when 57 per cent said they were a week away from trouble. The improvement seems to show that more Canadians are aware of the need to save for emergencies, which is a good sign.

Meanwhile, another report released today has a more worrying message. It's called 'Storm Clouds Gather Around Canadian Consumer Credit,' and it suggests that there's a 20-percent risk of Canada falling into a second recession.

Cheery stuff from Moody's Analytics.

The report points out that the Canadian debt-to-income ratio is at an all-time high of around 150 per cent. That doesn't give us much headroom if another economic downturn hits.

Mark Hopkins, one of the report's authors, talks about "a Wile E. Coyote moment": many Canadians have been "spending money they assumed would be coming, then they realize they've run over the cliff because income from exports from these trading partners is not materializing and that's translating to weaker jobs."

So basically, don't look down:

To put things in perspective, household and consumer debt are a problem in lots of other countries. Here's a brief look at three:

The UK

According to survey data from earlier this year, about 10 million people in the UK (or 20 percent of the adult population) are struggling to manage their debts. And at least 2.5 million people "are in arrears on at least one consumer credit product, household bill or payment," according to Joanna Elson, chief executive of the charity Money Advice Trust.

And back in May, the UK's Consumer Credit Counselling Service said it believed 6 million households were "financially vulnerable." A combination of high inflation, rising unemployment and changing benefits could put those households at risk.

The U.S.

Consumer debt in the U.S. actually fell in the second quarter of this year - but it's still $11.38 trillion. According to Reuters, "since the financial crisis and recession, Americans have been paring back the large amount of debt they amassed during the housing boom."

Americans have cut household debt by a total of $1.3 trillion since its peak in the third quarter of 2008. At the same time, fewer people are foreclosing on their homes and declaring bankruptcy. But some debts are increasing: student debt rose $10 billion to $914 billion in the second quarter.


Come on, it's Sweden. It's always near the top of those "best places in the world to live" studies, so you'd think they'd have well-managed, minimal household debt. But in fact, Swedish households' debt rose from 40 percent of gross domestic product in the 1990s to nearly 80 percent in 2010.

The reason seems to be excessive mortgage borrowing. Low interest rates have led more Swedes to take on more debt than ever before. And just like people in Canada, the U.S. and the UK, many Swedes are now carrying large amounts of household debt.

Back in Canada, David Chilton, author of 'The Wealthy Barber' and the newest Dragon on CBC's 'Dragons' Den,' was on the program last season, and he talked about the state of Canadians' personal finances.

His advice is pretty straightforward: save more, spend less. But as the survey (and David's experiences talking to and working with Canadians on personal finance) reveals, a lot of people are struggling to balance their books. Check out the interview below:

What about you? Are your personal finances in order? Are you on a path to saving what you need for retirement? Let us know in the comments below.

Related stories on Strombo.com:

The European Debt Crisis Explained - With Lego

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