Freida Richer is a licensed insolvency trustee with Grant Thornton Limited.
Calgary’s Business: What’s the state of consumer debt in Alberta these days?
Richer: As of June 2018, Albertans continued to carry the highest average consumer debt in the country, excluding mortgage debt, at $28,155. Although it’s moving in the right direction, the economic recovery in Alberta is slow and I continue to see many households struggling to stay on top of their debt obligations.
People have returned to work but income levels still have not reached pre-recession levels and that puts a strain on the household budget, especially when debt levels continue to increase.
CB: With school back, how can parents best deal with all the expenses they will face?
Richer: When it comes to back-to-school spending, parents need to approach it with a fundamental mindset that they control the purse strings and make the final decision on purchases. Caving in to your teenager’s demand for that $200 pair of jeans instead of the $40 pair will derail your budgeting. Talk to your child about the maximum spend, set expectations and ensure you stick to the budget and the bottom line. If there’s no room in the budget, don’t spend.
CB: Why is Alberta consumer debt the highest in the country?
Richer: Consumer optimism in this province may be outpacing the actual financial recovery of households.
Other contributing factors are the accessibility of consumer credit with relatively low interest rates, making it easier and cheaper to borrow, and the shifting attitude of generations where we’re seeing more millennials and seniors much more comfortable with using credit and carrying debt.
CB: If someone feels overwhelmed by debt, what are some of the steps they should take to get back into a balanced situation?
Richer: Often times, unmanageable debt, which is the kind that keeps you up all night and causes anxiety, is debt that’s insurmountable and requires a professional like a licensed insolvency trustee to help navigate through the smart solutions.
Filing a consumer proposal to consolidate and settle your debt is an alternative to filing a personal bankruptcy and an easier pill to swallow. Your plan of action will depend on how much you owe, the availability of reliable sources of cash or funding, the extent of the delinquency of your accounts, the level of collection action your creditors are taking, and your level of stress or anxiety.
CB: Do you think more Canadians need to spend time on becoming more financially literate?
Richer: Yes, financial literacy is an essential life tool and just like the tools in your tool belt, you should always have it within arm’s reach because money decisions happen every day. If you think about it, the concept of living within your means is really quite simple, yet difficult to execute and so why do some consumers still overspend or avoid good money management?
Well, that’s a deeper discussion on our spending behaviour and relationship with money, which is shaped and influenced by our childhood, caregivers and many other factors.
Financial literacy gives us the power of knowledge to make smart money decisions and when practised daily, it just might help people start to overcome destructive and emotional spending behaviour.
We choose to exercise and eat right for good physical and mental well-being. Financial well-being would round that out nicely and the key is financial literacy.
– Mario Toneguzzi