Personal Deleveraging to Manage Your Debt

Personal debt | BCBusiness
Ballooning household debt has reached a record high in Canada, but B.C. is the worst offender of them all.

British Columbians are drowning in debt. It’s time to put the brakes on our borrowing.

I don’t know about the rest of you, but Christmas is going to be more muted this year Chez Wanless.

You see, I’m engaging in some personal “deleveraging.”

That’s the wonderful word used by a raft of economists to describe “paying down debt,” or even more euphemistically, “We’re broke!” Don’t you just love economist speak, and how it can turn a simple statement into something completely incomprehensible?

The latest use of the word comes from Bank of Canada governor Mark Carney, who has warned Canadians should prepare for “a prolonged period of deleveraging” as the world’s major economies come to grips with excessive debt.

Probably, most of us couldn’t care less about the world’s major economies and their excessive debt. What concerns us is our own over-leveraging … er, borrowing.

Apparently, we’ve been damn good at it. According to CGA-Canada, household debt levels in Canada reached a record high of $1.5 trillion in the first quarter of 2011.

B.C. leads the nation in debt

And here in B.C., we’re even better at it. Forget this year’s Stanley Cup playoffs, we can at least say we’re No. 1 at something. In this case, we are the sort-of proud holders of the nation’s highest debt-service ratio. We channel 9.4 per cent of our disposable income to service debt interest payments.

That’s almost 10 per cent of our after-tax income going just to pay the interest on our debts. It would take a miracle – or some serious deleveraging – to even touch our actual debts.

Obviously, we have to get to work. Yes, much of our debt problems are due to mammoth mortgages taken out to afford housing here. But we’re probably pretty profilgate in other areas too.

I know I have been. So have many others.

So this is my new year’s resolution, and I suggest it should be yours as well – get that debt down.

There’s only one way to do that, of course – stop buying so much.

More budgeting. Less frivolous spending. No more being lured by Internet deals where something I marginally want is reduced from its “$149 value” to a mere $49.95. Stopping dead on scooping up something I could easily do without, even though it’s a deal.

Some of you may remember I once wrote a newspaper column on money management called “The Cheap Guy.” I abandoned him years ago.

But now, it seems, the Cheap Guy has to ride again.