September 28, 2012

I can’t understand why the experts are so surprised about Canadians using credit – even after all of the recent media coverage about frightening levels of household debt. It keeps coming up on programs like the Lang O’Leary Exchange.  Amanda Lang shakes her head as she asks the question – “How is it possible for people to keep on using credit when they are so heavily in debt?”

The answers swirl around the issue in a circular motion like a twister vacuuming up unwanted debris. First we hear how impulse-buying drives men to purchase technology related stuff (wants) and women buy needs (as opposed to wants). Shoppers are the undeniable culprits to winding the debt clock up, up and up…

Then, we hear about how everyone should have 3 months net income sitting in a bank account for emergencies. Fortunately, Ms. Lang seriously questions this platinum platitude from the early days of financial planning. “How can anyone afford to do this?” she asks. “Most people cannot afford to have that much money just sitting in a bank account.”

Another interesting comment is made. “What good is financial advice if no-one follows it? Having 3 months income reserved for emergencies isn’t helpful if no-one follows it or is able (can afford) to follow it?”

Now we’re getting somewhere. If we dig a bit deeper into the financial demands of raising children, housing, transportation, toll bridges, food, tax, fee increases and how incomes have fallen behind over the last 20 years, then there is no surprise about why Canadians are using credit and sinking deeper and deeper into debt every year.

It’s important that someone speak up on behalf of the impoverished middle class and announce to the experts that, “We are not stupid. What we lack is the money to meet all the necessary expenses, not the knowledge of how a credit card differs from money.”

Once again in response to some of the condescending messages about how dumb people are, we should remember that credit cards are much more than money, credit and debt. Credit cards are a symbol of the computer age. Credit cards identify us, qualify us for services and privileges, quantify us according to how much we are trusted to spend and act as a financial passport for the internet and international travel. It is very difficult to comprehend how we can live in an advanced credit society and not be in debt.

It should also be recounted that many of the same experts complain about economic downturns because consumers don’t spend enough. During these times it doesn’t seem to matter if the purchases are by cash or by credit.

Of course there are over-spenders and unwise consumers out there. But, they are not the majority. It is my opinion, based on my 35 years experience with families and credit issues that most people are honest and are not flawed by irresistible urges and uncontrollable impulses. They are stuck in a mire of increasing expenses and decreasing services. They are doing the best they can. They lack an adequate income.

Oh, just one more thing - the power of advertising.  Even the most controlled people are prone to a culture that promotes, bombards, suggests, prods, pleas and entices people to buy, buy buy. The advertisers say nothing about being careful with debt and credit. They tell seniors they need bathtubs, reverse mortgages and special security systems. They constantly pursue consumers with products and services that life is not complete without. Too bad that caution about debt does not compete equally with this plethora of relentless messages to consume, mortgage, remortgage and enjoy life to the fullest.