The debt debate: Is having debt really that bad?

Canadians owe a boatload of money according to new statistics. The average measure of household debt in Canada just hit a record of 151 percent of income – for every dollar we earn after tax, we owe $1.51. That money goes to pay off our mortgages, credit cards, credit lines and car loans.

It means we’re working really hard to pay for what we have – and it also means we’re more indebted than the UK and the U.S., two countries where debt-laden consumers have been a drag on economic growth.

But is all this debt a bad thing?

It’s a question that arose in a few news sources this week including the Globe and Mail where TD chief economist Craig Alexander suggested that maybe we shouldn’t get too stressed about the number, after all, for some people that much debt might be completely fine. As he put it,

“Let’s imagine there’s a household out there that has an annual income of $100,000 but they have a mortgage of $153,000. Do you think that sets off red flags that this house is in trouble? I think most people would say no. If you have a 25-year mortgage and you only have $153,000 of mortgage debt, you’re going to have no trouble meeting your financial commitments.”

That makes sense on the surface. The question is, what kind of debt are people working to pay off and are they struggling to do it?

Right now my husband and I don’t have any consumer debt outstanding but we do have a mortgage and it’s a lot more than $153,000. I have had high credit card debt in the past from when I had trouble finding a job the first year after grad school. My only access to cash at times was my credit card and I ended up paying just the minimum month after month. Once I got a full-time job, I was able to pay it off over time, but it took several months of saving and sacrifice.

Of course, that is just one person's experience. Some of my readers have told me they’re using debt to stay afloat while unemployed. Others are struggling to pay off credit card debt that skyrocketed during a hardship. Still others managed to pay off all their debts by making frugal decisions and lifestyle choices.

What about you? Do you feel like you owe too much money? Share your situation in the comment space below.