149 – Consumer Debt in Canada 2025: What You Need to Know

Wayne Kelly: Welcome to the Debt Matters podcast. I’m Wayne Kelly, and today we’re gonna get a report card on how Canadians are doing with debt and what we can do to get through some of the trials that we’re going through these days. Brenda Wood, joining me from Alan Marshall and Associates in Dartmouth, Nova Scotia.

Hi there Brenda. Hi Wayne. How are we doing? I’m doing very well, thank you. Terrific. Yes. So all of a sudden we’ve been looking at debt and consumer debts for the last little while, and it’s just growing and growing. Do we have any stats on how US Canadians are doing? Are we getting better at taking care of our debt?

Brenda Woods: We’re not doing too badly. We’ve actually lowered some of our debt in the last few years. One of the statistics we have is that in 2021 we had the highest debt to disposable income ratio in the G seven at 185%.

That meant that for every dollar we were making, we were spending 187% of it. So that’s a very large number. That’s actually been reduced some to 174% in the first quarter of 2025. And that debt ratio just means that for all of the income that we have coming in net of your tax. In your CPP and your ei your deductions and such that the, how much of that debt, how much of the money that we have left over is being used towards debt.

And so that’s, those are high numbers. Those are pretty staggering numbers for, and to have the highest in the G seven and probably still close to that right now is pretty, pretty unbelievable. 

Wayne Kelly: So is this because of card debt and mortgages? 

Brenda Woods: A lot of it is that the increase in debt that we’ve seen usually across the board here in the last few years has been car loan debt.

So non-bank car loan debt, that’s one of them. Certainly an increase in mortgage payments due to interest rates due to the market, how much higher costs the homes are now. And also because of I find at least in our practice, we have a lot of high interest loans, payday loans other high interest loans that people have gotten into who who maybe are overextended and can’t get bank loans to try to help pay down debt.

So they go out to higher interest loans, and then it just perpetuates itself. 

Wayne Kelly: So they’re trying to get ahold ahead of this using maybe credit cards to start and then that isn’t working. So they’re going to more drastic measures, are they? 

Brenda Woods: Exactly. So getting into payday loans and things that are, a lot of it is inflation, not having enough money to.

Pay the bills, pay all the things that they need to pay, plus pay their creditors and pay their minimum payments on everything. So people are reaching out to, with desperate measures and in trying to get payday loans and high interest loans. And that’s certainly causing more of a cashflow problem.

Wayne Kelly: And when I hear that payday loans, it just, it causes things to rise in my neck because we know it’s, once you go that route, it’s almost impossible to get out. 

Brenda Woods: It’s a very vicious cycle. Yes. I’ve seen people with a few payday loans and we’ve been able to give them some guidance on how to work through those payday loans and get rid of them in fairly short order.

But usually what happens is I find you’ve got this payday loan and then that payday loan to pay the first one. And it is a vicious cycle. And before you know it, you’ve got all kinds of payday loans and once you get past a couple of them that you could maybe manage, if you’ve got more than that, it just.

Becomes almost impossible for them to dig their way out of. 

Wayne Kelly: What I’m hearing, we’re actually doing better than we expected, especially when we were going through that little situation we went through in 2020 and 2021. We really thought things were gonna be horrible, and then we saw interest rates go through the roof and inflation went wild, and we’re seeing interest rates coming down.

Now that people are resigning with their mortgages, is it as bad as we thought it was going to be or is it a little bit better? 

Brenda Woods: I don’t know that it’s. Better. It’s still very tough for people. They’re still struggling a lot. And I think what happened with through COVID is people were spending more than maybe everybody talks about people were saving, but lots of people were spending as well.

And it’s got it’s grown and so people are very in over their heads and they’ve got mortgages that have renewed. If your mortgage is renewed. This year or in the last, few months or so are about to renew. A lot of people are renewing at higher rates with much higher balances on their mortgages especially if you’re a new home buyer.

So lots of people find themselves with over and above their mortgage, all lots of other debt that’s becoming very problematic. Although I think our debt ratios have come down, I think it’s still a huge problem for people. 

Wayne Kelly: Can you generalize as what are the main things that Canadians are doing wrong when it comes to debt?

Brenda Woods: I think the number one thing that we’re not doing is budgeting. Majority of Canadians budget in some way, shape or fashion, but a lot of Canadians don’t. A lot of Canadians have never been taught how to budget or what to do. And as a result, we have people who are just winging it. And so when you’re winging it and you’re not keeping track of your expenses, it’s easy to go beyond what you have for income.

And so you end up in a situation where you’re using credit. To live beyond your means and perhaps a lifestyle that, your income doesn’t doesn’t allow you to do, but you’re using credit to do that. And the flip side of that is that lots of people are also using credit just to get by every day with inflation and the cost of living.

People are struggling to pay for things, so they’re using their credit to buy groceries, to buy gas, to, gifts for the kids and things. And so it’s becoming a difficult situation for people where they’re using credit to get by every month. I’d say that’s the number one thing is just. Just budgeting, learning how to budget properly, lots of information available for that online.

We have a great web website, Al Marshall and Associates, lots of information on how to deal with budgeting there, and if you were to reach out to an LIT to talk to them about what your options are, one of the things we do with most of the programs we have are to make sure that we do a couple of counseling sessions and budgeting is one of the focuses on that.

Wayne Kelly: And people could make that call. They could do a free session with you just to even get a little bit of help right now. 

Brenda Woods: So even if they are not interested in filing a bankruptcy or filing a proposal, I always tell people, come and see us anyway. We have, we are federally regulated. We are required by our ethics and by the Bankruptcy and Solvency Act to provide people with all of the options that they have available to them.

That might be as simple as some information about budgeting. So even if I can point someone in the right direction about if you. Did A, B, and C in terms of your budgeting and kept track of these few things, you might be able to dig your way out, even just on your own. And so there’s lots of information there.

It’s just fact finding. It’s a great way to find out what is available, what could you do. And then people are very very much able to just walk away and say, I’m gonna think about what I wanna do, or maybe I’ve given them a good pointer on budgeting and they’re good to go on their own. 

Wayne Kelly: Can you give us some suggestions on how to go about regaining control of your finances when things are sliding out of control?

Brenda Woods: Yeah, so one of them, of course, we just talked about the budgeting, making sure that you’re setting up a budget for yourself. Another one is really think about what that debt looks like. I have people come in every day and until they write down how much they owe and who they owe, they really don’t.

I think about it or understand really necessary how much debt they may be in. So once you’ve written that down, then you can start looking at what are the alternatives to deal with that. And again, talking with us about what the alternatives are, one of the things people can do is try to tackle their debt with what we call the snowball method.

So basically just writing down your debts from the lowest amount, owing to the highest amount, owing making sure that in your budget you’ve set up the ability to pay all of the minimum payments to everybody. Then pick the guy with the lowest amount owing and start throwing any extra money that you have at that guy at the lowest amount owing dash.

Once you’ve got that paid off, then you can take the money that you were paying the lowest amount dash and start putting that on the next debt, and you just work your way through the pile. And that’s a good way to, that snowball effect is, essentially taking money and rolling it into the next one, and the next one and the next one until you’re done and over with.

And that’s a really great way to, to work out it. 

Wayne Kelly: And that might not be something that is done in six months. People need to realize it’s taken a while to get into that debt. So it is okay to take years to get out of it. 

Brenda Woods: That’s correct. And there are debt management calculators online. Our website has one at Ala Marshall and Associates, and you can find them often in the banks as well.

And what the calculator will do is you can put in, here’s the amount of my debt, here’s the interest rate, here’s the minimum payments. Now if I add a certain amount to that to start paying off the debt, how long is it gonna take me to pay it off? And that’s a really great way. To gauge how long it’s gonna take you to deal with this, as opposed to maybe some other form of dealing with it, like a bankruptcy, like a proposal.

And I think that’s a great way to manage your expectations as to how long it’s gonna take you to deal with it. 

Wayne Kelly: I love that ’cause it gives you a positive feeling that you can say, okay, right now it looks like 22 years, right? But then you make an extra a hundred dollars, you put it in the calculator, and all of a sudden it shrinks it down to nine.

It can make a substantial difference very quickly. 

Brenda Woods: It really can. It’s a great way to, to look at it and manage it and make sure that, again, manage your expectations. Can I do this in nine, nine years? Can I do it in 10 years? What’s the expectation? Another thing to look at is on your credit card statements there’s a long candidate that says that the credit card companies have to tell you.

If you only make your minimum payment on that credit card, how long is it gonna take you to pay it off? It’s a very small print, but it is there. So having a look at that is another great way to understand that. By making only your minimum payment, you could be looking at 25 years. I’ve seen ones that are 96 years, like crazy amounts of time to pay off that debt by making your minimum payment only.

Wayne Kelly: Wow gives so many heart palpitations just to hear that it could go that long and that they don’t do something about it. Like the credit card companies, obviously they’re happy when you get into that situation. Now you mentioned already, you know that. Contacting an LIT at Alan Marshall and Associates that you can often give some tips that they can walk away with without having to do a bankruptcy, et cetera.

Now, a lot of people think if I’m gonna be contacting a license insolvency trustee, I have to do bankruptcy or I have to do a consumer proposal. So when’s the right time to contact an LIT. 

Brenda Woods: I think the right time is the minute that you understand that you’ve got a problem, you’re not able to pay your bills.

So there’s lots of markers for that. Lots of signs that you’re having some trouble. Great. One is the overdraft. So if you’re using your overdraft all the time and you’re constantly in your max of your overdraft. We’ve got a problem. If you are looking at the debt and thinking I’ve had this Visa card for five years and I haven’t really paid anything down on it.

What’s happening? There’s a problem. If you’re getting creditor calls, if you’re getting legal action activity letters in the mail saying they’re gonna take legal action, those are all issues that you really need to have a look at. And I always say to people, don’t leave it. Too long. The most common thing I hear from people is I should have talked to you a year ago.

And, but they’re afraid to talk to me. So again, no obligation, no payment for the initial consultation. Come in, get a consultation, and get the facts and knowledge is power, right? So the more you know about it, the more of an informed decision you can make on whether or not I can help you or not, and you’re just going away.

Fact finding, figuring out what could you do next. 

Wayne Kelly: So there’s probably family members who may be watching this and listening, and they’re saying, oh, I’m gonna sit my kids here right in front of this camera to talk with Brenda. Brenda, what is your advice to young people starting out? 

Brenda Woods: I think for young people starting out, it is budgeting.

Get that budget in place and understand what your income is, what your expenses are, and keeping track of your expenses. Again, we have a real problem in this country, in that we don’t. Typically teach kids how to budget. It’s not usually taught in the schools. It’s certainly not something that is usually taught at home.

Sometimes it’s even a bit of a taboo subject at home. It’s getting better and there’s lots of information out there about budgeting, but that is the most important thing, is understanding how to budget. 

Wayne Kelly: I know of couples who they have to have everything separate because one spends money, one doesn’t spend money.

One likes to buy little things here and there, the other one doesn’t. And it causes such friction that they decide just let, we’re just gonna keep everything separate when it comes to our incomes and money going in the bank. But some other couples, then they just put everything into one account.

Is there a better way or a worse way or is it whatever works for the couple? 

Brenda Woods: I think it’s probably whatever works for the couple if you’re gonna do it separately. Then again, each of you has to have your own budget and maybe there’s a joint bank account where each of you puts a little bit in there to help out with the household expenses.

so you have a house account where all the house money goes, and then you each have your own separate account for spending and that may help with some friction that may help, may occur throughout the marriage. But I think the majority of pair of people still seem to budget. By doing it together.

And so it’s really sitting down and making sure that not just one person is doing the budgeting. That is what I see a lot. It’s typically one husband or wife. I seem to see a lot more women who seem to be the budgeter in the household, and I think it needs to really be a family affair and you can even get the children involved.

They don’t have to be involved in absolutely everything, and certainly not in large decision making. But if you have a budget line an eating out budget, it’s a great idea to share that with the kids. We only have this much money for eating out for the month, so we have to make some choices throughout the month about how much we’re gonna spend and where we’re gonna spend it.

So if you’ve got everybody involved in it and everybody’s on the same page, you’re gonna do much better. 

Wayne Kelly: And that spending is like going out for lunch. Even any of the fast food restaurants. Now you take three kids and two parents off to a fast food restaurant. It’s 45, 50 bucks. 

Brenda Woods: It sure is. It’s very pricey and I think people have not yet.

You understand, I think when you go and pay the bill, oh, it was 45 or $50, but a lot of people aren’t tracking how many times they’re doing that, 45 or $50. So if you’re really keeping track of it throughout the month, then you’re gonna see, I call it, is there a hole in your pocket? You’re gonna see when I add that up over the period of a month.

Let’s say you spent $200, that’s $2,400 a year. So when you look at it that way, and you average it out over the year and then took, take an annual look at it and go, gee, that’s money that I could have put towards the debt or money that we could have put towards a little mini vacation. Lots of things that could be done with the money if you just knew where it was going.

So that’s the importance of tracking it. 

Wayne Kelly: Amazing information. Is there anything that else that you wanted to mention? 

Brenda Woods: I think just again, make sure that if you are looking at the depths and you’re thinking, oh, I think I’ve got a problem here, reach out and have a chat with us Again, just fact finding, trying to figure out what you could do.

A lot of times there’s stuff we could do. A lot of times there’s things we can do that if you had reached out to us earlier, we might have had gone in a different direction. And unfortunately people leave it until there’s no other options left for them a lot of the time. And so they end up in a situation where.

They’re pressed for time because maybe there’s a garnishee, maybe there’s a, a threat of legal action and that’s what pushes them, their our way. So reach out as soon as you know there’s a problem or recognize any of those warning signs so that we can help guide you in the right direction.

Wayne Kelly: Brenda, thank you very much for all the great information today. You’re welcome. Thank you. You can learn more about Brenda and check out that free consultation@wecanhelp.ca and of course, if you want more information, you can check out debt matters.ca. Thanks very much for listening and for watching.