Student debt, high child care costs, a lingering global pandemic, rising inflation, and sky-high home prices. Is it really a surprise that Canadians are in debt and struggling to make ends meet?

If you feel like your household debt is growing and you’re unable to keep up with your monthly bills, you are not alone. There are many reasons why Canadians find themselves in debt, and it can happen to anyone.

According to a recent Equifax report, overall Canadian consumer debt sits at $2.2 trillion with the average Canadian holding $20,739 in debt, excluding mortgages. Canadians between the ages of 46 to 55 hold the highest average individual debt at $31,271, followed by those aged 56 to 65 with $26,028. Canadians aged 18 to 25 accounted for the lowest average individual debt at $8,318.

Causes of Canadian Debt

There are several reasons Canadians are finding themselves with a large amount of debt, including:

High inflation

Due to rising inflation, it’s more expensive for Canadians to participate in their day-to-day lives. From increasing food prices at the grocery store to increasing gas and housing prices, Canada’s annual rate of inflation is over 5%, higher than it’s been in over 30 years. Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada, believes “delinquencies are likely on the upswing from the immediate future when you layer in the pullback of government support and COVID-19 restrictions still hiring businesses”.

Rising Interest Rates

Lenders have also begun to increase interest rates in anticipation of a rate rise from the Bank of Canada. This will make it more expensive for Canadians to borrow money. Those with a variable rate mortgage or a home equity line of credit (HELOC) can expect to see rates rise when the Bank of Canada increases its rates. Rising interest rates will force Canadians to put most of their money into debt repayment leaving less money left over for groceries, gas, and other financial commitments.

High cost of housing

Breaking into the Canadian housing market is nearly impossible for many young Canadians. People simply can’t keep up with the increases in housing, especially in Toronto and Hamilton, Ontario. As a result, the number of new mortgages is on the decline. Part of the problem is that incomes are not increasing as quickly as housing prices. Rising inflation means some Canadians are actually seeing a decrease in their annual income.

According to Generation Squeeze, a house today costs an average of $568,000. In 1976, the average home price was $224,000. However, the average income for a 25 to 34-year old today is $53,000 compared to $58,300 in 1976. Yes, you read that right. The average income has decreased. To make housing more affordable, Canadians need to earn higher wages.

Increased spending

Canadians are spending more on their credit cards. According to Equifax, the average Canadian consumer spends $2,205 per month on their credit card, up 15.2% over the last quarter. This may be explained, in part, by people getting back to their pre-pandemic spending behaviors as well as a decrease in government benefits. Recent stats from Statistics Canada reveal the average Canadian household debt represents 186.2% of disposable income.

Federal Debt

You may not be the only one feeling the financial crunch. The Government of Canada’s national debt burden jumped by $253.4 billion from 2019 to 2020 and is anticipated to rise for the foreseeable future. As a percent of the Canadian gross domestic product (GDP), the deficit in 2020, amounted to 12.8%. This is compared to a debt to GDP of 1.8% in 2019. The last few years have not been financially easy for many Canadians, including the federal government.

According to the Canadian Taxpayers Federation Debt Clock, Canadian federal debt currently sits at over $1.1 trillion. The national daily debt increases by approximately $391 million per day and $16 million per hour. It’s hard to even fathom these numbers.

The point is, you are not alone. Even the government is struggling with debt.

How to Prepare for an Unpredictable Financial Future

If you are currently facing insolvency, your first step should be to contact a Licensed Insolvency Trustee (LIT). An LIT can help you to relieve your financial stress and give you the information and support needed to move forward.

An LIT will take you through your debt relief options and help you decide which one is right for you and your family. While no one thinks they’ll ever need to file for a Consumer Proposal or Bankruptcy, these debt options can provide immediate relief and give you the fresh financial start you need. Licensed Insolvency Trustees are the only professional authorized to administer government-regulated insolvency proceedings including Consumer Proposals and Bankruptcies.

Create a financial plan

Once you have your financial feet back on the ground, it’s important to take steps to avoid insolvency in the future. Creating a financial plan can help you to stay on course. Without a plan for your money, it’s easy to lose track of your finances and find yourself taking on debt. As you create your financial plan, consider your short, medium, and long-term financial goals. Simply writing your goals down is the first step to achieving them.

Build an emergency fund

If the past couple of years has taught us anything, it’s that life is unpredictable and it’s important to be prepared. Starting an emergency fund might not be possible for you at this time. However, when you are in a more favorable financial position and can afford to put aside some money, an emergency fund should be a priority. An emergency fund is meant to help you sustain an unexpected financial blow like a job loss, a home repair, or the financial fallout from a global pandemic.

Avoid taking on any new debt

It’s easier said than done but, if you are struggling with your finances try to avoid taking on any new debts. As interest rates increase, any current variable rate debts will get more expensive to maintain and any new debts will cost more to take on. If you are struggling with your finances and your credit score has taken a hit, you can also expect to pay a higher interest rate. Do your best to cut out unnecessary expenses before you consider taking on debt.

Make more money

If you can swing it, take on extra shifts at work or start a side job to bring in more money. Brainstorm potential businesses you can start based on your education, background, skills, and interests. Then, use this money to build your emergency fund and pay off debts.

Improve your financial literacy

Knowledge is power. However, many of us have received no formal financial education or training. It’s no wonder so many Canadians are in debt and find it difficult to manage their personal finances. Simply reading books on personal finance or searching for different financial websites or podcasts can be a good first step to improving your overall financial literacy and feeling more in control of your money.

Talk to a Licensed Insolvency Trustee

With rising inflation and interest rates, it is anticipated that insolvency rates are going to go up. As soon as you start to worry about your debt, reach out to a Licensed Insolvency Trustee. You don’t have to deal with the stress of your debt alone. Call Adamson and Associates Inc. at 519–310-JOHN (5646) for a no-obligation consultation.

Originally published at on April 18, 2022.



Adamson & Associates, Inc.

Licensed Insolvency Trustee. Experts in bankruptcy, consumer proposals, credit counselling, and other debt solutions in Ontario.