Debt – is it a four-letter word?

Debt can actually be a good thing, if you know how to use it properly

When used responsibly debt can be a good thing — necessary and helpful. But does that mean the more the better — that you should take on as much debt as your bank will allow you to?

You might be inclined to think so. After all, that is what Canadian banks are encouraging their customers to do. They offer mortgages, home equity lines of credit, investment loans, car loans, RRSP loans … you name it. They even send out cheques with your credit card statements that encourage you to borrow more (assuming there is room on your card). And they are more than happy to give you as much as you qualify for. So it would stand to reason that since they promote themselves as sources of “financial advice” that they must think that it is financially prudent to borrow as much as you can.

Politicians are worried and have issued several warnings. But that’s about all they are doing. With a weak economy the traditional policy governments use to discourage borrowing (raising interest rates) is not an option. The economy is too fragile.

Don’t get me wrong — our financial institutions without a doubt have been more responsible than their US counterparts. For the most part they have refrained from lending to those who clearly cannot afford it. Instead our financial institutions focus on those who can afford it, and try to get them to borrow as much as possible.

Think about it. When you apply for a mortgage, how often have you been told “this is how much you should borrow” as opposed to “this is how much you can borrow.” Consider this example: two borrowers with identical incomes buying similar houses, only Borrower A is a long-term member of a generous pension plan, while Borrower B is not, and needs to make sizable RRSP contributions to have any hope of a comfortable retirement. Yet most if not all Canadian financial institutions will be more than willing to give Borrower B every bit as big a mortgage as Borrower A.

Here’s another example: Have you ever consolidated your debt? I know people who have. And in many cases their banks have given them more than they actually needed. It sounds like a good thing: “it’s there if you need it.” But often it is used regardless of whether you need it or not.

Depending on your circumstances it might be a good time to look at debt reduction strategies instead – ways to manage and ultimately eliminate debt. It’s worth a look.

Feel free to call or email for more information.

 

 

 

Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). This article is for information only.  Securities are offered through Raymond James Ltd., member Canadian Investor Protection Fund. Insurance and estate planning offered through Raymond James Financial Planning Ltd., not member Canadian Investor Protection Fund. For more information feel free to call Jim at (250) 594-1100, or email at  jim.grant@raymondjames.ca. and/or visit www.jimgrant.ca.

 

 

Just Posted

The Co-op gas station at Whiskey Creek is burning after a camper van burst into flames just before 4 p.m. on Thursday, June 17, 2021. (FACEBOOK PHOTO)
Exploding camper van torches Highway 4 gas station between Qualicum Beach and Port Alberni

Highway traffic blocked after Whiskey Creek gas station erupts into flames

Morningstar Golf Club in Parksville will host the 2021 B.C. Junior Golf Championships. (PQB News file photo)
Morningstar Golf Club in Parksville to host 150 of B.C’s top junior golfers

Provincial boys and girls championship begins June 28

Hannes Grosse, left, and Iris Steigemann, right, as they prepared for their 'Moments of Silence' exhibit. The father-daughter duo are showing at The Old School House Arts Centre in Qualicum Beach until June 26. (Submitted photo)
Cortes Island artists exhibit at Qualicum Beach’s TOSH in first father-daughter show

Both artists will be present at shows on Friday, June 25 and Saturday, June 26

The Lighthouse Country Marine Rescue Society will get more funding from the Regional District of Nanaimo. (Submitted Photo)
More PQB communities to fund Lighthouse Country Marine Rescue Society

RDN to introduce amendment to service bylaw contribution

People line up to get their COVID-19 vaccine at a vaccination centre, Thursday, June 10, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Vaccines, low COVID case counts increase Father’s Day hope, but risk is still there

Expert says people will have to do their own risk calculus before popping in on Papa

Helen Austin performing with Trent Freeman at the 2018 Vancouver Island MusicFest. Austin is one of the many performers listed for the 2021 event.
Vancouver Island MusicFest goes virtual for 2021

Black Press to stream 25 hours of programming July 9-11

Greater father involvement in the home leads to improved childhood development and increased marital satisfaction, says expert. (Black Press Media file photo)
Vancouver Island researcher finds lack of father involvement a drag on gender equality

Working women still taking on most child and household duties in Canada: UVic professor

FILE – A science class at L.A. Matheson Secondary in Surrey, B.C. on March 12, 2021. (Lauren Collins/Surrey Now Leader)
Teachers’ union wants more COVID transmission data as B.C. prepares for back-to-school

BCTF says that details will be important as province works on plan for September

Provincial health officer Dr. Bonnie Henry outlines B.C.’s COVID-19 restart plan, May 25, 2021, including larger gatherings and a possible easing of mandatory masks on July 1. (B.C. government photo)
B.C. records 120 new COVID-19 cases, second vaccines accelerating

Lower Pfizer deliveries for early July, Moderna shipments up

A Heffley Creek peacock caught not one - but two - lifts on a logging truck this month. (Photo submitted)
Heffley Creek-area peacock hops logging trucks in search of love

Peacock hitched two lifts in the past month

The Calgary skyline is seen on Friday, Sept. 15, 2017. THE CANADIAN PRESS/Jeff McIntosh
2 deaths from COVID-19 Delta variant in Alberta, 1 patient was fully immunized

Kerry Williamson with Alberta Health Services says the patients likely acquired the virus in the hospital

The first suspension bridge is the tallest in Canada, with a second suspension bridge just below it. The two are connected by a trail that’s just over 1 km. (Claire Palmer photo)
PHOTOS: The highest suspension bridges in Canada just opened in B.C.

The Skybridge in Golden allows visitors to take in views standing at 130 and 80 metres

BC Green Party leader and Cowichan Valley MLA Sonia Furstenau introduced a petition to the provincial legislature on Thursday calling for the end of old-growth logging in the province. (File photo)
BC Green leader Furstenau introduces old-growth logging petition

Party calls for the end of old-growth logging as protests in Fairy Creek continue

Most Read