You probably know that Canada weathered the Economic Crisis of 2008 far better than the majority of other industrialized nations. This was small comfort to the people who walked into our offices in the past few years whose financial difficulty in Red Deer reached the point where a declaration of personal bankruptcy was their only option for getting back on their feet.
It is certainly true that things are improving, both here in Red Deer and around the world. Canadian unemployment has stabilized and shows some signs of improvement. Personal bankruptcy filings in 2010 dropped 18%. Household debt, which reached a record 1.48 trillion in late 2010, actually went down to 1.46 trillion in early 2011.
We think the most significant improvement is the decline in household debt. The recent numbers are only a snapshot in time, but some experts are claiming that Canadians are finally facing up to the fact they owe too much and are taking steps to get their debt under control.
While the majority of the residents of Red Deer who come to us for help are there due to a change in their income picture, the fact is it’s excessive household debt that turns an unexpected decline in income from a setback to a crisis.
Some people think of financial difficulty in Red Deer as restricted to difficulty in meeting current financial obligations. While that is certainly true, we think even those residents of Red Deer who are still able to manage their current debt may very well be in financial difficulty of which they are unaware.
The issue to confront is not your current ability to manage your debt, but your future ability. Do you have savings to allow you to withstand a personal economic crisis? Are you prepared for rising interest rates?
The Economic Crisis of 2008 drove already low interest rates to historic levels. Low interest rates made it easier for Canadians who might otherwise have fallen into financial difficulty to stay afloat by borrowing more. There is hardly a financial expert anywhere on the planet who expects interest rates to go down further.
As the economic recovery already in progress heats up, interest rates will rise, and along with them, your monthly debt repayments will go up. If you have a home mortgage loan in Red Deer, a higher interest rate when you renew is all but guaranteed.
Can you afford an increase in your monthly mortgage payment? Credit card interest rates may rise as well, leaving you with two options. Pay the higher monthly payments so you can continue to use your cards, or close the accounts to stay with the lower rate. Can you afford to live with less available credit?
If your answer to these questions is “no,” you are on the road to financial difficulty in Red Deer. If your answer is “I don’t know” you should consider getting professional financial help from an accredited credit counselor or licensed bankruptcy trustee in Red Deer.
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