Fall 2012 Challenges Assignment

The article talks about strategies on how to save for things like education, on saving for a car, how to pay off your debt at lower rates as well. 

Some ways to deal with debt are limiting yourself, thinking before spending (do I really this?), using cash instead of credit cards and getting educated about finance to minimize debt when it has to be paid.

The new report shows household debt to annual disposable income reached a new high at 164.6%, from 163.3% the previous quarter. In the July-September period, households borrowed $27.3-billion, $18.4-billion of that in mortgages, while consumer credit levels increased by $7-billion to $474-billion. As well, household net worth rose 1% to $197,800 in the July-September period, mostly due to gains in holdings in stocks, including mutual funds, and increased value of pension assets.

On a national accounting level, Canada's net worth increased by more than $9-billion in the third quarter to $6.8-trillion. That translates to $194,100 per person.

Canadians are taking on more debt than ever before, approaching US debt levels just prior to the housing market crash.

Consumer debt is becoming a larger threat to the Canadian economy as a whole. Meanwhile, businesses stopped expanding due to weak global growth.

Canadian government article advising consumers about debt, such as recognizing danger signs, various methods to deal with it, and information on declaring bankruptcy in case consumers are unable to pay off their debts.

Household debt contributes to recessions and depressions, one major cause is banks lowering their lending requirements to make more money. Household debt can be reduced through income and savings, debt negotiations and inflation.

Unemployment itself has negative effects on people besides the obvious ones of having less money. People are more likely to become depressed, less likely to retain learned skills and it may even affect their children's earnings.

The S&P/TSX composite index fell 87.49 points to 12,453.32, giving back a good-sized chunk of last week's gain of almost two per cent, while the TSX Venture Exchange added 0.74 of a points to 1,228.96. The energy sector was down 0.8 per cent with the February crude contract on the New York Mercantile Exchange down 26 cents to US$92.83 a barrel. Suncor Energy (TSX:SU) shed 35 cents to C$33.22 and Talisman Energy (TSX:TLM) was 24 cents lower to $11.65. The gold sector slipped about 0.7 per cent February bullion fell $3.40 to US$1,645.50 an ounce. Agnico Eagle Mines (TSX:AEM) faded 79 cents to C$49.60 and Centerra Gold (TSX:CG) declined 14 cents to $9.20.

February crude was up 96 cents at US$94.24 a barrel and the energy sector was down 0.35%. Canadian Natural Resources (TSX:CNQ) gave back 35 cents to C$28.74. The gold sector was off about 0.4% while February bullion declined 70 cents to US$1,683.20 an ounce. Barrick Gold Corp. (TSX:ABX) faded 34 cents to C$33.69.

The firm acquired 180 oil and gas wells, 150,000 net acres in mineral leases, a gas processing facility and a 262-mile gas gathering system from Houston-based Patara Oil & Gas, it said in a press release. Dubin was listed as number 285 on the Forbes 400 list of billionaires in September 2012 with a net worth of $1.7 billion; Tudor was number 108 on the same list, with $3.6 billion.

Canadian Natural Resources Ltd. and Suncor Energy Inc. added at least 0.9 percent as crude rose to a three-month high. Yamana Gold Inc. gained 4.5 percent as gold rose the most in six weeks. The market today is moving primarily on the Chinese data, so gold is up and crude is up which is very good for the Canadian market," said John Kinsey, fund manager with Caldwell Securities Ltd. in Toronto. His firm manages about C$1 billion ($1.01 billion). "Those are the two areas that have been dragging." Yamana climbed 4.5 percent to C$17.06 and Eldorado Gold Corp. advanced 3.3 percent to C$12.61 as gold futures for February delivery gained 1.4 percent to $1,678 an ounce in New York, the biggest gain for a most-active contract since since Nov. 6.

The S&P/TSX composite index rose 70.06 points to 12,404.40, as key commodities prices moved higher. The TSX Venture Exchange gained 2.11 points to 1,178.11. March copper declined about four cents to US$3.61 a pound while February gold bullion moved ahead $3 to US$1,673.70 an ounce. In Europe, the FTSE 100 index of leading British shares was up 0.6 per cent at 5,968 while Germany's DAX rose 0.2 per cent at 7,667. The CAC-40 in France was 0.4 per cent higher at 3,661.

Consumer debt as a percentage of income is highest in BC, Alberta, and Ontario where house prices are highest

Canadian debt loads grew at their fastest pace in two years during the summer Canadian instalment loan borrower debt grew 2.3 per cent over the third-quarter of last year to an average of $22,849

From 84% in 1990 to 164.6% today - it's an alarming leap, a dramatic number that may actually have scared some of us into doing something about our debt load. Someone with a $300,000 mortgage and after-tax household income of $100,000, for example, really shouldn't be in a full-fledged panic because they have a debt-to-income ratio of 300%. That's a normal scenario in today's market and not cause for alarm by itself. Still more relevant to consider might be your debt servicing costs and then what they would be if interest rates went up two percentage points. On average, Canadian households pay about 7.6% of their after-tax income on interest payments. That number was 8.8% in 2000 and consumers were able to handle the load, says Mr. Tal

It seems that while the economy can help consumers in addressing their debt problems, it can be very unstable. Because of this, every debtor and Canadian consumer must take action themselves to ensure that their debts stay within their control. Average consumer debt reaches $26,221

Credit cards: Johnson suggests getting a credit card that gives you cash back rather than points, saying the money is more useful. The Penniless Parenting blog says spendthrifts should use cash as much as possible and recommends carrying around a $50 or a $100 bill. See how long that bill can last without being broken.

There is more debt in canada thehn ever before

Canadian debt/income ratio isn't as bad as it looks. Because Canadians pay for their health care through their taxes, their disposable income is distorted relative to the U.S. In terms of personal income, the ratio is actually closer to 118%, rather the scary 165%. Canadian household debt relative to assets (19%) and net worth (24%) is below prior peaks of 20% and 25%, respectively. Rosenberg estimates Canada would need to see a 20% drop in the housing market to get net worth/income ratio down to the U.S. level. Canadians have more equity in their homes - 69% of the value compared with 43% in the U.S. "This equity gap is a prime reason why Canadian household net worth/income ratio (at over 500%) is some 35 percentage points above U.S. levels," Rosenberg writes. Canadians are better able to service their debts. Canadian wage growth at 4% a year is about double what it is in the U.S. - a rise that pretty much matches the average interest rate they are paying. The debt-servicing ratio in Canadian households is now just over 7% - a level it has only been below in the past 15% of the time. So even though Canadian interest rates are 75 basis points higher than in U.S, it is not hampering our ability to handle debt.

Credit reporting agency TransUnion's latest quarterly analysis of Canadian credit trends found average consumer non-mortgage debt jumped 4.6% year-over-year in the third quarter to an average of $26,768.