Today my firm, released a Harris/Decima survey of over 1,000 Canadians, asking about their attitudes towards debt.  We discovered that even though we have a lot of debt, we do not appear to be concerned about it, and I find that frightening.

Statistics Canada tells us that the average adult in Canada is carrying debt equal to over 150% of their annual disposable income.  So, if your take home pay is $20,000 per year, if you are the average Canadian you have over $30,000 in debt.  Most of us don’t see that as a problem.

In some cases, I agree.  If your debt is for a mortgage, and your house is increasing in value, you can make the argument that a mortgage is “good debt”.  That’s true, provided that your house continues to increase in value, and that you can continue to make your mortgage payments.  (I realize that most experts disagree with me, but I don’t view a house as an investment; I view it as a place to live).  Of course if house prices decline, as they have in certain areas in Canada over the last few years, or if you lose your job and can’t make the payments, “good debt” can become “bad debt” very quickly.I suspect that is why most Canadians don’t view debt as a problem; as long as we can make our payments, it’s all good, right?

Despite the fact that we have record levels of debt, 62% of those surveyed are comfortable with their financial situation.  As of today interest rates are low, and the unemployment rate isn’t huge, so we are not overly concerned.

We asked another question in the survey:

How confident are you that you could come up with $2,000 if an unexpected need were to arise in the next month?

55% of Canadians were extremely or very confident.  Again, it looks like we are in good shape, right?  But then we asked another question: “how would you come up with the money?”

We gave many suggested options, and an astounding 92% of those surveyed picked, as at least one of their responses, some form of borrowing.  People told us they would get some of the money from existing savings, but almost everyone said they would also consider tapping into their line of credit, or credit card, or getting a bank loan, or borrowing from friends or family.

In simple terms, most of us don’t have cash set aside for an emergency.

I’m not blaming anyone for that.  Canada has experienced an economic slowdown since 2008, and when times are tough, it’s difficult to save.  However, it does point out the fact that we are all vulnerable in the event of a financial emergency.

My advice is simple: if you have a good income, take steps to reduce your expenses and pay off your debt, and start a savings plan so you are protected.

If you have a lot of debt and can’t cut your expenses enough to get out of debt, consider your options, which may include a consumer proposal as a way to negotiate payment arrangements with your creditors.

Either way, assuming that you will always be able to borrow to deal with a financial emergency is a risky bet; reducing debt and having cash at hand is a much safer and less risky way to live.