53% of Canadians on the Brink of Insolvency
bnnbloomberg.ca
bnnbloomberg.ca
However, MNP's survey methodology makes the 52% number misleading: they basically ask a sample of the population if a $200 increase in monthly spending would make them unable to pay bills and meet debt obligations, and people self-report if that is the case or not. Most people don't have firm monthly budgets, so this is probably more a psychological excercise than a personal finance one.
Realistically, most people have more "give" in their monthly spending than they realize: if they get stuck with a $200 per month increase from somewhere, they can probably compensate by reducing bills (eg: cutting cable, changing phone/internet providers, shopping at the discount grocery store) and adjusting spending habits.
A better, more informative metric would be to sit down with a representative sample of the population and analyze their monthly bills to find the gap between inflexible expenditures (eg: rent/mortage, debt service, utilities, basic internet + phone packages, reasonable food expenditures) and monthly income. Knowing what the statistics are for that number is a better proxy for how close Canadians are to insolvency than self-reporting. But that's an awful lot of work.
Financial literacy really should be required in primary education.
And interest rates have fallen, so monthly payments may be net the same. Rising prices could have an impact of down payments though.
In the US, inflation-adjusted mortgage payments seem to be at the lowest they've every been:
* https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
The ladder was pulled up in the mid-nineties, and since 2008 it's out of reach.
In contrast, if you cannot cut your costs anymore and your outgoings exceed your income, you will have a negative cash flow. You are still not insolvent, but you will eat into your savings and credit lines and eventually become insolvent if you cannot recover.
Most healthy adults do not eat a diet of ramen as their mainstay. However an independent budget analysis would surely find that a healthy individual could downgrade their food purchases to just ramen (or another minimal cost set of foods) and find more give in the budget. As I recall the McDonalds budget also assumed the individual would not need phone or internet as they can use the library.
This quickly becomes an exercise in lifestyle dictation.
And we can agree that assuming that somebody uses the library for the internet is unreasonable - a better baseline is a basic package for both at local market rates.
The goal is to assess reasonable flexibility in cashflow. If the study author is biased towards trying to prove a predetermined outcome (eg: that minimum wage in high CoL areas is livable), the results are poisoned from the get-go: good luck getting repeat business from McDonalds' if your study unearths some unpleasant truths. It's the classic case of a metric becoming a goal and ceasing to be useful as a metric.
I do think this is certainly something a national statistical agency could do in a minimally biased fashion, if done rigorously.
Ignoring that is of course a nasty bias. Much like ignoring that you do sometimes have to buy clothing or shoes, you probably do have to spend on something to unwind. (What it is depends on the person.)
Likewise, ignoring cost of transportation is a chief sin of those analyses, even bus tickets are not free, and bicycles are not exactly fast.
As a minimal example, calorie and nutrition demands can vary by about 2x with height and biological factors and easily up to 3-4x if you consider more active lifestyles. You would generally expect some portion of the population in the study to need double or even quadruple the grocery cost per household member than the average. Are they cost burdened if most of their budget goes to grocery?
Similarly housing is heavily biased by when you purchased property comparing someone renting market rate housing to someone who lives in rent control or has owned property for a while is challenging. You can't exclude owners as they are the most likely to bankrupt in this scenario if they become cost burdened.
Even worse, for both of the above baselines the cost of goods can easily vary by 4x depending on where you live within a 50 mile radius when it comes to dense population centers. Starbucks employees in SF proper aren't going to commute 4+ hours through bay traffic to live in lower cost regions of California. They will inherently need to purchase grocery, housing, and other goods at higher than average prices.
These edge cases matter in this analysis as the outliers are the ones who probably will go bankrupt or otherwise exit the economy if the economic environment turns profoundly negative. If by circumstance the average household is happy, but 10% of households are on the brink - it wouldn't take much for things to take a serious turn.
All that being said, there is no reason a government agency couldn't devise a methodology based on the 90th or 99th percentile to capture these edge cases and report on a number that would more reasonably reflect the long-term outlook of houses under financial stress.
https://www.nasdaq.com/articles/mcdonalds-sample-budget-shee...
Highlights include:
* At minimum wage, it would require working 284 hours per month, or about 70 hours a week. To work merely 40 hours per week, they'd need to be earning $12.75.
* It assumes they can get health insurance for $20 a month, even though they're working two part-time jobs.
Not specific to Canada but rather generic: it's virtually without alternative in most parts of the world to pay enormous percentages of a net income for fixed, unchangeable stuff:
- rent
- car-related payments (even a beater requires gas, insurance and maintenance) or public transport
- some form of internet access
- food
Most people (~70% in the US!) don't have the savings to weather an unexpected 1000$ bill so it's fair to assume they've already stretched their budgets thin. It is very, very hard to cut in the variable part of monthly costs then, and impossible to cut on the fixed costs. And the coronavirus crisis with its various impacts, especially destroying a lot of "side hustles" like restaurant or other service "moonlight" jobs or sex work, hasn't made things better.
In fact, most of the Western societies' masses are barely kept afloat. It is a ticking bomb waiting to explode, we're seeing violent outbursts for over two years now - Yellow Vests in France, the BLM protests and the January putsch attempt in the US, covid-deniers nearly storming the Parliament in Germany, escalating covid-denier and youth riots in the Netherlands, religious-nationalist riots in Northern Ireland... societies are under immense tension, with demagogues fanning the flames.
According to this report the 60-80th percentile family has an income of $97k/year and a net worth of $423k: https://www.federalreserve.gov/publications/files/scf20.pdf
It's fine if housing is a significant asset, but we should treat it as a problem if people see it as an investment (the actual utility of most housing declines over time, maintenance and upkeep are required, value only goes up because of location and demand).
Edmonton saw a massive shortage in housing a few years back during the oil boom and moved to build tons of condos and apartments, plus offered tax subsidies if you converted a basement or in-law apartment into a full-on dwelling. So there is a glut of average-tier 2-bed 2-bath apartments everywhere.
Plenty of space and COL is reasonable if you're willing to go further out.
But, on average, still 100k (adjusting for currency) more than what my coworkers in the NC Research Triangle are paying for a similar square footage house.
Unless you can recreate desirable weather patterns and topography, that’s not going to happen.
Of course location will always be a factor in prices, but policy can exacerbate the effect or not, and we tend to have policies that exacerbate it.
Creating enough housing supply to satisfy it, whether through higher density or sprawl, will make the place less desirable (have to share resources and amenities with more people), so residents will of course oppose it.
Maybe smoke season will dissuade people.
pretty sure the only number that is different from pre-pandemic statistics is $200, used to be $1000. People in Canada have really low net cashflows and believe in real estate as the only form of saving/investment. It is common for people to spend more than 50% of income on mortgages, even after government introduced benchmarking.
https://www.ipsos.com/en-ca/over-half-53-canadian-households...
(Earliest one I found so far, its 2016) https://www.ipsos.com/en-ca/news-polls/half-48-canadians-are...
https://www.ipsos.com/en-ca/news-polls/Canadians-and-Bankrup...
https://www.ipsos.com/en-ca/news-polls/MNP-Debt-Index-Wave-8
https://www.ipsos.com/en-ca/news-polls/MNP-Debt-Index-Wave-7...
Do you by any chance happen to live in Vancouver or the GTA?
https://www.ctvnews.ca/business/where-in-canada-are-house-pr...
Speaking for all Canadians, as though a massive country of 30M people is a monolith, is ridiculous. Every time I see a comment like the OPs above, it's inevitable that a) they're from Toronto or Vancouver, and b) they think their experiences represent those of the entire country.
Obviously everyone has their preferences for where they want to live. But there's no part of the country I "dislike"--let alone "passionately" so--and I'd hope and expect the rest of my fellow Canadians to be similarly generous and open-minded about the rest of their country and their countrymen.
It's a shame you can't seem to find that in yourself, as every part of the country has something unique to offer, whether that's a small town in Saskatchewan or a massive suburb in Ontario.
There's no way this is true. It fails the sniff test on the face of it.
But the problem is, the actual data is a bit mixed. One study says, "bankruptcies are down 27% in the past 12 months"[1].
Another report said that savings was at a modern "all time high".[2]
I remember reading stories about how personal debt had fallen the most in 2020, "a record" amount.[3]
Today I read that more money has been put into the stock market in the last 5 months as has in the last 12 years.[4]
Governments (in Canada) have been sending billions of dollars in direct payments to people who's income has been affected by the pandemic. The cost of direct pandemic support payments per capita in Canada works out to $10,000+.
Others have said that this article was written/sponsored by a bankruptcy firm. This same firm has published this same figure ("50% within $200 of bankruptcy") for years and years.
And so in 2021, this makes a good story. And people think it feels true. There is inequality. We see it. We feel it. But you can't measure it the way this study did (asking people) and I question the source of the data.
[1] https://hbswk.hbs.edu/item/covid-was-supposed-to-increase-ba...
[2] https://time.com/nextadvisor/banking/savings/us-saving-rate-...
[3] https://www.cnbc.com/2021/03/08/americans-paid-off-a-record-...
[4] https://www.cnbc.com/2021/04/09/investors-have-put-more-mone...