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Canadians spend more for fun, info

Forget the recession. Forget that Canadian households are in debt up to their computer screens and TV sets. Forget about the fact that unemployment is rising and more and more Canadians are losing their jobs.

Forget the recession. Forget that Canadian households are in debt up to their computer screens and TV sets.

Forget about the fact that unemployment is rising and more and more Canadians are losing their jobs.

Regardless of what seems to be happening in the economy here and elsewhere in the world, Canadians still are spending their money and racking up more debt.

A recent report by the Certified General Accountants of Association of Canada showed that household debt in the country kept rising during the recession, peaking in December at $1.41 trillion, or an average of $41,740 per person.

Canadians now have the dubious distinction of having a debt to income ratio of 144 per cent, the worst among 20 advanced countries in the OECD.

“The growth in household debt had been strong during ‘good times,’ showed a remarkable resilience during ‘challenging times,’ and seems to be set to continue its upward trend as we navigate ‘interesting time,’” said association president Anthony Ariganello.

“The rapidly deteriorating situation of the household sector’s balance sheet should be viewed as alarming.”

Debt may be a four-letter word, but that doesn’t necessarily mean it’s ALL bad. Financial experts like to differentiate between good and bad debt.

Good debt includes anything that is too expensive to pay cash for but is something that you need or might be considered a good investment, such as a house, which usually rises in value over time.

Bad debt is any form of debt with a high interest rate for things you don’t really need or can’t afford, such as charging an expensive vacation on a credit card.

The worst form of bad debt is credit card debt because it carries the highest interest rate.

Debt even has roots in religion.

Crown Financial Ministries Canada says the Bible discourages the use of debt but does not go so far as to call it a sin. Debt is considered a form of slavery because it puts people in a position of servitude to the lender.

The more we owe the greater the depth of servitude.

In the Old Testament, debt was considered a curse and one of the consequences of disobedience.

So what are Canadians spending their money on?

According to recent reports based on Pricewaterhouse Cooper LLP’s most recent Global Entertainment and Media Outlook, Canadian consumers are spending more than ever on entertainment and information — everything from Internet access to television subscriptions and video games.

Canadians spent $238 million in 2009 to access the Internet through mobile devices such as the BlackBerry and iPhones, and their spending on Internet access will increase by an average of about 12 per cent a year in the future.

Further, consumer spending on TV subscriptions and video games in Canada is projected to grow at compounded annual rates of 6.8 per cent and 6.6 per cent respectively, while Internet advertising in Canada will grow at an annual rate of 11.7 per cent.

If you can’t solve your debt problem by budgeting, you may need a debt management plan (DMP).

A DMP is designed for people who can afford to repay their debt but need help negotiating with creditors and time to get back on top of their financial situation. It’s a voluntary agreement between you and your creditors arranged by a credit counselling agency.

The agency pools your unsecured debt together so that you make a single monthly payment to the agency, which then divides your payment among your creditors, with the largest creditors getting a bigger share of the payment.

A DMP gives you a single monthly payment to make.

Then it reduces and sometimes can even eliminate interest charges. In most cases, creditors will agree to waive most or all of the interest, so all payments go toward paying off principal, which reduces the debt faster.

Depending on individual circumstances, a DMP may be a great way for many Canadians to get relief from the increasing level of debt they are incurring.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. He can be contacted at boggsyourmoney@rogers.com).