CASH IS KING – household debts


not only that, it also is QUEEN and all the other assorted royals. In other words, if forced into a situation of whether to use your own cash for a necessary cost (one that cannot be avoided) or to instead take on a loan from a Bank, choose using your own cash. According to this, and compared to the statistics on average Canadian household debt loads [ ], I am not only KING but in this case also QUEEN. No mortgage (thanks, Bank, but no thanks), no vehicle, no loan for anything.

Example: An older condominium building requires a number of substantial renovation projects, amounting to over one million dollars. Each condo owner must contribute (in six monthly installments) a certain amount of cash. Due and payable at the start of each month. If not paid, the strata company (who manages our property) takes 10% interest on what is owed and unpaid. Bad news for all those whose condominiums are already mortgaged (maybe, to the hilt), or those who simply do not have the needed cash when due. Mostly, those larger renovation projects draw out over a long period, during which Banks are all too happy to offer loans. It sounds nice and enticing, especially when loan rates are low. Even if the Bank of Canada rate is only 2.45%, the mortgage rates are around 4% (or higher). However, since our Canadian Banking system is conservative and well regulated, mortgages must be secured. Means, a debt must be registered against a property title.

Imagine I only need $10,000. I am still saddled with the mortgage/loan registration costs for about at least $500 – legal, document, registration costs. I refused the Bank offer of a (short-term) loan, even if the interest rates were very attractive. Why ? because of the mortgage document and registration costs (to register a loan and de-register again); these costs are not refunded.

Instead, I am using all my CASH savings for this enormous building renovation project. Lucky, I had some savings. How easy it is to fall into the debt trap.

Likewise, what should be paid off first ? when money is scarce. The credit card ! In fact, consumers who cannot afford a credit card, should not have one. Food for Thought: Most household debts can be attributed to the rigorous commercial advertising for (needed, or not needed) products, especially automobiles.

Ballooning Household Debt

Small household debt

Banks putting out warnings about world wide ballooning household debts. Do not blame households, put the blame squarely onto the shoulders of advertisers using (one could almost say) criminal marketing techniques. Who needs three automobiles, when they are barely even driven ? Then, why all this advertising of ZERO PERCENT DOWN ? (whatever that means ?). When in fact normal intelligent people know that ZERO percent could become EIGHTEEN percent annually interest, once that kicks in.
While we are at it, why not blame today’s ready access to all sorts of advertising media. Including also illegal via home telephone calling machinery. Most customers and ordinary folks are easy prey to those (marketing) predators, while others only buy what they need. Which would immediately reduce their household debt by eighty percent. [The last category including myself. Zero debt.]