The Creeping Definition of Debt

What’s your definition of debt?

Apparently, some Canadians with $50,000 or more in yearly income don't consider their mortgage or car payments as debt. Say what?! 

No. I’m not kidding. Here’s the article, which appeared in the Globe and Mail Online on December 1, 2014.

One quarter of [2,373] respondents said they don’t consider their mortgage or vehicle loans to be part of their debt, a sign that not everyone shares the same definition of what ‘debt-free’ means…
— Globe and Mail article published 01/12/14 "Many Homeowners Struggle to Balance Retirement, Debt Repayment: Survey"

The quote (see right), which was offered more as a “by the way” comment than the central theme of the article, points to a serious perception problem.

A number of thoughts ran through my head when I read it, including: 

  • The marketers and the bankers have won: having debt in the form of a mortgage and a car payment is the new “normal”.
  • Credit cards, payday loans, gambling debts and other unsecured loans are the only “real” debt now? Really?
  • If debt of any type is no longer counted as debt, what now counts as savings? I'm not sure I want the answer to that one. It might be even scarier...

Good Debt vs Bad Debt

We’ve all heard the terms "good debt" and "bad debt". Often our mortgage and our student loans fall under “good” because of the future potential they represent and, everything else (car loan, credit cards, lines of credit and other debt) would be considered “bad”.

To me, it’s all bad, just different shades of grey, really…

I don’t say I agree necessarily with the categorization of debt as good or bad because it’s too black and white, but I would say that debt is on somewhat of a continuum, from least (mortgage) to most (payday loans) egregious. And, the less you have, preferably none, is the only acceptable place to be in the long run. Unfortunately, it looks like ever fewer of us will reach this state if perceptions keep moving in the wrong direction.

What Changing Perceptions Means for Canadians

If Canadian consumers’ view on debt has softened considerably—it’s now downright “squishy”, it can only mean that:

  • More individuals consider "perpetual bondage" as acceptable or even the norm.
  • Fewer individuals will be truly debt free when entering retirement.
  • Fewer individuals will ever understand what it feels like to have no one to answer to.
  • More individuals will have their standard of living affected by changing interest rates (and we're likely to see some carnage when interest rates rise, as they inevitably will). There will be more foreclosures, more bankruptcies, more sadness and despair.
  • More individuals will be vulnerable to changes in life circumstances: job loss, loss of a spouse, illness or long term disability. 

What an awful position to put ourselves in as a nation. This is as far away from living "the good life" as you can get.

Not surprisingly, the article left me feeling empty, feeling somewhat desperate. I almost wish I hadn’t read the article to tell you the truth. It even made me want to figure out how to save more, how to eschew spending more…as though it would somehow stem the tide. 

What's your definition of debt?

Puzzle image credit/copyright: enciktepstudio/Shutterstock
Photograph of couple image credit/copyright: wavebreakmedia/Shutterstock