Top News

Russell Wangersky: Shrinking wallets, special offers

Canadians are drowning in record debt, often as a result of purchasing things we don’t really need, writes Russell Wangersky. —
Canadians are drowning in record debt, often as a result of purchasing things we don’t really need, writes Russell Wangersky. — 123RF Stock Photo

I don’t blame big-box stores for doing it.

And I don’t really blame customers who whom it is the only option. (Well, maybe I do a little, only because they’re ignoring what’s right in front of their faces.)

Russell Wangersky
Russell Wangersky

 

But there’s something new that is a signal about just how big the financial hole some of us are building for ourselves, and just how very close the tipping point is for personal financial collapse.

Cruising through the flyers last week, I saw a different kind of offer: buy an elliptical exercise machine for $548.99. Or, just like the old furniture-store layaway plan, buy that elliptical for 24 equal payments of $22.88. Now, it’s not quite like the furniture stores — it’s not “pay nothing down and no payments for two years!!”

You can understand it a bit for furniture, which tends to have a big-ticket price tag — without some sort of payment plan, plenty of people couldn’t afford a sectional sofa set or new king-size bed, box spring and mattress. And people need a place to sleep.

But if you have so little room in your household finances that the only way you can buy a barbecue is to take the monthly pay option, you’re out of money. And maybe, just maybe, you should be thinking of doing without.

But I’d suggest that, if you crunch the numbers and have to buy your elliptical on a monthly payment plan because you don’t have the capital to buy it outright, the simple fact is that you just can’t afford an elliptical.

There are similar offers in the same flyer for portable air conditioners, generators, log splitters, truck winches and barbecues.

There’s no interest or fees built into these particular offers: the $22.90 you’d pay each month for 24 months works out to within pennies of the $549.49 price tag for the barbecue — so you can also make the argument that it makes more sense to buy a barbecue and pay for it over time than to put it on your credit card and pay it (and the attendant interest) off over three months or so.

But if you have so little room in your household finances that the only way you can buy a barbecue is to take the monthly pay option, you’re out of money. And maybe, just maybe, you should be thinking of doing without.

We don’t necessarily deserve the best of everything. We’ve been taught that we do: cheap interest rates have turned this nation into a country of outrageous household debt. Hugely expensive houses with huge mortgages, cars bought on time, credit cards maxed out so that we can have massive smart televisions and entertainment systems; cheap credit has taught us that someone will lend us money for the things we can’t afford.

That’s particularly the case because credit is tightening. The six big banks all put their five fixed rates up in April and May, with some reaching 5.34 per cent. This, at a time when a CIBC Capital Markets report released in early May said that half of all the existing mortgages in the country will have to be renewed this year. (Many people have been rolling the dice on short-term mortgages to take advantage of low rates, and face regular renewals. And variable mortgages have been discounted by banks because of the number of people moving to lock in to avoid expected increases in rates.)

Monthly payments on ever-smaller and less expensive items? It simply means that the debt ship is coming ever closer to sinking.

I understand that sellers have to sell, and that means buyers have to buy.

But the seam of customer ore that stores are mining is getting narrower and narrower with every passing year.

To put that another way? In boating terms, the sliver of freeboard that some people have over the surface of the debt ocean is so slender that drowning is a real and constant risk.

People are going to sink without a trace. They just don’t know it yet.

Russell Wangersky’s column appears in 39 SaltWire newspapers and websites in Atlantic Canada. He can be reached at russell.wangersky@thetelegram.com — Twitter: @wangersky.

Recent Stories