News

That's it? It's over?

Canada's shaky economy is said to be in recovery, and late last week economic indicators coming out of the United States supposedly showed the recession is finished there too. Done, finito. Awesome!

So what do we do now with all those how-to-live-cheaply tips, those bargainista belt-tightening strategies, those solemn vows to change our wicked, wicked ways, not to mention hair-shirty, I'll-never-eat-out-at-a-luxe-restaurant-again resolutions?

"Honey, get dressed, we're going to Scaramouche for dinner tonight!"

Not so fast. The question now is whether the so-called end of the great recession means we are going to go back to spending however and whenever we feel like it, racking up more debt in the process.

Or, just as the terrorist attacks of Sept. 11, 2001, forever changed our attitudes toward our own physical security, has this global recession permanently changed how we feel about our financial security - and how we handle our own spending?

It depends on who "we" is. I know that as a self-employed person in an endangered profession I will continue to spend less than I did before the recession hit, assiduously paying off my monthly credit-card balance. I will keep trying to figure out a way to live well but save more. Not to mention carefully justify new purchases or make do with what I already have.

But I don't run a small business that requires me to access credit so I can come up with money just to survive each month. For the many risk-taking entrepreneurial types out there, with absolutely no safety net, going into debt is unavoidable.

They don't get a lot of praise these days for starting a business, let alone just trying to keep it afloat.

Nor am I a pampered public-sector employee whose salary and benefits may not have increased but still arrived like clockwork throughout the year-long financial drought. Those public-sector employees, as my hairdresser recently pointed out, were the ones who calmly kept spending. I suppose we could generously praise them for keeping the economy going, but, like many others, I'm too envious of the safety net they still have. Even if there is no guarantee it will be there a year or so from now.

Those who deal daily with the aftermath of our bad spending habits - credit counsellors and bankruptcy trustees - are none too sanguine about the behaviour-modification potential of this recession. They are highly skeptical that we have really changed those bad prerecession consumer spending habits that saw Canadian consumer debt spiral up out of control.

According to the Vanier Institute's 2008 report on family finances, total consumer debt is now equal to a new record of 131 per cent of household income after transfers and income taxes, compared with only 91 per cent in 1990.

Unemployment is still going up in the United States, points out Jay Harris, a Toronto bankruptcy trustee.

He says that since 2008, his company has handled a 50-per-cent increase in consumer bankruptcy and a whopping 200-per-cent jump in commercial files.

Yet Mr. Harris believes that when employment returns and people are no longer in fear of losing their jobs (and pensions), they "will go back to spending wildly."

Laurie Campbell, executive director of Credit Canada, a non-profit agency that offers counselling to the financially distressed, was let's just say lively when I reached her on the phone. "This is what kills me," she says of the news that the recession is apparently over. "What was all that about the Great Depression? Didn't that last a lot longer?"

Ms. Campbell frets: "I hope to hell people have learned their lesson, but I'm concerned that some people who were unscathed by the whole economic downturn may think it's okay to be out there spending." Her stern advice: "Keep your belts tightened. Debt ruins lives. People have to recognize this is not a healthy way to live."

With that in mind, Credit Canada is launching today the third annual Credit Education Week, complete with political honchos such as federal Finance Minister Jim Flaherty showing up at Toronto's Grosvenor Street YMCA - to promote financial literacy. They're especially targeting couples, many of whom, according to a survey Credit Canada commissioned, continue to hide their debt from each other. So there's a quiz on its website (crediteducationweekcanada.com) for couples to test their financial compatibility and a "fun" essay question asking Grade 12 students what was the "dumbest thing" they ever did with their money and what lessons they learned as a result. (The prize is a scholarship.)

Well, I'm not eligible to enter, but I think I have one quick answer to that "what's the dumbest thing ..." question: Spend as if the recession is over.

"Honey, don't bother to get dressed, we're eating in again tonight."