Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Credit cards

Jeff J Mitchell

Building Blocks is a special personal finance web series geared towards educating families on money-related topics. A collection of stories, videos and discussions, Building Blocks will run online until the end of December.

Easy-to-obtain credit cards and student loans means many college and university grads enter the working world with more than diplomas and high hopes - they are also saddled with hefty debt loads. After graduation, they face the prospect of piling on more debt in the forms of mortgages and lines of credit. Before they know it, Gen Xers and Ys can find themselves buried more deeply in loans than their parents could ever have imagined.

One thing is certain: digging out from under the debt heap will prove more difficult than building the money mountain in the first place.

Story continues below advertisement





So just how do young families struggling with heavy debt loads deal with those financial institutions, once so eager to lend, now asking for payments on credit cards, lines of credit, mortgages and student loans? Unless an inheritance providentially appears, the formula for success consists of discipline, a plan and time.

Alex, an IT industry worker, and his school-teacher wife Sam (they did not want their last names used) are illustrative of how debts can quickly erase any post-graduate euphoria. The two mature university students, both in their early 30s, had accumulated nearly $110,000 in red ink - a combination of student loans, credit card debt and personal loans.

Personal circumstances forced Alex to become a part-time student, which meant his student loans immediately began accruing interest. He lost his new job and ran out of new sources of credit. The couple enrolled in Credit Canada's credit counseling program and have graduate married, with a seven-year-old son and no debt. The couple is now redirecting the money that has for so long been paying off their debt load towards a down payment on their first home.

"We're free and clear right now," said Alex. Under the program, the two drew up a budget with a counselor. Going out for dinners and entertainment disappeared immediately, a lifestyle change that got easier when they had a child. "Really the biggest change is just being conscious about the money that is coming in, the money that is going out and not having that constant feeling of `Where did all my money go?' which was definitely the case for both of us beforehand."

The combination of young families and out-of-control debt is all too common, said Laurie Campbell, executive director of Credit Canada, which provides debt management programs in the greater Toronto area. Her group regularly sees young families with a child or two living in their parent's basement. "They can't handle living on their own because of their current debt situation which is usually high student loans and high credit debt."

While financial experts often say people should look to pay off their most expensive debt first, such as those 28 per cent store credit cards, Ms. Campbell suggested those drowning in debt take a long, hard look at their lifestyles. Are two cars with their attendant loan payments, insurance, maintenance and parking costs really necessary? Many young families are also camped in more home than they can afford, barely scraping by with a 35 or 40-year mortgage. "It may mean they need to sell their home, significantly scale back in order to deal with this debt because it is not going to go away and their current lifestyle can not sustain it."

Ms. Campbell singles out daycare costs (which can run as much as $700 to $800 a month) as a major household expense that might be offset with the assistance of family and friends.

Story continues below advertisement

Although much of her group's debt relief advice seems pretty obvious - brown bagging lunch or ditching the family wheels for transit - it's not always welcome. "There is a lot of reluctance, unless they have thought of these ideas on their own."

While cutting costs on travel and entertainment may be the quickest way to free up cash, Ms. Campbell says most people overlook ways to earn more revenue such as taking a part-time job (admittedly tough in this economy) or renting out part of their property.

Margaret Johnson, president of Vancouver-based Solutions Credit Counselling Service Inc., has a straightforward approach to dealing with those drowning in too much debt. First of all, she advises clients to cut up the four, five or six credit cards populating their wallets and purses. It is not a popular recommendation: "Most people have an unbelievable fear of living in a cash world. They can't imagine living without a credit card," she said. "They say, `How will I book a trip?'' Her answer: "You don't have any money so you can't go on a trip, you don't need a card for that."

Ms. Johnson's favorite debt story concerns a couple who wanted to put a $2,500 fireplace in their house and the bank would not give them more credit or a personal loan. The couple, who had already maxed out their credit cards, decided to buy a bigger house. This house, which had a fireplace, cost $50,000 more and came with a larger mortgage. "Today they are divorced and the house is long gone."

Although most couples likely will not face Alex and Sam's seven-year journey to debt freedom, Ms. Campbell says young families can't expect a quick financial turnaround. "A lot of people are shocked by this but it takes a lot of time to get into debt, it takes a lot of time to get out of debt," she said. "It takes up to two to four years depending on their situation but then the beauty of this is that they have learned to manage their money and restrain their spending."

Special to The Globe and Mail

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies