What does it mean?
Most people confuse debts with deficits and vice versa, no so and here is the explanation.The government collects taxes, fees, and other revenues each year while spending on programs and operations. If the government spends more than it takes in over the course of one year then it has run a deficit which applies to just one year. When the government runs a deficit then it must borrow money to make up the deficit. A debt is completely different. A debt is an accumulation of deficits. The debt usually grows year after year. with each additional deficit the debt continues to grow. Do not think if the government takes in more money then it spends in one year then it suddenly doesn't have any debt. This is not the case as it means the government has managed to run a surplus which is opposite to deficit. The debt is still there. Please!!! also note if the government has to continually borrow money each year then the debt will continue to grow year after year. This debt does not disappear. Having outlined both I want to show some very interesting figures produced by the present Ontario Liberal government. At the present time the Ontario debt amounts to $212.1 billion mainly to finance the deficit in 2009-2010. When the Liberals took office in 2003-2004 the debt was$138.8 billion, In all of the following years deficits resulted year by year as the Liberals spent more then was collected.
For this year the deficit is expected to be close to $20. billion and if spending exceeds the revenue the debt will climb regardless of what the liberals did in the line of cutting back money to the hospitals, cutting back money to people on welfare, collecting part of the loan to the Big 3, and introducing the HST.
If the Liberals can not reduce the deficit beware of McGuinty's next step when he will come up with another of his tax increases.
Now, lets look at the Canadian federal government. The federal debt now sits at $ 1.2 trillion which is the amount of money the Federal, provincial, territories, and municipal governments owe as a whole.
Just as a breather the city of Welland's debt could very easily reach $ 60 million when the Sportsplex gets under way and if it does it will leave Welland very close to the allowable debt set by the province.
Since we are talking about debt and how serious it is and how serious it can be perhaps now we should discuss the debt of the Canadian families. A recent release stated the average Canadian family debt ( household ) is $ 96,000.00, mortgage payments up to 90 days late and credit card payments were 3 months behind.
Year 2009 was a record year for personal bankruptcy filings which caused a week economy thus causing record levels of personal debt. It should be noted high personal debt levels continue to climb to a point of no return.
Canadians are continuing to borrow shown by the end of the third quarter in 2009 the average Canadian adult had over $ 40,000.00 in household credit. Back in 2000 the average was approximately$20,000.00 and in 10 years it had doubled. By the end of September 2009 the average Canadian adult was carrying a household debt of 140.8% of their personal disposable income. Three years ago it was 120%. In simple terms every dollar earned one has $1.41 in debt.
If one has a good job and interest rates stay low one can probably service one's debt
BUT
If the job is lost. the hours are cut back, one has a divorce, there is a medical problem so one could not work, can you pay your mortgage, your car loan,your line of credit, and your credit cards?
NO
I you are in this position be very careful in taking on new debt, do not even think about buying a bigger house or new car.
To control your debt move to a smaller house, or an apartment, trade in your car for something smaller with a lower monthly payment and much better on gas.
Do you need the big boat and cottage?
Do you need 500 TV channels?
Do you need to buy a coffee every day?
Can you not make your own coffee?
Sell or return the 2nd car
Put a freeze on new spending.
Stop paying the minimum monthly payment on the credit cards and increase the payment. If you don't, rest assured the principal will have tripled by the time it is paid in full paying the minimum. Credit cards are the fast road to bankruptcy. Above all if you follow these rules don't think you have extra money because you don't.
If one heeds this advice which is not from me the writer but from professional financial advisers there is a chance of getting out of debt, if not expect to be bankrupt.