Big income . . . and big debt?

Celebrities – and ‘regular folk’ too – often file bankruptcy or consumer proposal for similar reasons:

Limited financial education: If, like a whirlwind celebrity’s (think YouTube insta-sensation) rise to fame you go from having nothing to having the world at your fingertips, a financial education is not usually part of the package. Learning how to effectively save, budget, and invest can take years, and sometimes a team of help, to achieve. When handed huge checks to cash, many celebs go out and buy the biggest house and fastest car, rather than learning how to properly handle their money.

For ‘mere mortals’ a significant career promotion with pay increase (or an inheritance or elusive lottery win) can add a boost to our credibility and add some additional buying power. But, it’s essential to learn how to manage your money, your budget and your long-term financial planning.

Materialism: Our culture can be highly materialistic. It prompts some people to try to ‘one up’ each other with larger houses or forever be ‘keeping up with the Joneses’ with more expensive vehicles. Young people, in particular, can be susceptible to the ‘celeb mindset’ believing their ownership of the latest designer handbag or electronic item is a given. The easy access to credit cards to people with limited income and often limited money management experience (see above) can lead to serious debt problems.

Celebrities, like the rest of us, can get caught up in having the finer things in life. But, a great TV gig can get cancelled and when the paycheques stop rolling in, it’s harder and harder to maintain that same standard of living without getting into serious debt.

Lack of investment in self: Often the stars surround themselves with lawyers, accountants, and insurance professionals to help them with proper estate, tax, and insurance planning. Sometimes they don’t double-check the work done on their behalf, or they don’t properly vet the financial professionals they hire. Not surprisingly, many fall prey to unscrupulous advisors.

The lesson here for ‘man on the street’ is to take ultimate responsibility for your own financial affairs. Yes, seek the advice of proven professionals. Ask other trusted sources for referrals. Get second opinions. And – refer again to the info above – get educated!

If you are facing financial struggles or would like some help with managing your debt—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll at 310 8888.

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Generation X & Y debt levels soar in response to changes in our world—and choices.

Current statistics indicate that Gen X’ers (those born after 1980) and Generation Y are increasingly unable to pay their debt and seeking solutions to deal with their unmanageable debt. Nationally, 21.4 per cent of all Canadian insolvency filings are made by individuals aged 18 to 34; in Alberta that number is even higher at a shocking 23.2 per cent!

A number of factors contribute to the challenges of paying off the debt load of the younger generations including:

  • Poor employment prospects with heavy student loans: New graduates end up carry debt loads that average between $20,000 and $30,000 and take an average of 14 years to pay off – if they ever get paid off. One out of three students enters a low-skilled job or accepts employment in an outside from the area they studied after graduating.
  • Dim summer job prospects: Student jobs in the summer of 2012 were at their lowest level recorded. 14.8 per cent (June 2012) of the youth were unemployed – more than double the national average! In 2013 a Statistics Canada study found that 13 per cent of the 6.8 million Canadians aged 15 to 29 were not currently in school, employment or training. While 2013 reflected an improvement – there is still room to go.
  • Competition for work: Baby boomers who are delaying retirement or returning to work after retirement reduce employment prospects for youth. – Much of the time, the baby boomers only want to work the coveted part time positions which are in high demand by students.

In additional to these realities, some young Canadians are further affected by changes in society leading them to make different choices than the generations before them.

It’s no secret that our world has changed; we are no longer a nation of cautious savers, guided by close-knit families living in the same community. Today we are mobile and we’re linked, informed (and occasionally over-informed) and stimulated via technology in new, immediate and potentially addictive ways. We are keeping up with the Joneses’ the Smiths’ and the Browns’. We have become social voyeurs in the field of social media and technology; we are seeing and sharing instantly our upgrades: the new car, toys and the clothes. Our increased exposure to the online world of social media further debilitates our sense of self-worth, leading some of us to chase the same ‘keeping up with the Jones’ perception like never before.

Our exposure and access to consumer products is further stimulated (in part) by our ‘celebrity’ culture. Unlike the generations before, this generation has increased access and visibility to the celebrity lifestyle, exposure to these celebrities’ personal lives, homes and luxuries. We now have new ‘instant’ celebrities (You Tube) and the development of the ‘reality TV star’ celebrities have made us all share and consume more – excess no longer seems that excessive, it has become the new normal. These all-access passes have led (for some) to: unrealistic buying practices. There is a detached (and sometimes irresponsible) use of ‘plastic’ (credit cards) resulting in a cohort of this generation as having poor financial literacy skills, distant role models and debilitating debt.

What is one to do? A common solution to this increasing debt and the burden it bestows is for Gen X & Gen Y is to simply ask their parents to help them out, leading to significant financial burdens of the sandwich generation: those with kids in the home while also taking care of their parents.

Financial literacy training and non-profit debt counseling services are available in most major centers and on-line. Professional debt services share: insight, guidance and debt resolution solutions with Canadians—from teens to seniors. The most important thing parents can do is start early; teach the importance of financial management while your kids are still young.

If you or someone you know are facing financial struggles and an unmanageable debt load—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Alberta 310 8888.

Information provided by: Community Foundations of Canada Vital Signs, Statistics Canada and the Office of the Superintendent of Bankruptcy.

www.gt.alger.ca