How Much Debt Is Too Much Debt?

**This post may contain affiliate links. I may be compensated if you use them.

How much debt is too much debt? Well if you’re a fan of Gail Vaz-Oxlade then you should know that any kind of consumer debt is bad. Not surprising, yet still disappointing it appears that our household debt has risen 6% according to the annual debt report conducted by BMO Financial Group.

According to the poll the average household debt for Canadians now sits at $76,140, the average last year was $72,045. Most of us don’t even know how much money we have in our bank accounts so how can we realistically expect to know how much debt we have?

In Alberta household debt almost doubles those living in Ontario ($124,838 vs. $67,507).  Traditionally Alberta has been considered one of the “cheaper” provinces to live in but if Albertans are carrying twice as much debt does that really make it cheaper or is it all an illusion?

Credit Card Debt

One positive thing found in the report is that only 52% of us are now carrying a credit debt, that’s down 56% from the previous year. So we’re clear, there is nothing to be proud of when more than half of Canadians are carrying a balance on their credit cards. Any debt on your credit card is too much debt.

I don’t want to preach here but if you can’t  pay off the full balance on your credit card at the end of the month then it means you can’t afford whatever you just bought.

Interest rates are insanely high on credit cards, if you’re carrying a balance you need to make paying it off a priority. Don’t even think about your RRSP or TFSA, get rid of that credit card debt first!

Too Much Debt

Mortgage Debt

Interesting enough the survey reveals that 43% of us have mortgage debt yet it’s estimated nearly 70% of Canadians are homeowners. I wouldn’t be surprised if the difference in numbers are those home owners that are mortgage free but I find it very hard to believe that the national average for debt is only $76,140.  Based on vagueness of the report I have to assume it adds mortgage debt, credit card debt and student debt so it just doesn’t add up.  Regardless it’s really meaningless since there is no way to verify these numbers.

Yes mortgages can be considered a good debt but too many of us take on too much debt when buying a home.  My friend Robb Engen over at Boomerandecho described it best in his recent post 35 Thoughts On Turning 35.

 “Tens of thousands of dollars have been wasted because home builders and real estate agents invented terms like “starter homes” and “trading up”.  Buy a home that’ll suit you for the next decade or more.”

I wouldn’t be surprised if hundreds of thousands of dollars have been wasted when you consider how much money banks are willing to lend us for our first home. Crunch those numbers and make sure not to borrow excessively just to say you’re a homeowner. The last thing you want to be is house poor.

Final Word
Sure banks and credit card companies encourage us to borrow and spend more than we can afford but in the end,
we only have ourselves to blame when we get into the debt trap. Just because money is cheap and incredibly easy to access doesn’t mean we should borrow and spend ourselves into debt.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Tawcan on August 11, 2014 at 1:48 PM

    Credit card is bad, however you put it. Mortgage debt is generally good debt as long as you can pay your mortgage without taxing your budget.

    • Barry Choi on August 11, 2014 at 1:50 PM


      Agreed mortgage debt can be good debt but I think it can be a problem when people borrow the maximum amount and can only “afford” it when taking the longest term and making just the monthly payment

  2. Robb Engen on August 11, 2014 at 7:38 PM

    I’m not sure how much we can trust the numbers in this survey. Alberta’s household debt is up big time but Ontario’s contracted year over year?!?

    I don’t like to read too much into these surveys but it’s pretty clear that a lot of indebted Ontarians moved to Alberta last year and skewed the numbers.

  3. Dan @ Our Big Fat Wallet on August 12, 2014 at 10:49 PM

    As someone living in Alberta I’m willing to bet the debt levels relate to how people feel about the economy. The economy (here in Alberta) is great so people are wiling to buy the expensive BMW or boat they have always wanted. And since they don’t have the money for it (saving would be too simple) they finance it

    • Barry Choi on August 12, 2014 at 10:56 PM

      Hey Dan,

      I just find these surveys ridiculous, there was a separate report that went out yesterday saying Canadian wealth is up due to rising real estate prices. If you own a home that is currently worth 1 million but owe $950,000 you are not a millionaire.

  4. […] Barry Choi wrote about debt. […]

Leave a Comment

Get a FREE copy of Travel Hacking for Lazy People

Subscribe now to get your FREE eBook and learn how to travel in luxury for less