Writer Margot Bai says Canadians have embraced the idea that shopping is a form of entertainment. (White Knight Books)Margot Bai knows something about owing and saving money. When the Markham, Ont.-based author married her husband, James Bai, in 1998, they shared a tiny one-bedroom apartment and $18,000 in student loans. To realize their dream of buying a house, they had to hunker down and focus on their financial goals.
Many Canadian consumers are facing a situation similar to that of the Bais in these rocky economic times. But instead of formulating a sound financial plan and sticking to it, they're see-sawing between saving and spending.
Case in point: Canadians queued for Boxing Day electronics sales, and according to Interac, on December 23 (its busiest pre-Christmas shopping day), they upped debit card usage to 15.9 million transactions from 15.6 million for December 21, 2007. Meanwhile, 62 per cent of 1,000 Canadians recently polled by the Boston Consulting Group said they plan to start living more frugally and skip big-ticket items such as travel, cars and electronics.
In her book Spend Smarter, Save Bigger (Toronto, White Knight Books 2006), the 35-year-old Bai says, "Canadians have embraced the idea that shopping is itself a form of entertainment."
The trouble is, those shopping sprees are leaving many saddled with growing debt loads.
John de Wit, president and chief executive officer of Abbotsford, B.C.-based DebtManagers, Canada's largest independent credit counselling firm, says his clients range from recently graduated students to individuals earning six figures. They have debts ranging from $1,000 to $50,000, with some reaching $100,000 or more, and the number of people on the higher end of that scale is rising.
"We started to notice it [increasing numbers of people with higher debt] first in B.C. with the reduction of labour with the forest industry, then in Ontario with the layoffs in the auto industry," de Wit says. Lately, he adds, debt loads are increasing in affluent provinces such as Alberta as the global downturn in oil prices drives the oil industry to cut jobs and backburner development projects.
Margot's Story
Margot Bai learned frugal living from her family. Her father, nearly 30 years older than her mother and a retired Stelco professional engineer, started up a home-based tax-return business; mom taught piano. Dad's thrifty modus operandi included saving energy, driving one used car, seldom dining out and vacationing in a camper in provincial parks (free then to seniors).
But the heart of the family's control of finances was "the budget." Everyone recorded personal expenses in a budget notebook. Dad added the amounts and compared them to the annual family budget. Margot and her sister were paid an allowance for household chores (teenage Margot discovered she could make more money cleaning houses than flipping burgers). Dad contributed to the Canadian Scholarship Trust Plan. When he died (Bai was 17), to supplement her widow's pension, mom continued teaching piano and rented out the basement of the family home. When Margot moved to Guelph for university, she took a page out of dad's budget book — keeping track of spending, first in longhand and then on a computer.
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