The answer is simple, more debt than you can pay is too much debt. 

Someone called me recently to ask me questions regarding his wife’s debt issues. She was laid off a couple months ago and was unable to pay her credit cards while on unemployment. She was very behind on her payments and was curious about bankruptcy. I know that in some cases, it’s nearly impossible to stop debt from piling up. Unfortunately, once you have let your debt pile up for too long, bankruptcy may be your only option. 

We tell people that a good way to avoid debt even during unexpected financially difficult times, is to save a large amount of their income so that they have about six months of expenses saved up. Unfortunately, many people in our society aren’t able to save that much as job security isn’t what it used to be.

Households today are even borrowing differently than they did nine years ago. Student loan debt, driven by soaring tuition costs, now makes up 11 percent of total household debt, up from 5 percent in the third quarter of 2008 (this is an American statistic, but it still resonates with Canada).

This brings me to borrowing students. I definitely believe that education is important, but when it comes to borrowing, please remember that you have to pay back every dollar with interest. If you can, start saving at a young age and don’t overspend throughout your post-secondary career. And you may not be allowed to include student loan debt in bankruptcy. 

If you are starting to struggle with debt, try saving for items and paying cash instead of borrowing. Whatever you can do to avoid borrowing, do that. It may mean getting a second job, budgeting or cutting out expenses. In the long run, you will be much better off. Don’t let debt get a stronghold on you.

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