Table of Contents
Acknowledgements ix
Introduction 1
Where I am Coming From 2
A Word about Books 3
The World is on the Edge of a Cliff 4
It Ain't Gonna be Easy, But There is Hope 5
Why I Wrote This Book 6
What You Will Learn 7
Chapter 1—Debt: The Snake in the Closet 10
My Own Story 10
Marie's Story 12
Chapter 2—Why is the Consumer Debt Crisis So Bad? 16
Human Nature 16
The Environment 20
A Financially Illiterate Consumer is a Bank's Best Customer 24
Consumer Financial Education: Why is It Missing? 24
Look at What Happened in the United States 25
Chapter 3—The U.S. Subprime Mortgage Disaster 26
The Perfect Debt Storm 27
My Trip to Slavic Village, Cleveland, Ohio 28
Why the Crisis Spread 30
Houses "Under Water" 31
The Current U.S. Consumer Debt Situation 32
Could the U.S. Subprime Mortgage Crisis Come to Canada? 34
Chapter 4—Canada's Government Debt 37
Canada's Debt 38
Accumulated Versus Annual Defi cits 40
You Say "Deficit," I Say "Loss" 40
How Big is Canada's Debt? 41
Canada's Annual Defi cit History 41
Federal Debt or Accumulated Deficits 42
Future Federal Debt Projections 42
Ratio of Federal Debt to Gross Domestic Product 45
A Word about Provincial and Territorial Accumulated Deficits 46
Canada's Debt versus the Rest of the World 47
Debt to GDP May be a Misleading Measure 48
MGI's Five-Part Framework to Assess the Sustainability of Leverage 49
A Personal Health Check 50
A Health Check of Canada 50
One More Measure: Canada’s Debt Per Capita 54
What’s It Like to be Bailed Out 55
Perpetual Government Defi cits 56
Is a Foreign Government Default Inevitable? 56
What We Need to Do Now 58
Chapter 5—Canada’s Big Six Chartered Banks 59
Why are They So Worried about Household Debt? 61
An Analysis of the Big Six Canadian Chartered Banks 62
How Much Debt Do the Banks Themselves Have? 66
For A Bank, A Billion Dollar Profi t is Peanuts 66
Return On Equity—A Good Measure? 68
What about the Debt-To-Equity Ratio? 69
Why Debt is more Popular Than Equity 70
Did Canadian Banks Get a Bailout? 71
CMHC Financial Situation 73
Conclusion 74
Chapter 6—Canadian Household Debt Levels 76
Canadian Average Debt Levels 77
The Line of Credit Trap 79
Been There, Done That 79
Chapter 7—How to Get Out of Personal Debt 81
It's the Principal of the Matter 82
Canadians' Love Affair With Debt 83
The Options to Crush Your Debt 86
Paying Off Your Debts Yourself 86
Are You a Spender or a Saver? 91
Would You Like to Earn $100 by Staying at Home and Watching TV? 91
Credit Counselling: Debt Management Program (DMP) 92
Shirley's DMP Success Story 94
Consumer Proposal 97
Bankruptcy 98
Choosing Which Route to Take 102
Chapter 8—Your Credit Score 109
What is a Credit Score? 109
How to Find Out Your Credit Score 109
The Credit Reporting System is not Perfect 111
Your FICO Credit Score 111
What Determines Your FICO Credit Score 112
What Your FICO Score Ignores 115
Individual Credit Ratings 115
Warning: The Following Information Could be Dangerous 116
Credit Score Secrets You Need to Know 117
A Good Credit Score Can Save You Big Money 121
Wrap-Up 121
Chapter 9—Gaining Control Over Your Money 123
How to Track Your Spending and Find the Fat 123
Analyzing Your Spending Results 132
How Much Do You Make? 134
How Big a Mortgage Could You Get? 135
The Gross Debt Service Ratio (GDS) 135
The Total Debt Service Ratio (TDS) 136
How Much Mortgage Can You Get? 136
The Government Tightens the Insured Mortgage Rules 137
What about Regular Uninsured Mortgages and Other Debt? 139
Conclusion 140
Resources 142
Index 145