The increase in interest rates announced yesterday by the Fed in the United States, inflation and the rise in gas prices are having a direct impact on Quebecers’ wallets.
Canada’s household debt ratio is at a record high, Statistics Canada reported last March.
Should we be even more concerned about the current state of the economy if we accumulate multiple debts? To take stock, you need to calculate your debt ratio.
“To determine if we are on the verge of over-indebtedness, there is the debt ratio, which makes it possible to determine if we are over-indebted,” explains Sophie Desautels, Certified Insolvency Practitioner at Raymond Chabot.
However, it is reassuring: some debts are not worrying.
“A mortgage is a good debt. The problem is when our debt is greater than our ability to pay back. So the debt ratio makes it possible to calculate disposable income and our debt,” she explains in an interview with TVA Midi.
This percentage gives a clear picture of your personal finances.
“The percentage we have to identify with is a 40% debt ratio. If we go beyond that, it means our budget is going to be very, very, very tight. Our situation will depend on whether we have a family, whether we are single, single parents…”
Several factors must therefore be taken into account when making the calculation.
To calculate this ratio, we need to take all of the monthly payments, add them up, and divide by our gross monthly income, which is before taxes.
“We take our annual gross income and divide it by twelve. There are also family allowances. We then take the amount of our debt and divide that by our monthly income.
If you can no longer make your essential expenses without a credit card, this is a harbinger of over-indebtedness.
“Pharmacy or grocery expenses are a big sign if you put that on the credit card and can’t pay it back before the end of the month. It’s a clear sign. If you reimburse a credit card by paying a credit card, you have to see that things are not going well there,” she points out.
“If you start getting calls from a creditor, don’t wait. There are solutions, there are people for them and there is life after financial recovery,” she concludes.