Math keeps finances in order

Have a quick look at Bernie Sanders’ website and, without so much as a broken pencil, see if it offends your financial senses. 

Maybe it helps being parented by children of the Great Depression. As my mom scolded: “If you don’t get out there and cut the grass PDQ (pretty darn quick), you’re not getting a penny!”

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Or my dad: “There are no free lunches, even for clowns!”

A poster on the wall of my university math lab said: “Thinking about dropping math?  Well you can also drop these careers…” and then listed dozens of high-paying jobs where a good working knowledge of math is considered non-negotiable.  

Taking that idea a logical step further, and not a huge one, whether it be running a country or a piggy bank, here’s a list of the things that will foul up our lives without a functioning working knowledge of money management: 


Courtesy of our friends at RBC Economics, some red-lit data suggests Canada’s circus has lots of future employee fodder. 

Consumer insolvencies rose an eye-catching 9.5 per cent in 2019, the largest annual increase since the 2008-09 recession. That’s 44.6 insolvencies per 10,000 working age Canadians, up from 41.4 in 2018 but still short of the 55.8 rate seen in 2009. Last year’s increase reflected a rise in the number of “proposals” - offers to pay creditors a percentage of what is owed and/or extend the repayment schedule, a remedy available to individuals with up to $250,000 in unsecured debt. (Apparently bankers can be clowns too, seriously?)

Fortunately, the data from  the Canadian Bankers Association shows just 0.23 per cent of mortgages were more than 90 days in arrears as of August 2019, matching the lowest rate since 1990. Those having trouble making debt payments are prioritizing their mortgages over credit cards and auto loans. 

The surprising (or worrying) feature of the recent rise in insolvencies is that it comes amid a robust job market. Canada’s unemployment rate averaged 5.7 per cent in 2019, the lowest since 1974. Employment rose by 2.1 per cent last year - the fastest increase in twelve years - and average hourly wages grew at a healthy 3.4 per cent pace. Only Alberta’s insolvencies (the third-largest in the country) seems to reflect deteriorating job markets.      

That a modest 125 basis point increase in the policy rate caused all this kerfuffle says a lot about Canadian households. Canada’s aggregate debt service ratio — principal and interest payments as a share of household disposable income — hit a record-high 15.0 per cent in Q3/19, having climbed steadily from 14.0 per cent in Q3/17 when the Bank of  Canada began raising interest rates. This, despite a relative sensitivity to interest rates amid record high debt loads, as the Bank of Canada warned when it started raising rates.  

The last time household debt servicing costs were this high was in the second half of 2007 when the Bank of Canada’s overnight rate hit 4.50 per cent (a 200 basis point increase from two years earlier). But the sharp household deterioration in 2009 was also driven by rising unemployment and a global economic downturn, not a made-in Canada recession emanating from stressed households. But with a perpetually dovish policy rate, barring an unexpected deterioration in Canadian labour markets, we don’t expect to see another nearly 10 per cent increase in insolvencies this year.

Granted, finance can be complex, but common sense needn’t be. Avoiding debt is always prudent. 


- Mark Ryan is an investment advisor with RBC Dominion Securities Inc. (Member–CIPF), and a licensed Insurance Representative with RBC Wealth Management Services Inc. These are Mark’s views, and not those of RBC. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. See Mark’s website at:


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