It's time to bring in a specialist to diagnose what's wrong with the way we're all managing our day-to-day spending.
We're not helping ourselves, that's for sure. The credit analysis firm TransUnion says the average amount of non-mortgage household debt in Canada is up 4.3 per cent from year-ago levels to a strapping $25,163.
What are we doing wrong? Let's consult Aaron Patzer, founder of an online financial tracking tool called Mint.com.
Mint, which Mr. Patzer now runs for the big financial software firm Intuit Inc., tracks all your bank and investment accounts to provide a continually updated big-picture view.
On the occasion of Mint officially branching into Canada from its U.S. base on Wednesday, we asked Mr. Patzer to share with us some of his observations on how people manage money. Here's an edited and condensed version of our conversation:
Q: We've gone through a global financial crisis and recession, and yet Canadians still haven't shaken the debt habit. Can people change their spending habits?
A: Ninety per cent of Mint users say they've changed their habits. The most striking example is that people dine out less. Given our younger demographic, people in their 20s, 30s and early 40s, the biggest area they can cut back on is restaurant spending, going out with friends, bars and alcohol. People will often find they spend more on restaurants than they do on rent, or they spend more on shopping than on their kids' education.
Q: What has most surprised you about the way people are managing their money?
A: How shockingly unaware people are of how much money they have in aggregate and how much they owe, let alone where they're spending. I had a friend of mine in New York City, a teacher making $40,000 [U.S.]a year, and she was paying $82 a month for a gym she hadn't gone to in two years.
Q: Why aren't people paying attention?
A: They think it's going to take too much time and way too much effort. I designed Mint so that you can get up and running in about 10 minutes.
Q: How high are the credit card debts you're seeing?
A: When people set a goal to get out of debt on Mint, we find they have an average of $11,000 in credit card debt. It tells me people charge too much on their credit cards and that they need to set a budget.
Q: What are the top "indulgences" you see people spending money on?
A: It's going out, entertainment. That includes movies, DVDs, shows, concerts. I know that's a downer - it sounds like all the fun stuff in life is pretty much what gets you into trouble.
Q: But this stuff is also the easiest to cut back on, right?
A: There's only so much cutting you can do on, for example, your spending on gas.
Q: No more lattes, then?
A: Coffee is a big one. But it's less about the $2 or $3 latte and more about the $8 to $14 lunch.
Q: Having an emergency fund is personal finance 101 stuff - do you see a lot of people with these?
A: A lot of Mint users have set them up because it's something that Mint heavily suggests. But in the general population, no.
Q: Something like 70,000 Canadians have signed up for Mint since you began a soft launch a few months ago - have you noticed any differences in the way they and Americans manage money?
A: So far, Canadians look roughly the same, including in credit card debt [note: CIBC World Markets says the average balance on credit cards in Canada is $6,100]
Q: Where did you get the idea for Mint.com?
A: I was co-mingling my business and my personal finances using [available]desktop tools, but it seemed like they took too much data entry or didn't categorize well. I just wanted something that would do as much of the work as possible for me. Also, I figured as much of this stuff as possible should be online so I could access it on the go.
Q: How savvy are you at managing money?
A: I've been managing my money and investments since I was about 15, and I just turned 30.
Q: Any credit card debt?
A: None. I pay as I go.
Q: What's the best personal finance advice you can offer our readers?
A: The best advice is simply knowing where you spend. It makes all the difference. The second best piece of advice is to put 10 per cent of what you earn into an index fund. If you do that when you're young and you continue through the years, then you'll be happy with the results.
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Have a question on your personal finances for Mint.com founder Aaron Patzer or the Globe's Rob Carrick? Join us for a live discussion Wednesday morning:
Habitual problems
Some of the findings from a poll Mint.com commissioned from Angus Reid on the spending habits of Canadians.
Budgeting:
94% of respondents think having a budget is important
13% have a formal plan
7% said they stick to a plan
Spending:
14.4% of monthly household income went to entertainment
13.1% went to saving
9.2% went to investments
Average weekly spending on coffee is more than $10, average on lunches is $25
Saving:
47% of respondents believe they are not allocating enough to savings and investments each month
52% of women feel they are not saving enough
43% of men feel that way
Note: The survey of 1,201 adults was conducted in late October and early November
Rob Carrick