Don’t let your credit card use you

Posted on October 6, 2011 by Paul

Remember to only spend what you can afford. Some people view their credit cards as an endless source of money that they somehow don’t have to pay. You must remember that you have to be able to pay the card off by the end of the month and any outstanding amount left on the card will collect interest at high rates.

Use your credit card like a budgeting tool. Never use it for a loan or as an overdraft.

Don’t use the card limit as your spending limit. Make your own card budget based on what you can afford and use that number as opposed to your card limit.

Add your credit card bill to your budget. Remember to make the minimum payments since failing to do so can reflect poorly on your credit.

Track when your 0% interest payments are due to end. Once this period ends, you are charged interest on a monthly basis on any outstanding balance.[1] You absolutely must read the fine print.

It is also important not to get cash advances on your credit card since interest charges start immediately — this may generate a higher interest rate and can accumulate quickly.

If you rely on credit cards, try to only bring one card with you and continue to watch closely that you are buying only what you need.

[1] www.tescofinance.com/personal/finance/finance/creditcards/elh/dont-let-your-credit-card-get-you-into-debt.html

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Put your credit cards on a diet

Posted on September 28, 2011 by Brian

Some steps to help reduce your credit card debt are:[1]

  1. Take stock — know where you stand before you begin to plan any reductions. Write down the debt and interest rate for every card.
  2. Improve your rates — a fast way to save on credit card bills is by negotiating a lower rate. This can be done with a polite phone call in certain situations. If the rate is lowered, write the new interest rate down.
  3. Track your costs — List the committed expenses (rent, transportation, food) and variable expenses (entertainment, restaurants). This list will help you form a budget. You should look at previous credit card bills to get a good idea of your average monthly spending.
  4. Create a budget — At this point you will go through the list from step three and begin to eliminate costs that are not a necessity. It is important to make sacrifices in some areas to improve you financial stability. This doesn’t always have to be big things; they could be little things like not ordering a pizza on Fridays. After making a weekly budget you can go a step further and break it down into increments of weeks to give you an even better idea of where your money is going.
  5. Choose your payoff strategy — There are two credit card payoff strategies that are the most common. The first is to put all your extra money into the highest interest card, while making the minimum payments on your other cards. Once the card is paid off you will have more extra money and can apply the same process to the next highest interest card. The second strategy is to pay off the lowest balance card first. This is not as cost-effective, but it is the fastest way to eliminate the debt of a single card. After choosing one of these steps, rank your cards in the order you would like to pay them off.
  6. Stash your plastic! — Try to leave your cards at home. Plan to use cash. On average people paying with credit cards are tempted to spend more than those paying with cold hard cash. One tip is to freeze your credit card in a large pail of water and keep it in your freezer.  By the time your credit card is unthawed that urge to spend may have disappeared.
  7. Find your motivation and support — It’s important to set goals and to stay focused on them. You can try talking to others about what you are trying to accomplish to help with support and motivation.
  8. Track your progress —Remember to keep an eye on your monthly spending throughout this process. It is not something that you will need to worry about checking everyday, but it’s beneficial to check it periodically.
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Dig yourself out of debt

Posted on September 9, 2011 by Brian

Step 1: Assess your current amount of debt and the interest rates related to each creditor. Knowing your credit score is important. Once you begin to pay off debt, your score will increase and interest rates will drop.

Step 2: Set-up payments based on priority. First priority is the essentials needed to live (food, rent, transportation, and medical). Second priority would be taxes and loans that need to be paid off. Third priority would be everything else (bank card, furniture debt, retail store debts).

Step 3: Find expenditures that are not necessities that could be cut to use the money for debt payments. This requires mapping out where your money is going.

Step 4: Pay off credit cards. There are two credit card payoff strategies that are the most common. The first is to put all your extra money into the highest interest card, while making the minimum payments on your other cards. Once the card is paid off you will have more extra money and can apply the same process to the next highest interest card. The second strategy is to pay off the lowest balance card first. This is not as cost-effective, but it is the fastest way to eliminate the debt of a single card. After choosing one of these steps, you should rank your cards in the order you would like to pay them off. You can also call your credit card company and ask to have your interest rate lowered or switch to a lower interest rate card. In some cases the credit card company will do this so it’s definitely worth asking.

Step 5: Stop spending! Some ways to cut down on your spending are:

  • Don’t carry credit cards with you
  • Pay cash or write cheques
  • Turn down credit line increases
  • Don’t sign up for new credit cards
  • Make a special event fund (holiday gift-giving, vacations)
  • Ask for a friend’s support in your attempt to save money
  • Pay cards on time to avoid late fees

Step 6: Create a monthly spending plan prior to the beginning of the month. Detailing all your monthly expenditures beforehand will allow you to manage your money and make cuts to certain areas, if needed, during the month.

Step 7: Assess your situation and possessions and see where you can make cuts or let certain “big-ticket” items go in order to boost your income. For example, this could mean downsizing to a smaller home or taking transit as opposed to owning and maintaining a car. It also means looking at things that are expensive and may not be absolutely necessary in your life. This could be things like boats, cottages, and motorcycles. Selling off possessions like this can help you climb out of debt.

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Over your head financially? You’re not alone.

Posted on August 26, 2011 by Paul

A total of 145,233 Canadians filed for bankruptcy or submitted a consumer proposal for the 12-month period ending June 30, 2010. This represents a 6.2% increase over the previous 12 months.[1] With escalating fuel and food costs card debt is mounting and many Canadians are finding themselves in increasingly difficult circumstances. Household credit includes mortgages, car loans, student loans and credit card debt.[2]

In 2009, average consumer debt per person in Canada reached 145% of annual income. TD Bank economists predict that within five years the ratio will exceed 150%. This means that for every four dollars Canadians earn a year, they are almost six dollars in debt.

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The Office of the Superintendent of Bankruptcy

Posted on August 19, 2011 by Brian

The Office of the Superintendent of Bankruptcy (OSB) provides the following services to people and companies looking to declare bankruptcy:

  • Alternatives to bankruptcy
  • Steps for declaring bankruptcy
  • A directory of bankruptcy trustees

If you are a creditor, then the OSB provides these services:

  • Different options and processes for recovering losses
  • A directory of unclaimed funds held for creditors by trustees

The OSB website explains the 10-step process and requirements to go through the filing process smoothly and as privately as possible:

Step 1:
Contact a trustee and attend a meeting with him or her to talk about your personal situation and your options.

Step 2:
Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy.

Step 3:
The trustee sells your assets and you make payments to the trustee.

Step 4:
The trustee notifies your creditors of the bankruptcy.

Step 5:
You attend a meeting of creditors, if one is called.

Step 6:
You attend an examination by an officer at the Office of the Superintendent of Bankruptcy, if required.

Step 7:
You attend two counselling sessions.

Step 8:
The trustee prepares a report to the OSB describing your actions during the bankruptcy.

Step 9:
You attend the discharge hearing, if required.

Step 10:
The bankruptcy is discharged.

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Keeping anonymous….will my friends and family find out?

Posted on August 12, 2011 by Brian

For the vast majority of Canadian personal bankruptcies there is no obvious public disclosure that an individual has become bankrupt. There are very rarely public filings of court records related to personal bankruptcies. In the majority of cases, unless you are a very well-known high profile personality in your community, only your trustee will have knowledge of your bankruptcy. Remember that creditors will know about the bankruptcy, so any local stores, family or friends you may have listed as creditors will be informed of your bankruptcy. One thing to remember is that in the future when you are completing a credit application, if you are asked whether or not you have been bankrupt, you must answer honestly. Failing to make a correct declaration could land you in trouble.

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Yikes… now we have to live on one income

Posted on July 11, 2011 by Paul

The average Canadian family has both spouses working outside the home. We live in a culture that encourages a high standard of living, often unachievable by a single salary. But whether your significant other experiences a job loss, sickness, or just wants to put more focus on family, careful planning can make the transition to a single-income home much smoother.

Ideally, you would like 6-12 months to properly prepare for living on a single income. In cases where this is planning isn’t possible, communication between all family members will be key to making the adjustment.

Next you will want to work out a plan together to pay the bills and upcoming expenses, like vacations, retirement, and education savings. You also need to prioritize debt repayment, since those commitments will only get more cumbersome in the future.

Lifestyle is the biggest adjustment that is usually required for the transition.  There are small changes, like cable, magazine subscriptions and phone packages, as well as big ones like keeping only a single vehicle or moving to a more affordable home. It might seem scary, but remember you don’t have to have to change who you are, just some things that you do.

Ultimately, even if you aren’t planning on living on a single income, you should prepare for that possible outcome. So start a savings account now and keep yourself one step ahead.

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Vacation time… keep it affordable!

Posted on July 4, 2011 by Brian

Summer vacations can be expensive. Families spend lots of money on travel, accommodations, dining, entertainment and souvenirs.

But don’t wait until the credit card bills start rolling in to find out how much your vacation actually costs. Here are six steps to enjoy your vacation without breaking the bank.

  • Step 1 – Write a budget. Vacations are supposed to be care-free – right?  Wrong! They are about relaxing, which is a lot easier when you know what is manageable.
  • Step 2 – Make it a family affair. You’ve figured out the money, now let your family help figure out the fun! Getting them involved in the decision making will help everyone understand expectations right from the start.
  • Step 3 – Strategize. Deal hunting is easier than ever with travel websites, travel agents, travel guides, coupon books, not to mention all those friends and relatives on Facebook who would love to tell you where to go!
  • Step 4 – Make a plan. Keep it a secret if you like the idea of appearing spontaneous, but know exactly what your activities will be before get to where you’re going. Spontaneous stops and impulse decisions can easily break the bank on vacation.
  • Step 5 – Reach out. If you’re overwhelmed with planning a vacation that you thought should be fun, don’t be afraid to contact Doyle Salewski. We’re happy to analyze your situation and make recommendations.
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Reorder your finances and rebuild your life

Posted on June 27, 2011 by Paul

The following percentage breakdowns are for a four-member family with an annual gross income of $130,000 or less.  Disposal income shown in brackets is the money available for you to spend after you have paid income taxes, CPP and other payroll deductions.

Housing (38 %)

  • Don’t buy or rent a house you can’t afford – total housing includes mortgage, taxes, insurance, utilities, phone, and household maintenance.
  • Don’t finance closing costs or secure a second mortgage for a down payment.

Food (12 %)

  • Plan and stick to written weekly menus.
  • Don’t shop when hungry or hurried.  Do shop specials, store brands such as No Name and other generic brands, and use coupons.

Cars (15 %)

  • Buy quality used cars you can afford, and don’t trade in before a car’s usefulness is over.
  • Auto price, maintenance, gas, licences, taxes, and insurance are all part of the cost.
  • Consider dropping collision insurance on cars more than four years old.
  • Consider only one family car—carpool, telecommute, take transit and ride your bike whenever possible—the Canadian Automobile Association estimates that the annual cost of driving 18,000 kilometres is $6,462 for a Chevy Cobalt LS and $8,599 for a Dodge Grand Caravan.

Debt (5%)

  • Establish a payment schedule to pay all creditors regularly, and get rid of credit cards that you can’t pay in full each month.
  • Sacrifice wants and desires – buy with cash until debts are current.

Insurance (5 %)

  • Find a well-informed, trusted insurance agent to get the best possible coverage for the money or check or online insurance companies—but read the fine print!

Recreation/Entertainment (5 %)

  • If you’re in debt then it goes without saying that you shouldn’t borrow to entertain yourself.
  • Plan vacations during off seasons, select local vacation destinations, consider camping.

Clothing (5%)

  • Save money and buy without using credit.
  • Purchase off season if possible, and select home washable fabrics and outfits that can be used in multiple combinations.

Medical and Dental (5%)

  • Prevention is cheaper than treatment.
  • Teach children to eat the right foods and clean their teeth properly. Good diet, rest, and exercise will most likely result in better health.
  • Ask dentists in advance about costs, shop for prescriptions, and ask for generic drugs.

Savings (10 %)

  • Without savings, the use of credit and debt becomes a way of life.
  • Use payroll deduction for savings. If it’s not available, your bank can automatically withdraw from your chequeing account each month and deposit into your savings account.
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Paul’s list of everyday money wasters!

Posted on June 20, 2011 by Paul

People often say they want to make big life changes, but then assume they can still get away with small indulgences.  I’m here to tell you they all add up and account for the bigger problem of wasting money. Here are some of the most common examples:

  • Gym memberships – stay fit with walking, running, and the multitude other gym-less exercises available (push-ups, pull-ups, sits ups, etc.) until your bank account is in better shape.
  • Lottery tickets – let’s face it people, you are twice as likely to be struck by lightening and survive both times before this coming Saturday night than you are to win the lottery—so get real, grow up, and keep your money in your wallet!
  • Popcorn and two soft drinks at the cinema – this is the granddaddy of money wasters. I promise you can make it through the movie without spending $22.50 on popcorn and two drinks. If the craving subsists, make some microwave popcorn when you get home.
  • Fast food – if you are trying to make ends meet, reduce debt and get on with your life—the only restaurant you are allowed to go into is the one that you work in.  Otherwise keep out!
  • White label or generic ATM fees – use the ATM at your bank.  Do a little planning—have cash on hand.  Stay away from these machines.  Whatever you are taking money out for is probably something you shouldn’t buy anyway!
  • Cigarettes – my personal pet peeve.  Let me give you reason 778 for quitting smoking – it’s expensive and YOU my friend can’t afford it.
  • Extended warranties – this is the retailer’s way of very nicely getting you to pay more for their product.  No you do not need an extended warranty on that vacuum cleaner you just bought!
  • Credit card debt – we’ve been through this before—what part of paying 19.5% or 28.5% interest every month makes sense to you?
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