Canadian Personal Finance Blog

As I am cleaning up my blog (and making sure all of my links work) I find some interesting gems that I had forgotten that I had written. The following is a classic Rant from me Pay Day Loans: No, No, No!!!!. I have added a fun charicature of the Pay Day Loans business as well (the Great White Shark).

Pay Day Loans: No, No, No!!!!

As most of my regular readers know, I tend to get a twitch and rant loudly when talking about payday loans and the places that give out this “alternate credit vehicle” (a term used by the industry). I have pontificated about this point many times, but now Stats Canada has put out a study about the growth of this financial alternative, and also who uses it. Perspectives on Labour and Income examines this whole industry in detail, but Stats Canada has put up a good summary on their web site about it.

Pay Day Loans Just Like the Great White, A Perfect Eating Machine

Three percent (3%) of families in Canada have admitted to using these kind of services in the past 3 years. The family’s main bread winner is typically between 35 and 44, which is also interesting (non baby boomers, more like Generation X’ers).

This quote makes me feel very sad:

Almost half of families who used payday loans reported that they had no one to turn to if they faced financial difficulty, significantly higher than for non-users (32%). More than one-quarter reported that they could not handle an unforeseen expenditure of $500, almost four times the rate for non-users. Nearly half could not handle one of $5,000 (17% for non-users).

Yikes, that really does mean we are living a little too close to the ragged edge these days and really need to think about how we spend our money.

I am not condemning you for using this service, but I do want you to think about how you can stop using these services. There are many different ideas out there on many different blogs and books you can get from your library, so please start a plan. Don’t feel like this is your only way to deal with this, because these Loan Sharks are not the answer to your financial survival, if anything they are the end of your survival, there is little chance of escape from these sharks. If you are paying 470% interest, your chances of getting out from under this is not likely.

Having worked in High Tech for 20+ years, I have heard many tales about lay offs and how they have “gone down” for some of the High Flying start ups of the late 90’s.

One former colleague told me about how his severance package was his laptop PC, and his Aeron chair (the company had burned all of their cash and the receivers were coming to take everything that was not nailed down). Another told me about getting two weeks notice, and a promise of a package, which never materialized, because creditors got wind of it, and garnished it from the company.

I am luckily nowhere near that situation, if anything, this is a financial opportunity for me, and I am going to have to learn a great deal about the Canadian Tax system in the next few weeks. I was under the naive assumption that it would be relatively straight forward with my severance package, but that is not the case. There are options and scenarios that I must think out and figure out what the optimal financial model will end up being for me (given my age and current financial status).

My vagueness in my description is intentional because I am just not sure about a lot of the financial twists that will be transpiring in the near future.  I will also need to build a certain amount of “crystal ball” gazing about what I think may be happening in the future and what will be important to me as well. Some of the points already in my mind to think about are:

• Do I think I can find a job very soon (i.e. the next month or so)?
• Will I find a comparable paying job in the near future (next 4 months)?
• Which is more important Debt Reduction or Retirement Savings? (right now the answer is both, with an emphasis on Debt Destruction).
• Do I need benefits in the near future? Yes, I think so.
• Should I keep the life insurance from my previous employer? Yes!

Only some of the simple concepts and ideas I must weigh in any decisions in the next month or two.

More likely I will be writing my opinions up, as much for me to think and read my own thoughts, but also looking for any input from my highly gifted readership as well.

Those were the happy thoughts told to me one day at Church. The minister giving the sermon, worked with homeless people and such, so his view might be a little stunted, but that was the point of his statement, “We are all three pay cheques away from living on the streets”.

Is this really the case? Well that all depends on the debt burden that you carry.  If you suddenly had no means of income, but you didn’t have any debt to pay off, you’d simply need money to pay your day to day expenses that may be manageable or controllable. If you are carrying a large credit card debt load, and have minimum payments to make, then your issues are far more complicated and you must find ways to pay spiraling debt as well.

Am I three pay cheques from living on the streets? I don’t think so, I have a fair amount in RRSPs and such, and I also have some savings, but I also have a debt load that does worry me, and given the renewed vigour I have been given from reading good books like: Smoke and Mirrors , I think that is my goal is to kill my debt load while I can.

BCE & Nortel Both Cutting

The news is full of job cuts at BCE as they head towards privatization, and there was the renewed cutting announced by Nortel at the start of the year as well, which may mean some dark times ahead in the High Tech World as well. Hope those folks aren’t three pay cheques away from the streets.

Telus and BCE can both enjoy a new class action suit against them as well for their new texting surcharges. That won’t help BCE, that’s for sure.

This is sort of an off shoot of a discussion I read in my paper about whether Obesity is a Moral issue.

Is debt a moral issue?

Let’s go over a few points here:

• I am not saying anyone who is in debt is of questionable morality (since that would include me), or imply a “sinful living” of some kind.
• Remember Greed is one of the Seven Deadly Sins, and thus trying to gain wealth and reduce debt might actually be viewed as immoral in some ways (if you want to think of the converse of this question, which would be, “Is Debt Reduction immoral, as it is a type of Greed”).
• Let’s stick with Morality as your “code of conduct” as it were.

If the way you live is what is getting you into debt (and most of the time, that is the cause of debt), then I think yes, Debt is a Moral issue. If you cannot control your spending that is a Moral issue for you and you need to change that pattern in your life (I won’t use the trite term Lifestyle Change for this).

If you don’t view your debt as being a problem, yet it is affecting how you live then most definitely debt is a Moral Issue, and it must be dealt with in that way, as well.

In some ways debt build up can be a sign of Greed, in that you don’t worry about whether you can pay for something, you simply want it, and that is a moral issue as well (depending on what you are going into debt for). If you are building up debt to better yourself (i.e. education) then that is not a moral issue, but if you must buy a new car every year, simply to keep up appearances, that is a moral issue.

Opinions from my good readers would be appreciated for this Sunday, as well.