Three Solid Ideas For Your HeLOC

Given the rising interest rates, if you have been using your HELOC (Home equity Line of Credit or Secured Line of Credit) for investing or for debt payments, here are 3 solid ideas to do with that account.

  1. Reduce the principal
  2. Pay it Off
  3. Close it

With interest rates rising, paying off debt has now become a solid investment plan. It will pay upwards of 4% in this situation (as of May 2022).

1. Reduce the HELOC Principal

If your HELOC rate is at 4.5%, every dollar you pay to the principal saves you 4.5%. That money stays in your pocket, so it can be used for other things, and it is risk-free. This makes it an excellent investment.

This gem has disappeared for a long time, due to very low-interest rates. With rates now going up, paying off debt is a good investment, again.

2. Pay it Off

This fits in nicely with the Debt is Bad view that I have. This is also a follow-on to (1) Reduce the Principal. Having no debt creates so many choices and options in your life. You can then invest the money you were paying off the HELOC principal with.

3. Close It

This assumes you have achieved (2) by paying the line of credit off. Why close it?

I am confident many financial planners will poo-poo this perspective. I have always found borrowing to invest a risky thing to do, but paying off debt is never risky. You could put that money in a HISA for the moment until you decide what to do with it.


Use Your Calendar

I almost pulled a significant blunder this month by forgetting to pay my MasterCard Bill when it was due. It wasn’t in my Calendar.

Let us review. When you don’t pay your Credit Card Debt off monthly, you then incur exorbitant usury fees that dig you a hole that you will have a tough time getting out of, so paying your Credit Card debt off monthly and on time is of vital importance in any financial plan you put together.

Why did it take so long?

I usually end up putting the date of when the payment is due in Outlook or Google Calendar. My Calendar will remind me on my SmartPhone (or Watch), but you need Notifications turned on as well. I should write it on the Calendar at home on the Fridge as well, and you may have other places where you put important dates, but that one is essential.

Pay that darn credit card off ASAP!

Carrying credit card debt will hurt you financially. Make sure you get rid of it and pay it right away.

You Can Get Penalties Reversed

I was able to call and ask that the penalties be reversed since I am a “good” customer (i.e. I spend a lot of money with the card, and I pay it off every month). MasterCard was nice enough to forego it for that month. Since I had paid the entire amount, I didn’t have to pay any more penalties.

Use Your Calendar Don’t Be Proud

Don’t be too proud of your memory. This is creating a reminder for you, and maybe for your spouse. If you share your calendar with your spouse they can be aware of bills as well. The more information you share (financially) the fewer misunderstandings about money. Shared Calendars can be a very good thing.


Surreal Paragraphs Found in Credit Card Bills

I continue to clean up my huge archive. I often delete old silly content, but this topic is still valid. You are shocked if you carry a large credit card balance and make only minimum payments. Look for how long it will take to pay off the balance (it must be in your statement). This was initially published back in 2010.

My current credit card balance is relatively large this month due to several specific previously planned expenses (and a couple that we hadn’t planned). The bill will be paid on time, so there is not too much worry about starting a cycle of credit card interest charges (at least that is my plan unless I forget to pay on time).

Having wandered through the wonderland of spending, I tripped across the following sentence:

credit card minimum payment
Example of how long a minimum payment will take only 18 years, eh?

19 years? Aye, Carumba, that is an astounding time frame. So my estimation if we were making this same payment that the effective yearly rate is about 20%, and I’d end up paying back 500% of the initial amount on the credit line once all payments are made, pretty cool, eh?

I realize that sometimes folks’ spending gets out of control. Sometimes, bad things happen that knock you off your financial feet. If this happens, you must fight to get back to paying off the entire balance of your credit card monthly. The interest rates on Credit Cards can be over 20% and will dig a deep financial debt hole for you.

Stop Paying Credit Card Interest

Some ideas you can do to stop paying Credit Card interest:

  • Set up an unsecured line of credit. This can be good if you treat it as an Emergency only credit vehicle. Typically this has a lower interest rate, but it has risks. If you habitually use the LOC to pay off Debt, but can’t pay off that balance, maybe this is not the way to do it.
  • Consolidation loans or consolidation into your mortgage sounds good. If you use it once, it can get you back on track. If you use it habitually, that is a terrible thing. You are digging a bigger debt hole, more slowly.
  • Borrow it from your family or friends? The last resort and it can destroy relationships, but it could work, the short term.
  • Pay Day Loans? Absolutely, positively NO! Go talk to a licensed insolvency professional before you do this.

The amazing things you can read on your credit card statement.


Paying Off Debt is Risky ?

I have been attempting to raise my visibility on social media, lately. I have been commenting on Instagram and Twitter and it seems I have ruffled a few feathers. Paying off debt is risky ?

The risk is losing possible growth through investing. To be specific, the argument made was:

“…disagree. This is why so many people are cash poor, they race to pay off debts costing them 3% with cash making 7-8%…”

Instagram rebuke of my comment about paying off debt (Instagram has financial advice?)

Firstly 3% debt rate is only for Mortgages (or secured credit). Most unsecured debt is much closer to 3 to 18% more than many advisers would have you think about. The “cash poor” phrase made me bristle too. Remember how no one talks about house poor anymore.

Borrowing money to invest in the market always worries me. Leverage has the potential to make a lot of money, but it can also do the opposite. I wouldn’t do it, but I only buy Index Funds and similar ETFs.

A Scenario of What Can Go Wrong

I know a former exec at a large tech firm. He had many “options to buy” the firms stack at a lower price. He decided to exercise the options on the stock and hold the stock. Usually, the option is exercised and then a quick sell order is put in place to take profits from the sale.

This gentleman decided he would be more clever, and hold the stock, to live off the dividends from it. The stock dividend yield was about 1% at the time, which would be plenty to live on. Money was borrowed to make the transaction, as it was for a large amount of stock.

Less than two years later, the dividends were reduced to zero. A short period afterwards, the stock was worthless. This was yet another firm that was “too big to fail”.

Is this a “corner case”, yes I think it is. It is also an excellent example of someone assuming, “the good days are here to stay”.

Removal of Debt, Addition of Options

If you pay off debt, you have more options. Do not fall for the FOMO (fear of missing out) arguments. If you have little or no debt, you then have options to do whatever you like, with your money.

Social Media and Financial Advice

Some frowned at financial talk on web sites. Then there was Twitter and Facebook that got in on it, but now Instagram and TikTok? Seriously, unless it is the Wizard of Omaha on TikTok, maybe get your financial advice elsewhere? Need I point at the Gamestop Reddit debacle to suggest maybe you should be careful where you get your advice?

A Very True Statement

“Think of borrowing money today as negotiating a pay cut with your future self”

Preet Banerjee


A Mortgage Changes You

I was watching Chris Rock:Total Blackout and he had a good perspective on mortgages. His perspective actually can be extended to all debt, but his point about having a Mortgage changing you is spot on.

When you finally get a mortgage your behaviour and your attitude will change. Why? I won’t ruin Mr. Rock’s eloquent perspective (quite NSFW), but let me sum up:

When you have a large debt, you have fewer options. Your options are limited due to your need to pay off this large debt.

The people I know that have the most options, have little or no debt.

You can delude yourself into thinking you have options, but you don’t. If you carry a large debt, and think you can afford other high debt options, you will inevitably end up in a place with even fewer options.

Why do I constantly harp on reducing debt? It will give you more options. You are no longer a slave to your debt.


They Paid My Loan Off

“They paid my loan off” is what a co-worker told me, when he purchased a new vehicle. I have given up telling my co-workers things about finance (they don’t listen much). I knew what that meant, but it took a while for him to figure out what that phrase meant.

What did the phrase mean?

  • Whoever has taken over the debt from the other loan will add this to the new loan (debt) for this new vehicle. What might this include:
    • Penalties for ending the loan (or lease} early
    • The balance still owing for the previous vehicle. The vehicle may not be worth as much as the balance owing
    • Administration fees for closing the loan (for the new firm)
    • Other fees
  • If the other loan was at a lower rate, you will be using the new rate of this new loan
  • The vehicle you are purchasing is most likely not worth the “new” value of this new loan, but that is your problem.

My co-worker did finally figure this out, once he got all the documentation, which explained all the details to him. He was less than impressed that his loan was now larger than the actual value of his new automobile.

negative equity
A Useful Graphic from GoAuto.ca

Strangely there was no mention of “Negative Equity”, which seems to be a phrase no longer used in the automobile sales world.

Negative Equity ?

Debts do not just “disappear” without someone paying them off (with very few exceptions). Remember that when buying large items.

Someone may have “paid my loan” but what does that really mean?


3 Ways To Pull Off This Season’s Coolest Financial Trend

If you actually clicked on this title, you should be ashamed. You have a problem, and you need help. Don’t click this kind of crap (or worse the actual title which was 3 Ways To Pull Off This Season’s Coolest Beauty Trend ).

Coolest Financial Trend

You want to know what the coolest financial trend is this season? Pay off debt.

If you are carrying a large debt, and you want a guaranteed investment pay back? Pay off debt.

If you can’t sleep and you are having problems with anxiety due to how much money you owe? Pay off debt.

The best way for me to create a list of a whole bunch of articles about one of my cornerstones? Pay off debt.

If you simply follow these simple tips, you can be part of the financial trend setters this season.

What a Load of Tripe

No kidding? I read so many magazines that have less content than this post talking about fashion, beauty tips and yes even some financial advice columns, who buys into this bilge? Yes I have read articles that talked about the coolest financial trend, I threw up in my mouth a little.

You know what you need to do, you don’t need click-bait titled clap-trap to tell you what to do, just go do it.


When to Use a Payday Loan? Never!

Never use a Pay Day Loan. There is no reason to use this service, ever.

I was going to leave that as the entire post, but I suppose I should elaborate a little on my statement.

If you are considering a Pay Day Loan, you are in a bad place financially. Adding a pay day loan will simply add an accelerant to your financial demise. A ridiculously high interest rate loan is not going to help get you back on your feet. All a pay day loan will do is get you to bankruptcy faster.

What should you do if you are thinking of getting one of these short term high interest rate loans? Get Help!

See a licensed bankruptcy trustee. They will either recommend a plan on how to pay things off, or a Consumer Proposal or maybe that it is time to declare bankruptcy. Remember this is a one-time thing, you can’t keep doing this.

Pay Day Loans
Similarities Pay Day Loans and Loan Sharks

If you are thinking of going to a credit counselling firm, research them and figure out if they are reputable. How much this is going to cost? Some firms are helpful, others, not as much.

Sometimes you end up in this financial place due to life related issues, maybe it is time to talk to someone about that too? Talk to someone about the issues in your life, may help you fix your lifestyle (and your financial lifestyle). If you don’t understand how you got to this place (financially), how can you be sure you won’t end up here again?

Stay the hell away from Pay Day Loans and the new “On line loans” system coming forward as well. Fix the problem, don’t dig a deeper hole.

Simple Advice

No question has the answer, “You should get a payday loan”.

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