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?

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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.

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When to Use a Pay Day Loan

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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The 12 Days of Christmas Debt

Just to get everyone in a festive Christmas spirit allow me to offer, this cautionary tale of Christmas Debt.

The 12 Days of Christmas DEBT

12 Months of Agonizing Payments

Have you paid off last Christmas yet? How about the one before that?

11 Maxed Out Credit Cards

How much room do you have on those cards? Really?

10 Overdrafts a leaping

Really, how much are you paying in overdraft fees? Just because your bank balance can show a negative value, doesn’t mean it should always be that way!

9 Minimum Payments

You realize you will pay that off in 20 years with those minimum payments, or possibly 50 years? Minimum payments simply forestall the inevitable.

8 Balance Transfers

Shuttling debt from one credit card to another is not solving the problem. Juggling chainsaws will lead to a messy end, and that is what this is.

7 Cashed in Emergency Funds

Christmas debt is an emergency? Don’t think that is the emergency you were planning for.

6 Pay Day Loans

This could be starting a death spiral in your finances that will lead you to Day (3)

5 Gold Reclamations!

Did your Grandmother leave you that ring to help you cash it in for pennies on the dollar to pay off debt?

4 Calling Collection Agencies

These are not the bogus ones you get emails from, these are the real ones

3 Calls to insolvency trustees

They can help, but you can’t keep doing this every year either.

2 Calls to your family for an emergency loan

You do have to pay those back, you realize?

1 Mortgage Refinance

Using the equity in your house to pay for consumer debt is a very bad thing.

Yes, not very festive, but ultimately a bit too true. I go to Church and I am confident the Christmas season is not designed to bankrupt you. It is at time to get together with family and friends. 

Wonder why you dislike this time of season? How many of the Days of Debt on the list are you facing in January? 

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Farewell New Credit Card

Last week I received a new credit card in the mail. It was a Flexiti card, and they seem to have purchased the business from The Brick or some other store credit card. Every few months I keep getting new credit cards like this sent to me. They come with a simple activate procedure to turn them on.

Each of these new cards adds:

  • More liability to me, in the eyes of any reputable loan provider (i.e. bank or the like). In the good old days each credit cards credit limit counted against your ability to borrow I am not sure how things work these days.
  • Another attack vector for those attempting to fraudulently use my good credit. Each of these cards has a new number, a new login on-line and thus another place where thieves can attempt to steal your
  • Temptation, and this is the intangible nasty part of One day I might get into a position where if I had this card I might use it as a last resort (when maybe I should have done something sensible instead).
EQ Bank Savings Plus Account

Cancel the Card

To cancel this card, I called and spoke to a polite young man, who did try to convince me not to cancel the account, but relented when it became obvious I wouldn’t change my mind. I also asked for a confirmation that the card was cancelled. The credit card number and information have been put in a safe place as well (along with the date I cancelled the card).

The card has been shredded, so this credit vehicle should be dead.

As I have said previously I have too many credit cards, so cancelling this card and a few more is a very good idea for me. Your mileage may vary, but I think having one (or no) credit cards is a good idea.

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Make More by Reducing Debt

So you’d like to get a pay raise, but you are afraid to go ask your boss for a raise? How could reducing debt help that? This is a cornerstone of Financial Literacy.

Here is a novel way to get more Net income, pay down debt! By reducing debt you have more disposable income. The arithmetic is simple, less debt payments (after you have paid down debt) means more money for you.

This is the simplest of arithmetic problems, yet it seems to be missed by so many people that I feel it is important to enumerate it for you.

Net Income = Income (I) – Expenditure (X)

X = all money spent (S)

I =  all money earned (E)

Where ∑ simply means the sum of the variables in this case things like bills, pay cheques etc.,

Straight forward? So to increase your Net Income you can either increase your Income (I) or decrease X (your expenses), haven’t lost anyone have I?

So if we look closer and see that:

X = sum ( Mortgage Payment,Car Payment,Hydro,Natural Gas,Credit Cards,Interest on Credit Cards,Eating Out, …)

The whole idea is to minimize X (expenditures) and thus your Net Income or Savings increases.

This means the less you spend, overall, the more you have left over. It is much easier to lower your spending, than it is to increase your income (these days). You don’t have to ask your boss for a raise, or work overtime, you simply, spend less.

BCM Simple Rule of Money #1

If you want to make more money, you either increase your income, or you lower your expenses.

The rule seems quite simple, but is it?

EQ Bank Savings Plus Account

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Never was So Much Owed by So Many

Never was so much owed by so many to so few“, –Winston Churchill

Debt

True Heroes

I paraphrase Churchill as a precursor to the latest data from Stats Canada about the National Balance Sheet. Remembrance Day is not far off, but allow me to borrow from Mr. Churchill a bit more.

Unfortunately, the phrase is very much in context. The so few, is the banks, unfortunately.

Stats Canada published their latest update of the National balance sheet and financial flow accounts, second quarter 2018, and as usual there are some very interesting numbers in this report.

It starts off saying that we are wealthier (but you need to read carefully what that means), but then we find out about our debt loads.

So Much Owed?

The report states:

Credit market debt as a proportion of household disposable income (adjusted to exclude pension entitlements) increased to 169.1%, as credit market debt outpaced income. In other words, there was $1.69 in credit market debt for every dollar of household disposable income.

Let us not frolic with glee, while the increase is slowing, it is still increasing (i.e. we are borrowing more compared to our disposable income).

For every $1 of disposable income you owed $1.69 ? That seems quite worrisome, because eventually, someone will ask for their money. Loans are callable, especially HELOC’s, Credit Card Debt and Loans.

We are worth more, but so much of that net worth is tied up in Real Estate. If the housing market goes bust, this could lead to disastrous consequences. So much more will be owed by all of us then.

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Straight Talk on Your Money

A friend of this web site is Doug Hoyes (CA, CPA) and he gave me a copy of his book Straight Talk on Your Money to review. As most folks who have given me their books know, I am atrocious at reading and following up on books, however, Mr. Hoyes had an ace in the hole, he has published an Audiobook. I subscribe to Audible, so I used one of my credits to purchase the book and was pleasantly surprised.

Straight Talk on Your Money

Amazon Link

Mr. Hoyes’ presence and narration of the book is excellent. Many times authors fool themselves into thinking that only they can bring their story to life, but Mr. Hoyes’ experience with his podcast has served him well.

This is a book for anyone wanting to learn about how your financial plans can go awry. The stories told are of ordinary folks, who had some very bad luck, or things just got out of control. If you think you have everything under control, read the book you will feel less confident and see where your plan might need tweaking.

If you think you have your life insurance story in place, please read the There is More to Death than Life Insurance section. I did like the section about Never Loan Money to Family or Friends as well. I won’t ruin it for you, but it really does make sense to me.

The book is an excellent read and the audio book is really great to listen to while commuting or on long car trips too. Mr. Hoyes’ delivery on the audiobook is top rate (and his son engineered the book as well, and the sound balance was very good). This is not a classic How To financial book but it gives concrete examples about how life is variable and things can go wrong.

Straight Talk on Your Money is an excellent financial read.

Open Disclosure

I do like Mr. Hoyes, I have only met him a few times, however we have spoken many times on-line, and I have been a guest on his podcast twice. Mr. Hoyes  is a bankruptcy trustee (and an accountant), and he seems to genuinely care about his customers as well. Mr. Hoyes did give me a copy of his book, however, I bought the audiobook version myself. I am not receiving any payment for this review. If you click on the Amazon link I will make a small commission. Please keep this in mind reading my review.

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