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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Serial Refinancers

Serial refinancers is a term I heard Scott Terrio use on the Debt Free in 30 podcast, and it really resonated with me.

Much like serial murderers, serial refinancers just keep going back to the well and refinancing their debts with consolidation loans or similar debt vehicles. Much like serial murder (or murder in general) this is very bad! Consolidation or refinancing of a debt is supposed to be something you do once (if ever), not every 2 years.

Serial Refinancer Death Spiral

A good point that Mr. Terrio makes is that with the new credit rules in place, you are more likely to get turned down for a consolidation loan. Yes, credit is still loose, but the rules are tightening things up. Mr. Hoyes and Mr. Terrio are not seeing more folks coming into their offices with these problems, but it is still early. The new financing rules only came into play at the start of the year.

What will happen when this tighter credit takes hold? More folks going to Payday loan and alternate finance firms, most likely, which will simply accelerate the process of insolvency, or the personal finance death-spiral of serial refinancing.

Refinancing is Bad?

Yes, refinancing debt is bad in business and it is bad in your financial life as well. If you are carrying a huge credit card debt, refinancing looks like a life-line. It may be a life-line but if you are not going to delete those credit cards from your financial life, you are setting yourself up to fail.

I know serial refinancers, I have tried to point out the folly of their ways. I have not succeeded in most cases, but I can see the path (i.e. financial death spiral) they will follow, so I am keeping my favorite bankruptcy trustee’s number around in case.

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I Hate Sean Cooper

For those who are not aware Sean Cooper came to the media attention a while ago when he talked about how he worked very hard to pay off his house in a short period of time (three years). Sean has also written a very interesting book (the amazon link is on this page, book is out soon).

Sean Cooper

Amazon Link for Sean’s Book


Sean’s story is not that unique in my circle of friends, I know a few folks who worked very hard to get out of debt quickly. With my friends stories, they had two solid incomes, and made it their goal to pay off their house in less than 5 years (and not in the Toronto Real Estate market). Sean’s story is a little extreme (in that he worked more than 2 jobs at times and did other extreme savings tricks) but still to be applauded.

How Can You Hate Sean Cooper ?

Do I hate Sean Cooper? Evidently the Internet does (if you look at the stories about him, the comment section is peppered with angry folks who disagree with how Sean did it, and how it is unrealistic to assume this is possible). Let me be clear, Sean’s method is possible, if you want it.

No, I do not hate Sean Cooper, I have met him at a conference, he seems like a very nice young man (remember I am an old fart). He cannot loathed for his lifestyle, he should be applauded for setting a tough goal, and then making it happen. Could I have done it? I doubt it, but I do compliment him for accomplishing his goal. Am I jealous of him? Absolutely!

Can you Do What Sean Did?

Can you do this? Positively, it is not easy, but possible (if you have a job, and a lot of self-control (if you have two incomes, why aren’t you doing this?)). Should you do this? That is up to you, but I would suggest reading Sean’s book and see that parts of his concepts you can use in your life to get out of debt quickly.

Examples of Trolls of Mr. Cooper

The CBC article had some classic troll comments about Sean’s story. These are just so amazingly venomous (and I can’t figure out why they are so pissed off at him):

  • “…Another media PR job to whitewash the economy misery of the youth. 100 hours of work a week = over 14 hours of work a day, every day. …”
  • “…On the upside, he did die a rich man. However, since he didn’t have a social life and had no children, the state took it all. …”
  • “…Why isn’t anyone asking where a 25 year old got a nearly 200,000 dollar down payment? I’d say he HARDLY was living like a pauper. …”

Reading the comments on the article is almost more entertaining (but again, why so negative?). I look forward to reading his book.

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Debt Consolidation and Tattoo Coverups

A friend of mine had a tattoo on her forearm that after a while she grew to dislike, so she decided to see a tattoo artist and have that artist (evidently a renowned artist) see what could be done with the tattoo. It was decided to cover up the first tattoo with another tattoo that might be more aesthetically appealing. What does this have to do with debt consolidation ?

debt consolidation
This tattoo says, taken advantage of (according to Hanzismatter), I guess they were

The artist did his magic, and now a simply line drawing of an amphibian, has morphed in an elaborate colorful collage with an interesting phrase. The replacement is about 300% larger than the original tattoo in terms of surface area. I hope my friend enjoys the “cover up” tattoo, but it got me thinking that this seems much like the constant refinancing, and blending of debt (into other debt vehicles) that many folks seem to be doing these days. Still no explanation on this debt consolidation angle?

Covering up debt is not making debt go away, and while consolidation loans can make it convenient to have all (or most) of your debt in one (hopefully lower interest) debt vehicle, if you continue to live the lifestyle that got you into debt in the first place, you really are only making the debt bigger (much like the tattoo).

If you are using a Debt Consolidation loan to get control of your debts, make sure you have a solid plan in place to pay down the debt, and make sure that you are not growing the debt further. Debt Consolidation loans are simply a tool, they are not a cure, and as with all tools if you are not using them correctly, you can make one hell of a mess.

Mrs. C8j has pointed out that more than a few advertisements for Consolidation Loans imply that once you get the loan, you are “Out of Debt”, but your debt has not changed it is just all in one place. You are out of debt when it is paid off.

Another good point with the tattoo metaphor, at least my friend went to a professional to get the “touch up” tattoo (and didn’t rely on a friend of a friend who did these for fun). If you are thinking of a consolidation loan, see a professional credit councillor (or a similar financial service).

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