Pay Day Loans are Crack Cocaine of Personal Finances

I said it! I meant it! Pay Day Loans are predatory short term, high interest rate loans designed to entrap their customers in a financial death spiral.

Yup, if you look down the side of this post, you will find ads for Payday Loans, for that I apologize, I need to look into Adsense on how to turn those off, but yes, Pay Day Loans are the Financial Equivalent of Crack to your finances.

I have no idea how Crack feels, and I do not wish to ever learn (I have much the same view on Pay Day Loans too), however, prevailing opinions is that Crack is highly addictive, and it’s high diminishes over time so you have to use it more but you still don’t ever reach that initial high, much like a Pay Day Loan. Pay Day Loans are highly financially addictive, and once you start using them, your financial well-being goes down hill quickly, and they are hard to kick as a habit.

Pay Day loans are modern day loan sharks

Modern Day Loan Sharks

Why am I bitching about this still? Where I live in Ottawa is a relatively affluent area (although it does have a food bank), but it has more than a few Cheque Cashing/Pay Day Loan “stores”. All I can ask is What the Hell is Going on?

Interest rates are ridiculously low and these places are spreading faster than the black death in the middle ages, what happens when interest rates start going up? There are more regulations on these places, but I just don’t understand why there are so damn many of them.

Please feel free to comment on this (any comments about how I am a hypocrite for having ads on my site for these parasites, expect a colourful reply, but take your arguments to Google for allowing them to advertise) topic, and any insight as to why they are multiplying in a Fibonacci sequence would be helpful too.

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Downsizing, when?

Given my nest is a little emptier, the next interesting question to ask is when is it time to downsize? Do you really need to downsize, or have you been living a small life?

I know a lot of friends who really don’t need to downsize, because they never really “exploded” or got “too big”, and I applaud them for their intestinal fortitude, but most of my friends will soon have:

  • A large house with a lot of empty space
  • Cars bigger than they need
  • A lot of stuff that they really may not need any more
  • etc., etc., etc.,

Downsizing

Downsizing sounds really simple, but is it as easy as you think? In my case selling my house is not completely straight forward because I have to do a lot of repairing of the Big Cajun Castle before I could sell the Chateau, so that creates the “spend lots of money to get back some money“, which is always an interesting quandary. I will have to spend this money some time, since a lot of the work really does need to be done, if I sell the house or not, so I am not that worried about it.

The need to have many cars if there is only two of you is another important issue that needs to be addressed. In my case I think I’d like to downsize to a two-seater convertible sports car (used mind you), that is my idea.

Maybe downsizing isn’t needed? Maybe you can turn this into a business opportunity opening a Bed and Breakfast or maybe take in some lodgers? You need to go and investigate that further (laws for your city and such), but that is another use for a house that has grown too large for your means.

Is Downsizing Necessary ?

I don’t think you can easily brick up rooms, but you could change your kids rooms into studies, and/or hot tub rooms, but how many extra bedrooms do you have?

How old should you be when you downsize? When you no longer need the space, or when you can no longer live in the space? These are all very good questions, but am I missing anything here?

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After 25 Years Then What?

Celebrating our Silver Wedding anniversary caused me and Mrs. C8j to go strolling down memory lane and we came to the (deep) conclusion that a lot has changed in 25 years in my life, but also in this world of ours:

  • In 1987 the Internet was just starting, now it is our only way to shop (or one of our favorite places to shop).
  • Banks closed at 3:00 PM Monday to Thursday and might stay open ’til 5:00 PM on Friday (and heaven forbid they opened on weekends). Phone banking? Say what? Interac? Huh? Pay for your groceries with a Credit Card? No way! If you were a good customer you could use a cheque card to write cheques to pay for your groceries. Luckily ATMs were available (and they had gone beyond the old “Johnny Cash” Canada Trust Machines).

    wedding anniversary

    Crockett and Tubbs would use this bad boy!

  • There wasn’t any Sunday shopping, and the idea was heresy to discuss (in fact a lot of shops had limited Saturday hours too). Remember the Lord’s Day act? In Ontario stores were fined (heavily) if they opened on Sundays or holidays. You ran out of milk on Sunday you went to Mac’s to get it!
  • You really only had a few TV stations to watch, now there are about a thousand to choose from and none of them seem to have much on anyhow. High Definition? We were entering the VCR age, Digital and HD TV were just ideas rolling around in the NTSC’s head.
  • Cell Phone? Yes, they were sort of out there, but they aren’t what they are today (about the size of a large brick, watch an episode of Miami Vice if you don’t believe me). There is an entire Industry that exploded in less than 25 years.
  • Blogging? Back then you had Newsgroups that you might be able to read at work (if you worked in a High Tech firm, or at a University). Does anyone remember net.singles?
  • On Line banking? No way! Heck you did your stock trades through a “Broker” back then, so no on line quick deals then. IPO’s? What were those? If you wanted to set up an RRSP, you had to go through one of the few Brokers out there. TFSA? Just a bunch of letters back then. You paid for that service, and you paid dearly!  Variable rate mortgages? Maybe, but they weren’t very common that is for sure. Carrying large amounts of money on your Credit Card? What? No one did that. Pay Day Loans? If you dealt with a loan shark maybe.

So much changed over 25 years, and so many more things will change, I just wonder my feelings about these upcoming changes will be? Will I be the “angry old man” or will I adopt it?

 

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Revisit: It’s Simple (isn’t it?)

I am borrowing an idea from my friend Michael James and having a look at some of my older posts, and one of my first posts in 2005 was  It’s Simple (isn’t it), about spending. I have put out more than 2000 posts since this early post, but I feel it does seem to hold its own even 7 years later. I’ll admit the writing style is a little more hard spoken than now, but I still enjoy having a good rant now and then! I note I hadn’t figured out how to bold things that well back then (lots of capitalization though).

 March 25th 2005 It’s Simple (isn’t it?)

So the first and easiest principle of financial planning is to SPEND less than you MAKE. Notice, I am not charging you for this piece of advice, so please no notes saying, “Well D’UH!“, or such. This is so obvious, that maybe it gets obscured with all of the odd plans and pecodilos that we put together in our financial lives. Let’s look at this as the real equation:

Incoming cash – Outgoing cash = SAVINGS (or Losses if negative)

You are probably thinking, I know that one! Really? Do you know how much money comes IN to your household? It’s not too hard to figure out, if you keep your pay stubs, but the rub is how do you figure out how much is going OUT of your household? Can you figure out where you are spending most of your money? Can you guess? My bet is you might be able to guess about, but I have also found that you might be wrong.

I am part of the “Quicken Cult” in that I track most of my expenditures and income in Quicken (no I don’t get any money from Intuit for saying this), and given that I use direct withdrawal to pay for most things, I actually have a pretty good view on what my family spends their money on (I’ll write another article on controlling spending, right now I am more worried about just bookkeeping).

Do you need to use Quicken to do this? No. You can use Microsoft Money, Excel, an accounting practice book, a spiral binder, or just keep your receipts for 2 or 3 months (or as long as you can stand keeping track of all of this). The important thing is that you are keeping track of things, you are watching (let’s not discuss the Heizenberg Principal just yet), and learning about your habits.

“I don’t need to track that, it’s only a coffee.”, think you? NO WAY! Go nuts for a short period and keep track of all that INCIDENTAL spending you have (if you are a smoker, you’ll have a heart attack on how much you spend on those). Let’s do a simple calculation here:

2 Stan Mikita’s Large Coffees per day * 5 days per week * 48 weeks * $1.40 = $672.00

The thing to remember this is AFTER TAX money too, could you use that much extra a year? If not, mail me a cheque for that amount (I sure as heck can).

The longer you do this “watching” of your spending the better a picture you can get about your spending HABITS. If you do it for a month, you’ll have a good snapshot, however, if you do it for 3 months, your picture is a bit clearer (and you are less likely to have “fudged” because you knew you were keeping track), and if you keep track for an entire YEAR, well then you can then plan for an entire year! WOW!!! That’s awesome.

Now that we have all this data, it is time to separate it into categories, the first is easy INCOMING and OUTGOING. Incoming is simple, that is your pay stub (but remember there is outgoing on there as well, taxes, CPP, EI, etc.,), outgoing is pretty much everything else. If you want you can use that big equation:

Incoming – Outgoing = Savings

and see where you stand (and whether it lines up with your bank statement), however, it might be better if you do a little more separation. In the OUTGOING, create subcategories for yourself, here are a few examples:

  • Groceries/Food
  • Transportation (Car/Bus/Moped expenses)
  • Taxes! (no, don’t add up GST unless you are a glutton for punishment)
  • Household
  • Utilities (if you live in an apartment or condo you might not need that)
  • Entertainment
  • Miscellaneous (i.e. all that is left)

OK, so we have done this and we now have a good view of where the money goes, and where it comes in, and hopefully at the end of it, you know why you have the savings (or debt) that you have in that time period. Is this the end of our quest? No way, this is only the beginning, all we have now is raw data, next we need to use this facts to make our financial plan.

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Job Hunting: Your Facebook Page is Your New Reference

Job Hunting: Your Facebook Page is Your New Reference, the personal reference for a job is a key part of the hiring process, and more than once, when I have been involved in hiring someone, we have checked the persons references, only to find out that the reference:

  • Doesn’t know the person used them as a reference, and thus doesn’t really have much to say about them.
  • Doesn’t know the person used them as a reference, is annoyed and thus gives a bad reference
  • The person doesn’t even remember the person

The importance of a solid personal and job reference is the cornerstone of any job application, however, what is now supplanting the reference as the major impediment for folks who are qualified getting hired, is your Social Network Page(s).

If you enjoy Social Network sites like Facebook, Pinterest, Twitter, MySpace or whatever, remember that whatever you put there, future employers are going to see it as well. Many folks think that if you set the privacy capabilities of these sites to a strong setting, outside folks are not going to see it, but I can assure you that anything you put on a Social Media site will be visible to folks who want to see it. I’ll say it again, Facebook Page is Your New Reference !

What kind of silliness have I heard of causing folks to not get a job?

  • Having a Twitter account and “bad mouthing” former employers (or current employers), on the site. If I am going to hire you and I see that, my first thought is, “What are they going to say about our company?”.
  • Pictures of you at a party “having a good time” (let’s leave it at that), as a future employer, do I start to wonder whether you are a reliable employee, or a party animal?
  • “Other pictures” (no more need be said), seriously folks, when did posting pictures of yourself in your underwear or less, become a normal thing? An employer sees that and says (out loud), “Indiscrete employees, if they post this, why should I trust them to keep any company secrets”. Remember if you are “tagged” in a Facebook picture, even if it is not yours, you are in trouble.
reputation

Simple reputation explanation

These are just a couple of the interesting ways you can thwart your job applications.

What do I do ?

How do I find out what others can find out about me?

  • Google your name and see what others can see (without even looking very hard).
  • Comb through your social media sites and see what is there (and look with a future employers point of view)

If you have some bad stuff out there, get rid of it as best you can, and hope no one has kept copies. Remember, Facebook Page is Your New Reference.

Any other areas I might have missed on this, dear reader?

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