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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How Important Are Credit Scores ?

I have been trying out social media to see what I can learn. About a week ago I put up a simple Twitter Poll on @bigcajunman, about Credit Scores and the results were interesting.

The first thing I saw was that only 16 folks answered, which is a little disheartening. I have 3600+ followers, but I guess folks are busy these days.

The question I asked was quite simple. Which is more important:

  • Blood Pressure Level
  • Credit Scores
  • Cholesterol Level

I was glad to see the results.

Results from my first Twitter Pool on Credit Scores

Yes, your blood pressure level is much more important than your credit score. Nobody died from their credit score, but many folks die from the complications from High Blood Pressure. Remember the most important part of your Retirement plan, don’t die! Your Health is the first thing you should worry about.

credit scores

Risks of a Low Credit Score

If Equifax gives you a low score you won’t get loaned money or won’t get a Credit Card. You can repair it if it is low. You may feel stress due to a low credit score. Stress is bad for your health as well.

Risks from High Blood Pressure or High Cholesterol Levels

Aneurisms, Blood Clots, Stroke, Heart Disease or Death.

From a lay person’s perspective, I would say that your Blood Pressure and Cholesterol levels are something you should know. Being able to quote your Equifax Numbers, doesn’t seem as important.

Do something about your health and then worry about credit.

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Exposed on Banks

Even as a simple country Index Investor (to paraphrase Bones McCoy), you need to understand the Index you invest in. If you own a TSX-based, Canadian S&P Based or Dividend Royalty based index you hold a lot of Banks.

Two examples of this are:

  • S&P/TSX Composite Index, (OSPTX) which holds 36 % “Financials“. The top 10 holdings 4 are banks (Royal Bank RY, Bank of Nova Scotia BNS, TD Bank TD and Bank of Montreal BMO).
  • S&P/TSX Composite High Dividend Index ETF (TXEI) which holds 30% “financials”. You find 4 banks in their top 10 holdings (Bank of Montreal BMO, Bank of Nova Scotia BNS, Canadian Imperial Bank of Commerce CM, National Bank of Canada NA)
exposed on banks

Why this imbalance? Banks are doing very well lately, and have done well for over 15 years.

Are banks likely to “Nortel out“, in the near future? No, but realize that you are holding a lot of Banks if you are investing in Canadian Indexes.

My problem is that I am highly exposed on Banks. From my days as a Stock holder, I still hold TD and BMO in one of my larger investing portfolios. In this same portfolio I also hold a TSX index fund, which means my exposure to banks is too large (given I may retire within the next 10 years).

As Interest Rates slowly rise to more normal rates, I should start thinking about some more stability and start building a GIC Ladder in my portfolio. I should be looking for more stability given I am within 10 years of retirement.

Treat This as Informational

I am not offering advice. I am simply pointing out that many passive investors are heavily exposed to the Financial Sector in Canada.

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CPP and EI for 2019

Happy New Year! I have been rummaging through my archives and a tradition seems to be talking about CPP & EI for each year. Who am I to argue with traditions?

As we start a new year, all we folks who receive pay cheques (I believe the Japanese term is Salaryman), we get to start paying CPP and EI premiums again.

For a lot of folks, they are just deductions that appear on every pay stub. For folks who make more, this deduction disappears some time in the year, and after that, they get a “virtual raise” given they do not have to pay these deductions for the rest of the year.

It is easy to approximate how much someone makes, by knowing when they stop paying EI premiums.

It’s actually a pretty simple game to play and well worth a couple of minutes time to create a little model to figure this thing out.

Meet Jill for 2019

Jill gets paid bi-weekly, lives in Ontario and works as an employee of private firm NUJAC. She gets paid a regular salary (assuming no bonuses ), so if we list the month in which Jill tells us “I stopped paying EI premiums in August” we can then approximate how much Jill actually makes in salary.

We learn from the EI web site that the 2019 premium is 1.62% of insurable earnings (and the maximum insurable earnings is $53,100 in 2019).

EI Rate1.62%Max income $  53,100.00
Max860.22
CPP Rate5.10%Max income $  53,900.00
Max$2,748.90
MonthBi-Weekly
Pays
Approx Gross
Income
Per Pay EIPer Pay CPP
January3$460,200.00$286.74$902.70
February5$276,120.00$172.04$541.62
March7$197,228.57$122.89$386.87
April9$153,400.00$95.58$300.90
May 11$125,509.09$78.20$246.19
June13$106,200.00$66.17$208.32
July 16$86,287.50$53.76$169.26
August18$76,700.00$47.79$150.45
September20$69,030.00$43.01$135.41
October22$62,754.55$39.10$123.10
November 24$57,525.00$35.84$112.84
December26$53,100.00$33.09$104.16

So Jill makes about $76,000 a year.

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If you are planning on making financial New Years resolutions do yourself a favour and make them measurable. When they are measurable they are attainable.

My Personal Opinion On Resolutions

Here is a good example of some noble resolutions

  • I will save more this year
  • Pay down my mortgage
  • Lose weight

I applaud you if these are your goals, however, how are you going to know whether you have succeeded or not? Without a tangible financial goal you are doomed to failure.

More tangible versions of the same goals might be:

  • The balance in my TFSA on Dec 31 2019 will be 10% larger than on January 1 2019. This is very specific, you can even put actual values in there, which makes things easier for you to monitor your goal.
    • Remember if you are saving for your kids’ educations an RESP goal of $2500 added to the account would be good.
    • RDSP contributions for your child need to be there as well.
  • My mortgage principal will be $10,000 lower at the end of this year. The important thing is to set a tangible financial goal. How you do it is left open, but what the goal is, is concrete.
    • You can automate this goal, and make it easier. Setting up automatic over payments on your on-line banking of $400 per pay (if you are paid bi-weekly) makes this resolution real.
  • I will lose 60 pounds this year by going to the gym at least 150 times. Ideally I will try to lose 5 pounds a month. Again, this is very concrete, and easily monitored.
    • In my case I am lucky as my office has a gym I can use for free.

Resolutions are wonderful things (although you can set goals any day of the year), but they must be specific. Saying, “I will be a better person” is admirable sentiment, but what does it mean and how are you going to do this?

  • Give more to charities?
  • Being more positive in your life outlook? (again really hard to monitor this, unless you tell someone who can say, “You really are being a sour puss these days”).

Make your goals and resolutions tangible and measurable and you are more likely to succeed. Also, remember to put your resolutions somewhere where you can be reminded about them.

  1. Set the background of your computer or tablet with them?
  2. Put them on your refrigerator?
  3. Tell your spouse, they will remind you.

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