Save up to 50% on life insurance.

Debt-shaming: Debt is Bad, but You Aren’t

I keep reading commentaries from “influencers” talking about debt-shaming. At best, “shaming” is becoming “old hat,” but I digress.

The Acadia Axe Man not a debt-shaming vehicle
The Acadia Axe Man, not the RedBlacks Big Jos

Debt continues to be a bad thing. It limits your choices in life and is a dangerous tool (much like a chainsaw). Surprisingly a chainsaw comes with warnings and instructions, whereas most debt vehicles do not. The debt vehicle also cannot be used to make incredible wood carvings, but I digress.

Many times you need to use debt, and this is not an immoral thing. Examples of this are mortgages and possibly student loans (in both cases, there are exceptions). Buying a highly leveraged house or getting a student loan to study Hegelian Philosophy are examples of those exceptions.

The indiscriminate use of debt for impulse purchases is a reason for debt dishonour. Using high leverage and high-interest rate debt vehicles is another reason the fickle finger of debt derision is wagged.

“Influencers” who portray a lifestyle where debt is a good thing are an issue to me. The credit vehicle providers’ advertising is truly reprehensible. The higher the interest rate of the vehicle, the more vile the product. Yes, I mean Pay Day loans, but reverse mortgages are odious.

Debt-Shaming Finger Wag

I will plead guilty as a debt-shamer. However, I stand by all of my previous statements.

Some of my favourite Debt Shaming Content

My list of debt commentary articles is quite long, so let’s stick with the basics.


Advice for New Grads?

I got called by Insight Magazine to give some advice to new grads on what they should be doing about their finances many years ago. It was so long ago, the magazine no longer exists. I gave some answers to the interviewer, but as usual, I was not sure I was very clear or eloquent, so now I will attempt to be more evident to those who might have read the article.

Get The Heck Out of Debt

You have just graduated from University, and you might be carrying upwards of $70K in debt (hopefully in student loans only). You most likely won’t be paying that debt off in your first year of working (should you find a job right away) if you can pay it off, good for you! However, it would help if you put together a plan on how you will pay off that debt and WHEN it will be retired.

Carrying debt is a drag on your finances, and the sooner the debt is retired, the easier your financial life will be. It would be best if you did not aspire to “get used to living in debt” this is the one thing my generation does NOT want to hand down to you.

Don’t Fall In Love With Having Money

Just because you have graduated from University and no longer have to eat Kraft Dinner with Hot Dogs for dinner does not mean you must go out every night to eat. You have lived a frugal lifestyle as a student (I am assuming), but if you continued that frugal lifestyle for a while longer, you might be able to pay down your debt faster and then be on a much stronger footing financially.

Yes, you deserve to enjoy life, but it is effortless to get used to the “Let’s go out to dinner tonight we deserve it” lifestyle, and once you are in that lifestyle, the habit is tough to break (speaking as a 61-year-old, I can attest to that issue).

You cannot live your parents’ lifestyle (yet), so don’t try. It took them 30 years to get where they are, don’t rush your spending habits to mimic them.

If your parents paid for you to have a Samsung or an iPhone or paid for your Cell phone bill, maybe it’s time to get rid of this expensive toy? You don’t need $120 a month cell phone bills. Discretionary spending (i.e. money bleeding) is a bad thing that you must watch diligently. Middle age mens’ wastes spread, but their spending spreads like that as well, don’t let it happen to you.

Have a Savings Plan

The sooner you start saving, the better it will be for you when you reach my age. However, saving while still carrying discretionary debt (i.e. non-mortgage debt) is paying Peter to feed Paul. Lowering your debt is first and foremost, if you have left over moneys from your year, yes, starting an RRSP early is a good thing to do, but pay your debts first.

Savings is good, and getting out of debt is better.

Get the Heck out of Debt

Did I mention this yet?

Banks Can be Negotiated With

As I have pointed out before Free Banking is possible, but it is more likely for old farts like me, who have a good track record with the bank already.  Paying $12-$25 a month in bank service charges you should try to avoid, since you most likely don’t use enough services with the bank to justify this charge. Go with as cheap banking as you can.

The Three Worst Ideas After Graduation

  1. I deserve a new car! -or- I deserve a vacation in Las Vegas!
  2. I’m a little short until my next pay cheque, I’ll get a pay day loan
  3. I am only carrying a few hundred dollars on my credit card balance this month

Keep this in mind, did I mention Get the Heck Out of Debt?

Last Pieces of Advice for New Grads

Originally published in 2010


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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Venn Diagrams For Borrowers

They say a picture is worth a thousand words, so this week I have written up a storm, however, this one has been hanging around in my archives for a while, waiting to come out and state the obvious. I borrowed the idea from a similar diagram comparing a cat and a homeless person.

Pay Day Loans
Similarities Pay Day Loans and Loan Sharks

Anyone care to disagree with this diagram, or did I miss other services made available from both businesses.


In Defense of Pay Day Loans?

One of the contributors to this site is Mrs. C8j, and last week she handed me an article from the Globe and Mail that absolutely flabbergasted her (admittedly Mrs. C8j can actually rant better than I can), written by Sean Silcoff with the title, “Expensive but not excessive: why Pay Day Lenders Aren’t a Rip Off”. Most of my readers know my opinions on these modern-day Loan Sharks, however, if you want to know my opinion read Pay Day Loans the Crack Cocaine of Personal Finances.

After reading the title I figured this was a misdirection story, where if you read the actual article the writer is actually saying the opposite and is attempting to suck you in with an inflammatory title, but I was dismayed to see that this really was not the case. I’d include a link to the article, however it is behind the Globe’s pay wall, and you have to be a Globe Subscriber to read it (click here if you are a Globe Subscriber).

pay day loans
Globe + Mail ?

The article is actually quite hum drum (not written in my style of ranting like a lunatic in every paragraph), and I kept wondering what tripped Mrs. C8j’s Rant-Fest, and then I read the second to last paragraph, and I must admit my flashing red-light rant-o-meter went off as well.

Given the fact the Globe protects this content with their Pay Wall, I will paraphrase what is said:

BCM thinks it says, “… this is a regulated business that doesn’t make a lot of money because they deal with bad borrowers and thus shouldn’t be viewed with scorn…”

The phrase that really caused me to almost choke on my coffee was, “… quick and convenient source of moderate amounts of cash…”. That reads like something out of a Pay Day Loans store’s brochure, “… quick and convenient …”?

Those are actually two criteria I always use when choosing a lender, also what kind of hot chicks they have in their ads (since everyone knows that hot chicks dig dudes who use Pay Day Loan services) (for those sarcastically impaired my apologies for me not marking this paragraph as a sarcastic opinion on my part).

Pay Day Loans or Loan Sharks?

The gist of the argument put forward in the article seems to be that because Pay Day Loan companies don’t make a lot of money, thus we shouldn’t view them as a modern-day Shylock (I use that as the vernacular for Loan Shark, not as a derogatory antisemitic term). My opinion is that Pay Day Loan Store Fronts aren’t making a lot of money mostly because there are so damn many of them (in downtown Ottawa, in the core, there is pretty much a pay day loan store front on every block).

Yes their customers are folks who may not pay them back, but my guess is they are not making a fortune on their 500% per annum loans due to a glut in the market. There are more pay day loan shops than banks these days, and now with competitors getting rid of their store fronts and running solely as Internet Web Sites, this industry could be ready to make even more money off their customers (following the lead of the Banks and other service industries).

The final paragraph seems to be borrowed from Dr. Henry Morgentaler, in that it is preferable for Pay Day Loan customers to use this legal service as opposed to a more dire choice (i.e. loan sharks). My view of that is: maybe it would be better if we had credit counselling services on every street corner instead? I am not making any statement about Abortions or Gun Control either (let’s deal with one controversial topic at a time).

MER : A Worm in the RESP Money TreeI honestly don’t understand why the Globe would publish this story, or why it was written, any ideas good reader? What’s next, articles defending the High MERs in Canadian Mutual Funds?


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