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3 RECENT DEBT HEADLINES

Debt headlines: Introduction

There have been three recent debt headlines that have attracted a lot of people’s attention. In this Brandon’s Blog, I discuss all three.

Debt headlines: Bankruptcy statistics

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. In my blog, BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?, I described the statistics. Many financial writers started to forecast doom and gloom. However, in my blog, I comment that I don’t see it that way. Insolvency filings in November 2018 were down from October 2018. The business writers quoted the statistic that there was a 5.2% increase in November 2018, compared to November 2017. However, insolvency filings have been unusually low for close to 10 years. So the increase really is not a big deal.

The actual problem is not these stats. Instead, it is the historically high degree of Canadian house debt collected when rates of interest went to near almost 0%. Since we stay in a slowly boosting rates of interest environment for the near future, not every person or business will be able to carry their high debt. This will lead to more insolvency filings.

Debt headlines: 46% of Canadians on the verge of bankruptcy as rates increase: Study

I have written before about Canadians and their debt load. Personal debt loads are of some worry. There’s brand-new information that casts a brand-new alarming light on the state of Canadians’ personal balance sheets.

A current study reveals that 46% of Canadians are on the verge of bankruptcy as interest rates increase. I begin by stating a word of caution. The survey size was a small pool so I don’t want to generalize. Canadians have a great deal of debt. What does that tell us about what these people are saying?

This really did not occur overnight. These are long-lasting financial obligations that have been gathered over a long time. The weight of them is actually having an influence. These are individuals that live paycheque to paycheque.

Well, these people are claiming that 46% who answered the survey would not have enough cash or are within $200 or much less to manage their debts and expenses at the end of the month. If something shows up that can interfere with that whether its rates of interest going higher, they might lose their job, or they might have unanticipated emergency costs. So what this informs us is that practically half of Canadians that were surveyed are truly living really near to the margin.

Numerous people do live in this way. Having debt repayments that stay in the mix since that is something that is non-negotiable, will certainly increase in time if you do not resolve it. Rates of interest will certainly increase. Do we understand what percentage of these individuals is facing that? I’m going say a fair number.

The reason I say this is due to the fact that if you return to the start of the monetary crisis in 2008, the Bank of Canada decreased rates of interest in an initiative to boost the economic climate. Ten years actually. I recognize rates of interest have actually begun to go higher however when you’re in this low-interest atmosphere you can carry a lot of debt.

People have. I’m not speaking about the tiny expenses placed on a charge card. I am speaking about paying an astronomically high price for a house in a rising real estate market, not having the ability to manage those home mortgage repayments, tackling that costly debt using your charge card.

43% of those surveyed stated they are sorry for some of the debt that they incurred. They would certainly enjoy a getaway today however if you cannot pay for it that vacation credit card debt is still there.

Just how concerned do you get when you hear that rates of interest are increasing? You are most likely to need to be getting ready to get your affairs in order.

Debt headlines: Canadian financial institutions might drop by ‘a minimum of’ 50% says a US Hedge Fund


Canadians following our markets look to see what’s happening with the Canadian financial institutions. There is one short seller following the Canadian banks. Denver-based Crest Capital believes the Canadian real estate market will lead Canada into an economic downturn. Nonetheless, the huge 6 financial institutions have actually taken care of proving the cynics incorrect in the past.

Kevin Smith is the founder and CEO of Crest Capital, a hedge fund with $53 million in assets under administration. Crest Capital also has an excellent track record. He is shorting the Canadian financial institutions and thinks now is the moment. He thinks it actually boils down to China.

Kevin Smith thinks that:

  • there is a real estate bubble in Canada;
  • housing debt to GDP has been blown up and been trouble for a time;
  • house prices have increased for a very long time; and
  • the cash streaming in from China that has actually pushed up housing prices and
  • compelled Canadians themselves to extend to purchase real estate.

He believes the China credit bubble is ultimately going to break. China has this credit bubble which has actually been taking place for years. The cash has actually been spilling around the globe yet he believes the funding streams currently from China are truly beginning to run out and perhaps also turn around. There has actually been a lot of cash leaving China right into Canada. This is what has aided the Canadian real estate market and the economic climate.

He said that we are 10 years right into a worldwide financial cycle. He thinks Canada’s personal high debt to GDP ratio will leave the financial institutions holding the bag on this debt trouble. I do not know if he is right, yet that is what he is banking on.

Debt headlines: Can you afford your debt payments with a higher interest rate?

Do you have too much debt? Are you worried that the future interest rate hikes will make presently affordable commitments entirely unmanageable? Is the discomfort, tension and anxiousness presently detrimentally affecting your health and wellness as well as health?

If so, speak to the Ira Smith Team today. We have decades and generations of helping people and companies looking for financial restructuring. As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only experts licensed and supervised by the Federal government to provide insolvency services.

Call the Ira Smith Team today for your free consultation and to make sure that we can begin assisting you to return right into a healthy, balanced, hassle-free life.debt headlines

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BANKRUPTCY STATISTICS CANADA 2018: SCARED OF INSOLVENCIES IN CANADA OR DEBT?

bankruptcy statistics

If you would rather listen to the Bankruptcy statistics Canada 2018 blog audio file, please scroll down to the end for the podcast.

Bankruptcy statistics: Introduction

On January 4, 2019, the Office of the Superintendent of Bankruptcy Canada issued its bankruptcy statistics report “Insolvency Statistics in Canada—November 2018”. Most of the headlines on this report quoted that Canadian insolvencies rose 5.2% in November 2018. While true, that headline alone could create the impression that we now have runaway bankruptcies in Canada. Nothing could be further from the truth. Let me explain.

Bankruptcy statistics: The latest numbers

Total insolvencies in November 2018 was 5.2% higher than total insolvencies in November 2017. That is what the press has quoted. However, that statistic by itself is meaningless. The complete number of insolvency filings (proposals and bankruptcies) in Canada lowered by 2.5% in November 2018 contrasted to the previous month.

For the 12-months ending November 30, 2018, total insolvencies boosted by 2.0% compared with the 12-month period ending November 30, 2017. This is a fairly modest total increase. Keep in mind that insolvencies in Canada have been at historically low levels for the last 9 years! A total annual increase of 2% from a historic low number is hardly an epidemic.

Consumer insolvencies for the 12-months ending November 30, 2018, increased by 2.0% compared to the 12-months ending November 30, 2017. Consumer personal bankruptcies were down by 5.0%, while consumer proposals were up by 8.4%. The percentage of proposals in consumer insolvencies increased to 55.7% during the 12-month period finishing November 30, 2018, up from 52.4% throughout the 12-months ending November 30, 2017. This means that over half of those Canadians who made an insolvency filing in this time period avoided bankruptcy. This is a good thing.

Business insolvencies for the 12-month period ending November 30, 2018, decreased by 0.6% compared to the 12-month period ending November 30, 2017. The industries with the largest decrease in insolvencies were mining and oil and gas. The industries with the largest increase in insolvencies were building and construction and retail.

Bankruptcy statistics: What is the real issue

The real issue is not these statistics. Rather, it is the historic high level of Canadian household debt amassed when interest rates were at near zero percent levels. Now that we are in a gradually increasing interest rate environment for the foreseeable future, not every person or company carrying high debt will be able to continue meeting their obligations and will have to resort to an insolvency proceeding.

I have written about the dangers of carrying too much debt for many years now. We are now entering the period where the rubber meets the road. Stephen Poloz, Governor of the Bank of Canada, feels the Canadian economy is doing sufficiently well to slowly boost rates of interest. Mr. Poloz believes to be tightening up that a bit. At the exact very same time, the latest insolvency statistics show that the marketplace now tells a story that there may be room for some actual pessimism about the Canadian economy.

Previous Bank of Canada Governor Mark Carney and the former Finance Minister, the late Jim Flaherty, warned the Canadian consumer to place the economy on their back and march it up a high hill. We did and it worked. This is now the outcome of it.

Bankruptcy statistics: Canadian household debt

There’s a good deal of conversation on what that suggests specifically for Canadians. It isn’t that the warnings have actually not been there for a while. The most recent statistics show that Canadian household debt is around 170 percent of disposable income. The regular Canadian owes $1.70 for every single buck of revenue made each year, after tax.

Twenty years ago, the proportion was 100%. So as you can see, there has been a stable climb in Canadians’ cravings for more financial debt. We have among the greatest financial obligation percentage of any of the Organisation for Economic Co-operation and Development participant nations. For those carrying high debt, it is now time to buckle your seat belts as interest rates will continue to rise.

There were indications that the Canadian consumer was thinking of their budgeting. Statistics Canada previously reported that retail sales were slowing down. Now in the latest insolvency statistics, we see that retail is one of the industry sectors that had an increase in corporate insolvency filings.

With rates of interest increasing, so does the cost of borrowing and the cost of maintaining variable rate loans. Fixed rate loans that mature will need to be refinanced at higher interest rates if the loan cannot be repaid in full.

Bankruptcy statistics: Debt in a rising interest rate environment

Do you have too much debt? Does your company have too much debt and is in danger of shutting down? Are you concerned that future interest rate hikes will make currently manageable debt totally unmanageable? Are the pain and stress now negatively affecting your health?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer a free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.

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DEBT CONSOLIDATION: DEBT CONSOLIDATION LOAN MAY START PLAYING HARD TO GET

 

Debt consolidation

Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process

Introduction

On November 16, 2018, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) issued a press release on the state of consumer insolvencies in Canada. Hidden in the information was data which leads me to believe that debt consolidation may be tougher in 2019 and certainly in 2020.

A perfect storm is brewing

A historically low rate of interest and accessibility to credit have enabled some Canadians to stay up to date with debt and debt payments that would otherwise have gone into default. Interest rates are now rising and it is expected that the Bank of Canada will continue to raise its benchmark rate into 2019. Canadian household debt is on average at its highest level ever and is forecast to continue to rise. Rising household debt combined with rising interest rates is not a good combination.

Until now, Canadian real estate values have continued to rise, so consumers have been able to combine unsecured credit card and other debt into new mortgage or home equity line of credit debt secured by Canadian real estate. However, times have changed. Effective January 1, 2018, a new mortgage stress test came into effect. We described it in our blog “CANADA MORTGAGE STRESS TEST: WE EXPOSE THE SECRET TO TURN YOU FROM ZERO TO HERO”.

The mortgage stress test has resulted in one of its prime goals; a noticeable downturn in new mortgage loans. The second result is a slowing down of the runaway real estate markets in Vancouver and Toronto. If Canadian household debt continues to rise, interest rates keep rising making debt payments tougher and Canadians can no longer combine their unsecured debts by taking out a new loan by borrowing against their homes, debt defaults are going to rise.

That is why I say that debt consolidation loans may start playing hard to get.

The important relationships to consider

Below is a chart displayed in the CAIRP press release which I have reproduced here.debt consolidation 3

 

CAIRP came to some interesting conclusions about interest rates and consumer insolvencies, based on the trends shown in these charts. However, I believe they overlooked what I think is the central issue.

In the top chart, it shows that insolvency filings increased in the 2009-2010 years. CAIRP surmised that there was a lag between the time interest rates rose in the years 2006 through 2008 and the increased filings. This is true. However, the increase in filings mirrors the increase in unemployment in the 2009-2010 period. My personal view is that the more important finding is that the unemployment rate lagged the interest rate increase and it is the increase in the unemployment rate that produced a higher level of insolvencies.

With higher interest rates, corporations are paying more on their debt. Corporations want to show a steady increase in their profits year over year. If debt costs rise, companies have to find other costs to save. One cost that can be reduced in the short-term is labour costs. The forecast shows that as employees are terminated, the unemployment rate rises. Not everyone can find new work in the same time frame. This leads to increased consumer insolvency filings. In my view, the unemployment rate is a more important relationship to consumer insolvency filings.

Looking at 2019 and 2020

The bottom chart shows the relationship between household debt to income and the inflation rate. As you can see, the household debt to income ratio has kept a steady climb in 1996 through 2017 years. This steady climb has continued in 2018 and is forecast to rise even more in 2019 and 2020. The forecast also shows that inflation will nudge up to the 3% rate in 2020. So prices are expected to rise with inflation, and the household debt to income ratio is expected to rise also. This will put more pressure on Canadians trying to keep up with their debt payments.

The upper chart shows us that in 2019-2020, the forecast is that GDP stays flat, while interest rates continue to rise. In the same time frame, the downward trend in the unemployment rate bottoms out and begins to rise. Again, more unemployment and higher interest rates lead to problems for people trying to pay off debts. If you agree with my hypothesis that Canadians won’t be able to merge debt by borrowing more against their homes, this will lead to more financial problems and presumably an increase in consumer insolvency filings.

What you can do now

All is not doom and gloom. There are many things a person with a lot of debt can do now before things get out of control. There are many things that you can do right now to avoid a disaster down the road. My 5 steps for anyone who wants to resolve debt issues now are:

  1. Review your household budget now and cut spending on “wants” vs. “needs”. If you don’t have a household budget, develop a realistic one NOW!
  2. Rework the budget so that you spend less each month than you are currently spending. Look for ways to economize. Use that extra cash to paying down debt.
  3. Start paying more than the minimum monthly payment on your credit card and other unsecured debt. The more you can pay, the faster you can pay it off.
  4. Pay down the debt with the highest interest rate first. The less you pay in interest the better. That means more is going to pay down the principal debt.
  5. Perhaps you need to consider taking on a part-time extra gig to bring in more income.ira smith trustee

What if I can’t pay off my debts?

For Canadians that discover themselves not able to handle their debt on their own, there is a range of alternatives to take into consideration:

Identifying which choice is most appropriate depends upon a person’s scenarios as well as their unique asset and liability structure.

Debt consolidation: How we can help you

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to recognize all of your alternatives. The alternative you pick based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

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CONSUMER PROPOSAL ONTARIO: AMAZING GOVERNMENT PLAN TO REDUCE CONSUMER DEBT

 


Consumer proposal Ontario: Introduction

I am finding that more people are calling me to ask about a consumer proposal Ontario. This is a Canadian federal government authorized program for people to lower their consumer debt.

What is triggering the boost in these queries?

Consumer proposal Ontario: New Ipsos Canadian consumer debt survey

A brand-new study by Ipsos might assist. It paints an unpleasant scene of just how much debt some Canadians are holding on to. Of those asked 31% claim they do not make an adequate amount to pay their costs monthly. More state they are having a hard time to merely to survive. Ontario residents in this predicament are candidates for consumer proposal Ontario.

The study discovers many people are sorry for the sort of spending they’ve done to find themselves with such debt. Peoples’ incomes aren’t maintaining pace with the increase in their costs. I am not just talking about extras; I am also talking about the basics of life such as food and shelter.

Consumer proposal Ontario: Bank of Canada benchmark interest rate hike

At the very same time, on October 24, 2018, Stephen Poloz, the Governor of the Bank of Canada (BOC) announced the Bank of Canada interest rate hike by a quarter-point to 1.75%. This increases the cost of borrowing for Canadians. This is the 5th bump since the summertime of 2017.

The Bank of Canada states that the Canadian economic situation remains running near capacity and is reasonably broad-based. The rising cost of living is close to target so what stands apart is that the current rate at 1.75% is still negative in actual terms adjusting for inflation.

Since the old Free Trade Agreement, the new USMCA appears to be resolved, several think with this 800-pound gorilla out of the room, it’s most likely to unlock the Bank of Canada’s ability to continue with rate hikes.

Consumer proposal Ontario: How will higher interest rates affect you?

If you stay in a variable price home mortgage or credit line, your rate of interest has risen. What that indicates for your capital is that your month-to-month repayment has actually risen. If your home mortgage is half a million bucks, your month-to-month repayment has actually increased by sixty-five dollars.

It does not feel like a great deal. Nevertheless, if your loan(s) rate of interest rises during the rest of the year and right into 2019, that will certainly maintain raising your repayments.

It isn’t simply your variable price home mortgage. Canadians additionally lug debt with credit lines, automobile financings as well as bank cards. Each rate of interest rise will certainly increase the price of borrowing on those variable price financings.

The raised repayments will certainly maintain consumption in your capital. So for those battling to make ends meet, rates of interest boosts will just make life harder. A consumer proposal Ontario won’t help with secured debt, but it will help eliminate unsecured debt

Consumer proposal Ontario: Higher interest costs lead to belt-tightening

To regulate debt, Canadians need to be aggressive with their budgeting. Individuals need to take ways to boost their monetary scenario, such as:

When talking to a LIT, ask about how a consumer proposal Ontario can help you.

Consumer proposal Ontario: Nonetheless, many Canadians are still seeking help

Many Canadians continue to be haunted by debt. They experience remorse towards their existing and future debt scenario. Fifty percent are not certain that they will not have any kind of debt in retired life, while 44% are not certain they will have the ability to cover all living expenditures in the next year, without taking on additional debt.

Some Canadians are thinking about bankruptcy. Their first step must be to go to a Trustee. A Trustee is an expert that is certified by the Office of the Superintendent of Bankruptcy Canada (OSB). The OSB is the government organization that controls the insolvency system in Canada.

Consumer proposal Ontario: A government-approved strategy to end consumer debt

To most of our potential clients’ shock, I have told many that bankruptcy might not be essential for them. Sometimes I suggest that it is possible to remove their debt via a government-approved strategy to decrease consumer debt called a consumer proposal Ontario.

Your government authorized debt settlement program is an offer made to your creditors. The offer is to repay only a percentage of what you owe, over a duration of no more than 5 years.ira smith trustee

Consumer proposal Ontario: The benefits to you

There are benefits for you to file such a debt settlement plan. First, you keep your assets. Next off, an approved proposal binds all creditors to the arrangement.

We begin with having the individual complete the standard intake form that we call, the Debt Relief Worksheet. When totally filled in, it gives us a listing of the individual’s assets as well as what they owe. It additionally aids them to budget their income and expenses. Utilizing that info, I am able to formulate a proposal based on your capacity to pay.

The proposal is submitted to the OSB. Once submitted, you can quit paying your unsecured creditors. If creditors are garnishing your income or suing you, those activities are stopped. As soon as the proper documents are submitted with the OSB, I then send out the proposal to every one of your creditors.

The creditors then have 45 days to approve or decline the deal. If creditors are unhappy with the proposal, as the Trustee I can work out changes such as greater payments. However, it all is based on what you can still manage to safely pay.

I tell people that if the proposal is turned down, the individual will certainly need to consider various other alternatives to resolve their monetary troubles. This might include bankruptcy.

Once we get approval, you are then in charge of making routine payments to the LIT as the proposal administrator. The LIT will certainly use that cash to pay your creditors.

As part of the consumer proposal process, you will need to go to 2 counseling sessions in the LIT’s office. This will aid you to get back on your feet monetarily. If you fully complete your plan, you will certainly be legitimately released from your unsecured financial obligations.

Consumer proposal Ontario: There are 2 consumer proposal FAQs everybody asks me

What this affect my credit score?

Yes, it will certainly be influenced, I tell every person. Once the regards to the proposal are fulfilled, people can begin reconstructing their credit history and their economic future.

Just how much does it cost?

The cost is established by the Federal government. How much an individual pays in for an effective consumer proposal is totally unrelated to the allowable government authorized to charge. The Trustee earns the fee from the amount you pay into your debt settlement restructuring plan. So, that means, the cost is FREE!

Consumer proposal Ontario: That freedom feeling

Our clients who complete their consumer proposal are so pleased to get that letter from us enclosing their Certificate of Full Performance. That is the document that confirms they have become debt-free.

The Ira Smith Team has years of experience of negotiating with creditors for debtors. If you owe less than $250,000, other than for any mortgages against your home, you can enter into a consumer proposal debt settlement plan. If you owe more or are a corporation, we can still negotiate with your creditors and restructure you with a restructuring proposal debt settlement plan.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, recover your money and move on to the next investment opportunity.

Call us today for your free consultation.consumer proposal ontario

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BANK OF CANADA INTEREST RATE HIKE: THE HARSH REALITY WHY CANADIANS FEAR INTEREST RATES GOING UP

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bank of canada interest rate hike

Bank of Canada interest rate hike: Introduction

Unfortunately for many Canadians, their fears are about to be realized. On Wednesday, January 17th the Bank of Canada interest rate hike began. The Bank of Canada raised its key lending rate by a quarter percentage point to 1.25%. This is the third time it’s moved its benchmark rate from once-record lows last summer.

Bank of Canada interest rate hike: How will changes in the prime lending rate affect Canadians?

Changes in the prime lending rate affect variable-rate mortgages, lines of credit and other lending linked to the benchmark rate, and this means that borrowers will be paying more. And the Bank of Canada interest rate hike has a ripple effect.

The Royal Bank of Canada raised its prime lending rate by a quarter of a percentage point, to 3.45%, effective Thursday, January 18th. Canadians expect that Canada’s other big banks will do the same. Already all of Canada’s Big Six banks raised their listed five-year mortgage rates by 15 basis points to 5.14%.

It’s now going to be more difficult for home buyers to qualify for mortgages, particularly with the new stricter guidelines. As you can see, a rise in interest rates can have far-reaching effects.

Bank of Canada interest rate hike: Reasons Canadians are concerned

With so many Canadians walking a financial tightrope, the last thing they wanted to see was an increase in interest rates. A recent survey by Ipsos showed that:

  • 48% of Canadians are within $200 of not being able to meet their financial obligations
  • 40% of Canadians worry that they’ll be in financial trouble if interest rates keep rising
  • 33% of Canadians can’t keep up with their monthly bills and make their debt repayments
  • 30% of Canadians are concerned that rising interest rates could push them close to bankruptcy

Bank of Canada interest rate hike: Are you worried about the interest rate hike?

If you’re like many Canadians who worry that the rise in interest rates will push you over a cliff financially, now is the time to seek professional help. A licensed trustee can give you answers, options and a realistic plan for recovery.

Contact Ira Smith Trustee & Receiver Inc. We’ll evaluate your situation and help you to arrive at the best possible solution for your problems, whether that solution is a bankruptcy alternative like credit counselling, debt consolidation or a consumer proposal or bankruptcy. Give us a call today and Starting Over, Starting Now you can be on your way to debt free living.

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HOLIDAY SPENDING MISTAKES IN CANADA: 12 SECRETS TO SOLVE THEM

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Holiday spending mistakes in Canada: Introduction

Other than for some last-minute small items, your holiday spending is complete. The credit card bills will arrive next month. You will soon find out if you made any holiday spending mistakes in Canada.

Maybe you overspent and will now have too much debt you won’t be able to repay. Perhaps you spent wisely, but it will put you over the top given your current debt level. Regardless, you now need to know how to help yourself financially from holiday spending mistakes in Canada.

Holiday spending mistakes in Canada: You are not alone being in debt

Are you fighting financial threats daily? Do you wish you could unlock how to help yourself financially? If so, you are not alone. Lots of Canadians have fought the good fight to barely survive. There have been many articles in the media of the dangers of living with way too much debt. Many Canadians are living paycheque to paycheque.

The Bank of Canada has warned Canadians for years now. With the rate of interest having been so reduced, Canadians have taken on much debt. Now interest rates are beginning to rise. You have to know how to help yourself financially, so that you will not only be able to make your minimum payments, but you will also be able to start reducing your debt. Your holiday spending mistakes has now increased the pressure on you. I do not want to see anyone living this way.

Holiday spending mistakes in Canada: Who this information will help

You know you have debt troubles and this information will help if you:

  • often pay expenses after the date they are due;
  • on a regular basis write cheques that don’t clear your bank;
  • use room from one charge card to get a cash advance to pay the minimum due on a different card;
  • get telephone calls from a debt collector;
  • routinely ask pals or relatives for money;
  • utilities are threatening to cut you off;
  • cannot live to a balanced budget based on your current family income;
  • need to take a second job just to meet normal daily living expenses;

Holiday spending mistakes in Canada: Statistics Canada reporting

Statistics Canada reported that on average, at the end of 2016, Canadian families have a debt-to-income ratio of $1.67 for each dollar of after-tax revenue. At the end of the second quarter of 2017, they report that the ratio has risen to $1.68. Although Canadians’ net worth is also rising, primarily due to rising housing prices. So now housing prices have dropped, yet the debt remains.

If this sounds like how you have lived, then you need to take corrective action now from your holiday spending mistakes before it is too late. Bankruptcy should not be your first option. There are bankruptcy alternatives which include credit counselling, debt consolidation and a consumer proposal.

holiday spending

Holiday spending mistakes in Canada: Our 12 secrets on how to help yourself financially

If you are living in a debt threatening zone, it is currently the time to act to turn things around. Consider the following 12 secrets to stop your debt from spiralling out of control.

  1. Safeguard Your Health – Make sure that you are taking good care of yourself and your health, both physical and mental. You won’t be any good to yourself or your family if you are ill.
  2. Don’t Talk Yourself Out of What You’re Worth – Don’t put up with the things as they are of your job without seeking out new opportunities. Don’t sell yourself short. Make sure you understand if there are opportunities awaiting you that will pay you more than you are currently earning. Stay current on your marketable skills.
  3. Keep It Simple – Don’t over-complicate things. Don’t get involved with difficult payment plans. Put yourself in a position where if you need an essential item, you can pay for it. Don’t get sucked in by sexy advertisements for things that have long-term payment plans.
  4. Give to Your Future Before Giving to Others – There are many worthwhile causes that clamour for our money. Make sure your own house is in financial order before you give to others. Volunteer your time and not your money. You will find it very rewarding and you will be helping both yourself and others at the same time. Just say no to relatives and friends who ask you for money, until you have no debt yourself.
  5. Make Savings Automatic – Otherwise known as pay yourself first. Set up a special bank account and have the same percentage hived off of your paycheque every payday. Do not touch the funds in that special bank account, until you have enough money to invest in a safe investment. Have this money work for you over and over.
  6. Control Your Impulse Spending – Make sure that you have a monthly budget and follow it. Your budget should account for all your necessary living expenses for you and your family AND allow the percentage you are hiving off each pay period for your investment savings account. If there is anything left over, this balance should be used for debt reduction. Don’t buy on impulse as you will regret it.
  7. Evaluate Your Expenses, and live frugally – We can all get by on less than we think. This ties back into your budget. Make sure that your necessities of life and your regular payday savings are all accounted for. By cutting out expensive daily coffee drinks and other non-essential items, you will be surprised how much you will have leftover for debt reduction.
  8. Invest In Your Future – Upgrade your skillset. Take a course that will make you more marketable. Make room in your budget for this type of expense, as it will generate more income for you for the long-term future.
  9. Keep Your Family Secure – Involve your entire family in the family budget process. Everyone needs to be on the same page and working towards the same goals. Meet regularly to go over your real performance as compared to budget. When everyone knows the plan is working, they will all feel secure and try even harder.
  10. Eliminate And Avoid Debt – Make sure that you are not taking on any new debt. Use budgeting to make sure that you allow a certain amount out of your monthly budget for paying down debt. Even small amounts add up over time. You will see and feel the difference it makes in your life.
  11. Use The Envelope System – Set up a separate envelope for each of your weekly necessities, based on your budget. Only take out enough cash for those amounts and place the right amount of cash in each envelope. Do not use credit cards to pay for the necessities; just use the cash in each envelope. Make the cash in your envelopes last the entire week, then rinse and repeat.
  12. Pay Bills Immediately And Automatically – If you don’t like the envelope system, here is another idea. Pay as much as you can online from your bank account. Set up regular automatic monthly payments so that the bills are paid. You can also use this method for your regular payday savings account. Make sure you budget properly so that you realize what money is coming out of your account in a month automatically so that you don’t overdraw your bank account.

Holiday spending mistakes in Canada: Will you need immediate help from your holiday spending mistakes?

These 12 steps will ensure that you get back on the road to financial health as soon as possible. You can recover from your holiday spending mistakes.

If you find that you have too much holiday or other debt, debt collectors are harassing you and you can’t keep them all happy, then you need to take more action. I say more action because it will be in ADDITION to the above 12 steps. What you will need to do is to immediately speak to a professional trustee.

The Ira Smith Team has a cumulative 50+ years of experience helping people who are facing a financial crisis and we deliver the highest quality of professional service. Make an appointment for a free, no-obligation appointment today and Starting Over, Starting Now you’ll take your first steps towards financial freedom. We can devise a plan so you can come back from your holiday spending mistakes in Canada.

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Brandon Blog Post

INTEREST RATES CANADA 2017: HOW TO REDUCE DEBT WITH EVERY GOVERNOR STEPHEN POLOZ SPEECH

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Interest rates Canada 2017: Introduction

Canada, the United States and much of the globe has remained in an extended period of reduced rates of interest. But the Bank of Canada, led by Governor Stephen Poloz and the US Federal Reserve, led by Janet L. Yellen as Chair of the Board of Governors of the Federal Reserve System, are the independent bodies in Canada and the US, respectively, that set base rate targets for the financial markets. They have now begun to slowly raise interest rates, so interest rates Canada 2017 are on the rise.

Interest rates Canada 2017: They are on the rise

On July 12, 2017, Governor Stephen Poloz announced the benchmark interest rate increase to 0.75 per cent from 0.5 per cent. Most economists expect that rates will continue to climb at least one more time before the end of the year.

Changing interest rates can impact our ability to service our debt on variable rate or prime based interest rate loans. One way to keep our debt load under control is to adjust our spending and saving behavior to pay down debt appropriately.

Interest rates Canada 2017: They are on the rise – so how much debt should I try to pay off?

When the Bank of Canada signals a rise in its benchmark rate, or a Governor Stephen Poloz speech on interest rates signalling an increase, the Canadian banks then raise:

  • its prime rate of interest;
  • the interest rate on variable rate loan products;
  • the interest rate on loans based off the prime rate;and
  • the interest rate on fixed rate loan products such as mortgages.

When those interest rates rise, we should try to look at paying down some debt so that our total cost of borrowing does not increase. We try to figure out how much debt to pay down by using the following formula:

New Debt Balance = Annual interest expense from older interest rate divided by the new interest expense of the new rate

We use the annual rate of interest of our portfolio before the rate hike due to the fact that we understand that’s what we could currently manage to pay every year. Simply take the weighted average of all the various rates of interest that we’re paying, and separate it by the complete amount of debt we have.

$ 100,000 x 3% = $3,000

Using the example above we understand the annual interest expense I was originally paying was $3,000. So, we could use the formula to figure out how much debt I ought to be reducing to maintain my capacity to service my obligations.

Annual previous interest cost/ the new expense (%) of borrowing = New Debt Balance

$ 3,000/ 3.25% = $92,308

This implies that to keep paying $3,000 a year in interest, I must have a debt balance that’s around $92,300. Because I in fact have $100,000 of debt I have to make some difficult choices.3bestaward

Interest rates Canada 2017: They are on the rise – so it is now decision time

I could either pay down my debt by $7,692 ($100,000 – $92,308), or accept paying more interest each year as well as make my regular monthly payments. The first alternative implies I will need to sacrifice personal costs to conserve more to pay down my debt. The second choice enables me to spend even more now, however will cost me an extra $250 yearly (in this example, 0.25% x $100,000) that I’m providing to the bank with nothing in return.

It really depends on what the purpose of borrowing in the first place was. Debt to pay for consumer purchases, you would want to try to reduce the debt as quickly as possible.

When you incur debt for investment purposes, then you might prefer to pay a little more tax deductible interest. If a stock’s price typically follows earnings, and earnings will grow, then the stock price should eventually grow as well.

The rate of interest we pay is simply one reason. Changes to our income, financial investment income, household scenarios, place, as well as situations around tax obligations all comes into play when making a choice about debt.

Interest rates Canada 2017: The effect of higher interest rates on the economy

Higher interest rates end up causing a slower economic climate. As people rush to pay for debt or spend more cash to service their present financial debts they must spend much less on consumer goods. Every person should set up a financial portrait that captures their scenario precisely so they can plan for further interest rates in the following 12 months.

Interest rates Canada 2017: What should you do if you have too much debt?

I hope that you have found this vlog helpful. If you’re looking for ways to end your financial debt call Ira Smith Trustee & Receiver Inc. Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you stroll in the door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress free life.interest rates canada 2017 10

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Brandon Blog Post

#VIDEO-CANADIAN HOUSEHOLD DEBT NEWS: ARE CANADIANS ADDICTED TO BORROWING#

Canadian household debt news: Canadians hunger for more borrowing

The Canadian household debt news is that the hunger for borrowing from our Canadian financial institutions stayed vibrant. It established a new high for Canadians’ borrowing, Statistics Canada reported in December 2016. The widely followed measure of Canadian household debt service ratio rose to a new high of nearly 167 percent.

The numbers will certainly heighten the issue for our provincial and federal governments. The consumer economic situation has actually ended up being over-reliant on bank borrowing. This as well makes it susceptible to a real estate slump and a climbing rate of interest.

Canadian household debt news: Finance Minister Bill Morneau says “What? Me worry?”

The current StatsCan reporting covers the 3 months before Finance Minister Bill Morneau tightening up home loan financing regulations once again in October. His action made to prevent Vancouver as well as Toronto house purchasers from taking on bigger home mortgages compared to what they can manage.

Credit-market financial debt reached C$ 2.005 trillion from C$ 1.980 trillion in the previous quarter. Those responsibilities leapt by 1.3 percent in the 3rd quarter, faster compared to the 0.9 percent gain in family income.

Overall personal financial obligations surpassed the dimensions of Canada’s economic climate for the 2nd straight quarter. It made up 101.2 percent of GDP from July to September 2016.

Financial debts have actually climbed up together with the Vancouver and Toronto real estate boom. Job creation and low-interest rates encourage more borrowing.

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household financial obligations household debt news Canadian household debt to gdp Canadian household debt by province

Canadian household debt news: Bank of Canada Governor Stephen Poloz says “What? Me worry?”

Bank of Canada Governor Stephen Poloz reduced rates of interest two times in 2014 to 0.5 percent. He claimed he should act to ease damages to personal incomes from plummeting oil prices. On December 15, 2016, the Bank of Canada published its newest Financial System Review. The semi-annual record specified that family monetary susceptibilities as well as discrepancies continues to climb in Canada.

The Financial System Review stated that the Bank of Canada really feels that these discrepancies will certainly not adversely impact the Canadian economic climate. Steps have actually currently been implemented to prevent negative after effects. Steven Poloz specified that plans to reduce the threat to the monetary system in its entirety have actually been presented in current months. He further stated that will certainly act to ease the possible repercussions for the monetary system of increasing family financial obligations.

On the bright side of Canadian household debt news, household financial obligations as a share of family net worth stayed at 20 percent in the 3rd quarter of 2016. As well as debt-service repayments were not altered at 14 percent of disposable income.

Canadian household debt news: What to do if you can no longer say “What? Me worry?”

Not all families’ stories have happy endings. If you’ve borrowed too much or life has thrown you a curve ball and you can’t make your mortgage and other debt payments, contact Ira Smith Trustee & Receiver Inc. We’re here to help you solve your debt problems and set you on a path to debt free living Starting Over, Starting Now. All it takes is one phone call to schedule a free, no obligation appointment.

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Brandon Blog Post

ARE YOU UP ON THE LATEST PHISHING SCAMS? YOU SHOULD BE!

Beware of both old and new phishing scams

We previously published three blogs and one vlog warning about various phishing scams:

The vlog on the CRA phone scam was published in December 2015. Since then, I know several people who received the CRA phone scam call and one person who actually fell for it and was defrauded.

On March 1, 2016, the Bank of Canada issued a press release on the Bank of Canada email scam, one of the newest phishing scams around. Here is a copy of the Bank of Canada press release:

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Since the CRA phone scam remains rampant and now there is a Bank of Canada email scam. we wish to again present to you, as a caution to remain vigilant, our video on the CRA phone scam and to protect yourself against the scammers.

What to do if you are a victim of one of the phishing scams and have too much debt

If you’ve been scammed by one of the phishing scams, and now are trapped with high debt that you cannot repay, you need a professional trustee to help you manage the situation before it reaches a critical stage where bankruptcy is your only option. We have been able to help many individuals carry out a successful debt settlement program. It all began with debt counseling. The first step is a realistic household budget. Successful completion of such a program, will free you from the burden of your financial challenges to go on to live a productive, stress-free, financially sound life.

If you’re like many Canadians on the brink of a financial crisis, you need the help of a professional trustee today while you have options. The Ira Smith Team can help before disaster strikes. There is a way to manage debt Starting Over, Starting Now. Contact us today.

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