Debt management spreadsheet: Download ours for free at the bottom of this blog
T’is the season to be jolly but it’s also the season that can have you taking on debt you can’t afford. If you have too much debt before you begin your holiday spending, you could make use of our debt management spreadsheet. At the bottom of this blog is a link for you to get it.
You may have already made your Christmas list and checked it twice, but Santa won’t pay the bills when they arrive, even if you’ve been nice. The question is, will you be able to pay your holiday spending bills?
Why?
Now is a very important time to make a debt spreadsheet. Believe me, it’ll be a reality check as what you can really afford to spend. A debt spreadsheet can give you a clear picture of how much you owe and how you plan to pay off your debts. If you’re in the process of repaying debts, now is no time to take on more debt. Getting deeper in the hole is not what the holiday season is all about. The holidays are all about getting together with family and friends, not spending money you don’t have and can’t repay.
How to enjoy the holidays without new debt
Listen to your spreadsheet and instead of going overboard shopping here are some ideas to control holiday spending.
Sit down with family and friends and let them know that you’re only buying gifts for the children. They’ll probably be relieved that you’ve lessened their load.
Buy books and crafts for the kids, not over-the-top electronic toys and gadgets.
Instead of spending money on hostess gifts, homemade items are always well received – baked goods, jams, sweets or homemade wine.
Give the gift of time. Spend time with your loved ones.
How to get rid of debt
The real spirit of the holidays doesn’t involve spending money you don’t have and creating a bigger hardship for yourself. For help with your financial problems and issues contact Ira Smith Trustee & Receiver Inc. We’re your best defence against debt. Make an appointment for a free, no-obligation consultation and you can be well on your way to a debt-free life Starting Over, Starting Now. Give us a call today.
Our free debt management spreadsheet
CLICK ON THE PICTURE BELOW TO GET OUR FREE EXCEL DEBT MANAGEMENT SPREADSHEET
The Manulife debt survey 2016 published recently shows that the results continue the trend of earlier Manulife surveys. We have written about the Manulife debt survey findings before in some of our blogs including:
Manulife debt survey: Majority of Canadians have no savings
The findings in the current debt survey shows that Canadians are continuing to rely upon debt and not building up any savings to speak of. The highlights from the 2016 Manulife debt survey are:
almost 4 in 10 homeowners were “caught short” at least once in the past 12 months in that they didn’t have enough money in their bank account to cover expenses
6 in 10 homeowners lack confidence that they’ll be able to maintain their lifestyle in retirement
a weaker Canadian dollar had an impact on over half of homeowners’ daily lives. It affected Canadians more on the spending and consumption behaviours than saving, debt repayment and investment activities
1 in 4 homeowners indicated they expect their home equity will make up over 80% of their household wealth at retirement
1 in 4 homeowners in their 50s expect their home equity will make up over 80% of their household wealth at retirement
Manulife debt survey: What does it mean for Canadians?
What this means is that on average:
Canadians’ wealth is composed of their equity in their homes and nothing else
spending habits are such that they have no savings to speak of
if faced with an emergency people couldn’t put their hands on a few thousand dollars of cash quickly
baby boomers have not saved for retirement, other than for the equity in their home;
millennial’s see their fate as the same as the baby boomers
on average, Canadians’ spending habits are such that many times they do not have enough money to live before the next payday
Manulife debt survey: 5 simple questions to ask yourself
The dangers are obvious. With everyone’s wealth tied up in the equity in their homes, most Canadians are cash and investment poor. Canadians worry that they won’t be able to live their current lifestyle in retirement. Also, without cash and investment savings, upon retirement, homeowners will have to sell their home to have the necessary cash to live on. Ask yourself the following:
Is all of my wealth tied up in the equity in my home?
If faced with an emergency, would I have to try to borrow more money because I don’t have a few thousand dollars available?
Do I have too much debt?
Manulife debt survey: Do you have no cash and too much debt?
If you have answered yes to any of these questions, there is help available for you. If you’re like many Canadians who don’t have a plan to deal with debt repayment, you need professional advice. ContactIra Smith Trustee & Receiver Inc. before your debt load becomes critical. The earlier you begin to deal with it, the more options you’ll have. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can live a debt free life.
The holiday shopping season is upon us and the first sign that you are in financial trouble is if you truly need to learn about consumer proposal vs bankruptcy BEFORE you begin your holiday shopping! If you have already recognized that you need to know your options in dealing with your debt before you start putting holiday gift purchases on your credit card, I suspect that the New Year will become the time when you begin taking positive action to reduce your debt and gain back control over your life.
A consumer proposal is an alternative to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to people only whose total debts do not exceed $250,000, not including debts secured by their principal residence. Division 1 proposals are available to both businesses and people whose debts exceed $250,000 (excluding the mortgage on their principal residence). The focus of this vlog is on the differences between a consumer proposal vs bankruptcy.
Consumer proposal vs. bankruptcy: What are consumer proposals?
Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee (Trustee) acting as the consumer proposal administrator, you make a proposal to:
Pay your creditors a percentage of what you owe them over a specific period not exceeding 60 months
Extend the time you have to pay off the debt
Or a mix of both
Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.
Below I will highlight more differences between a consumer proposal vs. bankruptcy.
Consumer proposal vs bankruptcy: What are the advantages of a consumer proposal?
The advantages of a consumer proposal vs. bankruptcy are:
You keep all of your assets
Actions against you by unsecured creditors, such as wage garnishments will stop.
Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
You don’t have to declare the “B” word
What are the differences in credit history score?
The individual that declares bankruptcy will certainly get R9 status. This is the lowest credit score as well as it will continue to be on their report for 7 to 14 years. A person that submits a consumer proposal will have an R7 ranking which is less extreme. It will certainly continue to be on their record for approximately 8 years in total, from the moment of declaring.
For the most part, you will certainly pay less than you owe with a consumer proposal. Often as much as 70% less. Your several financial obligations will also be consolidated right into a simple regular monthly settlement. This number will be based upon what you can pay for.
Your ability to improve your credit score later is much different in a consumer proposal vs bankruptcy
What are the costs and fees of a consumer proposal versus filing for bankruptcy?
When doing a consumer proposal, the Trustee’s charges are included in the payment you bargain with your creditors. For instance, if your consumer proposal has you paying $400 monthly for 60 months, the Trustee’s fee and disbursements are taken from those funds.
Nevertheless, if you were to file for bankruptcy, the cost is established by any kind of excess earnings you could have (based on the criterion that includes earnings as well as family size), any assets that you may intend to try to keep, and also the monthly contribution for surplus income if any.
If there is no excess earnings or assets, the insolvency cost will be around $2,000. This is another difference between a consumer proposal vs bankruptcy.
Are assets treated differently between a consumer proposal vs bankruptcy?
If you do a consumer proposal, you can retain your assets whereas in bankruptcy your properties might be impacted. This consists of the equity in your home if higher than $10,000, a car or truck worth more than $6,000 (with no liens against it), financial investments, tax refunds, and also RRSP payments made in the last 1 year. In bankruptcy, you transfer your possessions (except those that are exempt by regulation) to the Trustee, and they are then sold or transferred to repay your creditors.
This difference between a consumer proposal vs bankruptcy is huge.
What if I default on my consumer proposal vs bankruptcy payments?
If you do not maintain your payments on a consumer proposal, it defaults and is void. You also are unable to submit an additional one. Collection action by your credits will begin again. If you do not complete all your duties in bankruptcy, you will certainly not be discharged and eventually, your creditors will resume collection activities as well.
This is another consumer proposal vs bankruptcy difference.
When is a meeting of creditors held in a consumer proposal?
A meeting of creditors in a consumer proposal is held if one is requested by one or more creditors who are owed at least 25% of the total value of the proven claims.
A request for a meeting has to be made by the creditors within 45 days of the filing of the consumer proposal. The OSB can also request the Trustee to call a meeting of creditors any time within that exact same duration.
The meeting of creditors should be held within 21 days after being called. At the meeting of creditors, they vote to either approve or decline the proposal.
If no meeting of creditors is asked for within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors no matter any objections received later.
A consumer proposal is finished once the individual has actually made the required payments for the needed period of time. In a bankruptcy, the discharge depends on a variety of different aspects, consisting of whether it was the first time the debtor filed for bankruptcy and if they need to make surplus income payments.
If the debtor has actually never ever declared bankruptcy before and they do not have to make surplus income payments, most bankrupts are discharged 9 months after declaring bankruptcy. However, if the bankrupt has surplus income, they will need to make payments for 21 months prior to when they can be released.
This is another difference between a consumer proposal vs bankruptcy.
What do consumer proposals and bankruptcy have in common?
Both a consumer proposal and filing for bankruptcy are lawfully binding procedures that are provided by a Trustee. If you are thinking about bankruptcy, it is essential that you consult with a Trustee so that you can totally understand the procedure, what’s involved, and also any charges. You can speak with friends or family that may have filed for one or the other before, yet it is necessary that you get professional recommendations concerning your unique situation.
Filing for bankruptcy or doing a consumer proposal are both matters of public record. That means there will certainly be an irreversible public document regarding your insolvency that can be accessed by anyone. If the debts are joint or co-signed, the other individual is accountable for the financial debt in both a consumer proposal and personal bankruptcy as well, unless it is a joint filing.
Even these similarities still point out differences between a consumer proposal vs bankruptcy.
Consumer proposal vs bankruptcy: How to Figure Out Which Option is Best for You?
As you can see, when you look at a consumer proposal vs bankruptcy, there are definitely differences between the two, but they also have a lot in common too. What’s most important, though, is that you find the best way to get your finances back on track in a way that will help you achieve your long-term goals.
Consumer proposals and bankruptcy aren’t the only ways of obtaining debt relief and consolidating debt. There are also other ways of resolving debt problems that don’t involve an official program or paying anyone. If you honestly want to carefully and objectively look at all your options, contact a local Trustee, and speak to him or her. They’ll listen to your situation and issues and advise you on what will work best for you even if you do not need to file for either a consumer proposal or bankruptcy.
Their help is usually free and non-judgmental.
At our Firm, declaring bankruptcy is only encouraged until all other settlement solutions have been exhausted. A consumer proposal in Ontario is shaping up to be one of the better bankruptcy alternatives, primarily because of the reasons I describe in this Brandon’s Blog.
Consumer proposal vs bankruptcy: Who qualifies for a consumer proposal?
A consumer proposal is available to people whose total debts do not exceed $250,000, not including debts secured by their principal residence.
Before you decide what to declare, contact a professional to discuss all of your options. A trustee is a highly-skilled, professionally licensed by the federal government that can evaluate your situation and presents all the options available to you. Whatever process ends up being the best and the most helpful for your particular circumstance, we can administer the insolvency process.
Consumer proposal vs bankruptcy: How to file for bankruptcy?
In order to file, you must engage a Trustee. This is an individual or company licensed by Industry Canada to administer the insolvency process. The 10 steps below are a guide to the bankruptcy process.
Contact a licensed insolvency trustee and attend a meeting with him or her to talk about your personal situation and your options including if it is possible for you to avoid bankruptcy.
Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
The trustee notifies your creditors of the bankruptcy.
You attend a meeting of creditors if one is called.
You attend two counselling sessions.
Subject to your provincial exemptions, the trustee sells your assets; you may also have to make surplus income payments to the trustee.
In certain circumstances, you may have to attend an examination by an officer at the OSB.
The Trustee prepares a report to the OSB describing your actions during the bankruptcy.
You attend the discharge hearing if required.
You get your discharge from your bankruptcy and then the trustee completes the administration, including paying a dividend to your creditors, if available.
Consumer proposal vs bankruptcy: Move on with your life
The ability to live better than just hanging on one payday to the next;
Improved credit ratings; and
Improved health and well-being.
Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.
Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations. ContactIra Smith Trustee & Receiver Inc. today. All you have to lose is your debt!
We hope you enjoyed our video – DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS? If you would like a free copy of our eBook “Cost of Claiming Bankruptcy In Canada”, please subscribe, or confirm your existing subscription, to our blog by CLICKING HERE
The trend of debt into retirement
The biggest trend in debt into retirement among baby boomers is having a home mortgage in retirement. Financial advisers warn that this new trend could have serious lifestyle consequences for seniors. We have written on the topic of seniors in debt before:
Have seniors previously taken debt into retirement?
The baby boomers are the first generation carrying a mortgage into retirement; that’s never happened before. Think about it. Our parents typically bought one house they lived in their whole lives. They paid it off and it was a priority to pay off the house.
Today, because of low rates and the wish to use the home as much for financial gain as for shelter, people typically move up two or more times. The previous generation viewed their home as mainly shelter, and looked at paying off the mortgage as forced savings. With the mortgage gone, our parents then continued saving for a “rainy day”. Memories of the great depression were vivid and alive in their parents’ minds, who passed on the behaviour and mentality that saving was important.
Has the world changed causing seniors taking debt into retirement?
Today, the stock market crash of the late 1980’s is but a distant memory, let alone the feeling of depression. The post-World War II growth years, followed by boom and recession times of the 1970’s through the 1990’s, doesn’t really exist anymore. Rather, in our global economy, growth is slower, so a slowdown in the economy is also muted. The need to save as a philosophy has also taken a back seat, and given the price of homes and the size of the related mortgages, savings today in a growing family is also a near impossibility.
Risks from taking debt into retirement
Two of the risks of having debt into retirement are:
Delayed retirement plans as the baby boomers must keep working to have enough income to service and repay that debt.
If you become injured or sick and cannot work, there won’t be the income to service and repay the debt.
Solutions for taking debt into retirement
So, baby boomers much find ways to mitigate the cost of debt into retirement and being able to repay that debt in a reasonable time period. Some of the more common ways are:
Prior to retirement and after spending the large costs of children and family, while you are still experiencing higher earning years, is to shorten the amortization period of mortgages so that more money goes towards principal.
You can increase the frequency of your mortgage and other debt payments from once a month to once every two weeks, thereby reducing principal faster.
Refinance debt with higher interest rates, such as credit card debt, with mortgage or line of credit financing and then use strategies such as the two listed above to repay that debt.
Adjust your budget so that you are not spending more than you earn, and allow the necessary part of your after-tax income pay off your debt.
What to do if you fear taking too much debt into retirement
If you enjoyed this cost of filing for bankruptcy video and would like a copy of our free e-Book “Cost of Claiming Bankruptcy in Canada” please subscribe to Brandon’s blog by clicking on this link – CLICK HERE
Introduction
The cost of filing for bankruptcy is something you will need to consider when you are considering filing. How much you will have to pay to go bankrupt depends on a number of factors, including:
We strongly recommend that you contact a Licensed Insolvency Trustee to arrange for a free first consultation; they will check your situation and calculate the cost for you in your situation.
Your base cost
In most cases, you will have to make payments to the Trustee to contribute to your estate each month to cover various filing fees and other administrative costs. The minimum period for bankruptcy is nine months, so you will be making these payments for at least a nine-month period. This is the base cost of filing.
Surplus income
You are required to pay part of your surplus income into your estate each month. Surplus income is defined by the government, and if you and your family earn over a certain amount each month, you pay part of your earnings over that limit. The limit is essentially the poverty line.
The surplus income calculation is reasonably complicated, so we suggest you bring your recent pay stubs to your meeting with your trustee so that they can estimate the number of surplus income payments you will make while bankrupt. If you have surplus income, your bankruptcy will be extended for an extra year.
Another cost of filing for bankruptcy is that you will lose all of your non-exempt assets.
Tax refunds
You will lose any tax refunds and HST credits you would otherwise receive during the bankruptcy period. This is a further cost of filing for bankruptcy.
Windfalls
Finally, you will lose any windfalls you receive or become entitled to during the bankruptcy period. For example, if you inherit money while bankrupt, or win the lottery, that money must be surrendered to the trustee.
The minimum bankruptcy period in Canada is nine months, but if you have surplus income, or if you were before bankrupt, your bankruptcy will last longer before you are able to apply for your discharge from bankruptcy.
What should you do with too much debt?
The amount you will pay while bankrupt will depend on your monthly take-home pay, your family size, and your assets. Given this information, you may first wish to attempt to avoid bankruptcy by looking at one of the bankruptcy alternatives.
When it comes to insolvent estates Canada, among the various questions asked of us, these three questions are always asked:
What are the duties of an executor/personal representative when the estate has more liabilities than assets?
Can the executor(s) pay bills before the creditors actually file a claim?
Do executors or beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?
We prepared the above video to answer these 3 questions. Below is a more detailed discussion of the last 2 questions.
Insolvent estates Canada: The loss of life of a debtor occurs; who’s responsible for the money owed?
Although some creditors may try to collect from the spouse or other relatives, money owed doesn’t transfer because of marriage or death. If the debt is “joint”, the survivor has taken on the obligation directly and is liable on the account.
Debts are normally paid out of the assets of the property of the deceased before distributions to heirs (before paying heirs, the deceased’s debts must be paid). If the estate is insolvent (the assets of the estate are not enough to pay the amounts owed), then the order of charge is commonly prescribed by way of provincial rules.
If warranted, the executors could apply to Court for an order letting them assign the deceased’s estate into bankruptcy. In that situation, then the Bankruptcy and Insolvency Act (Canada) (“BIA”), the federal legislation, will prescribe the order of payment.
If insurance was bought to pay off a specific debt such as a bank issued mortgage or loan, then upon the death of the individual the insurance company will repay the bank and the debt will not exist in the deceased’s estate.
What are your alternatives and your responsibilities, as an executor upon the death of a debtor?
If the estate is insolvent, before or after paying the testamentary costs, you have alternatives:
Pay the money owed out of your personal resources.
Emotionally you may wish to pay the money owed because you believe in your heart that it is the proper thing to do and you don’t wish to dishonour the memory of your loved one with a string of bad debts and bankruptcy. But before you decide, you need to know that there is no liability for an executor or heir to take on the debts of the deceased.
Even though there may be a stigma connected to bankruptcy, the reality is that you are not responsible for the money owed, so why should you assume this burden and in all likelihood put your family in financial jeopardy?
Bankrupting the estate makes economic sense. An executor can sidestep the minefield of issues involved in administering the deceased’s insolvent estate by bankrupting it.
What should executors and heirs be aware of?
If you and/or another family member is the executor, be aware:
The executors have a legal responsibility for all acts completed, and for all acts not accomplished that they should have.
Notwithstanding everyone’s best efforts, they may unknowingly be inviting proceedings from lenders or heirs for difficult issues. This happens when family members, who are well-intentioned but not skilled at monetary, insolvency or legal issues, are executors because she or he is named, however actually has no know-how in this region.
By putting the property into bankruptcy, which requires the previous approval of the bankruptcy court, the executors are relieving themselves of personal legal responsibility because the estate will now be administered under the BIA and all creditors by the Licensed Insolvency Trustee.
The executor will relieve him or herself of coping with collection calls.
As long as there are sufficient funds in the estate to pay the funeral costs, that can be paid out first in the case of a bankruptcy of the deceased’s estate because of S.136. (1)(a) of the BIA states:
Priority of claims
“136 (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:
(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;”
It is the first debt with a preferred status that can be paid.
What should I do if I am an executor and I find that the liabilities are greater than the assets?
If you are an executor of a will and you find out that the estate is insolvent, after speaking with the estate lawyer, contactIra Smith Trustee & Receiver Inc. as soon as possible. We will evaluate the situation and give you sound financial advice on how best protect yourself as executor and the heirs, so that you will be able to go ahead Starting Over, Starting Now.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
A subject that rarely gets written about is the history of bankruptcy. Understanding the history of the Canadian bankruptcy system and how it has evolved, gives a helpful look into how it works and help Canadians and Canadian society.
History of bankruptcy: Helping the debtor
The Bankruptcy and Insolvency Act (BIA) provides a way for the orderly liquidation of a bankrupt’s assets and distribute that value to the creditors. In this way, the BIA assists the insolvent debtor who needs a way to be forgiven for his or her financial sins, relieved of their burden and be returned to society as a productive contributor. The BIA assists creditors in providing the system of turning the assets into cash to be distributed to them, and not keeping those assets either out of their reach or just laying in an unproductive state. The BIA also is a system of checks and balances, so that it provides both Canadians and foreigners that there is a vibrant and safe Canadian economy.
History of bankruptcy: Helping the creditors
The BIA also ensures that there is a fair and logical system in place to deal with the assets of the debtor and the claims of creditors. By invoking it, it avoids a race among creditors to attempt to get the right to seize assets in an uncontrolled way. Creditors are paid according to their place in the hierarchy of claims as described in the BIA as follows:
Trust claimants who are outside of the bankruptcy scheme
Secured creditors, who are also outside the bankruptcy scheme as long as they hold good and valid security
The BIA also provides debtors to opt for avoiding bankruptcy by making a Proposal. In the case of corporations, a Proposal; for people, either a Proposal or Consumer Proposal, depending on the level of their debt. Proposals are the bankruptcy alternative that allows companies or people to financially rehabilitate themselves and avoid bankruptcy, while offering the creditors more than they would receive in a bankruptcy. In this way, the BIA is both a liquidation and a rehabilitation statute, benefiting both debtors and creditors.
History of bankruptcy: The BIA
The present bankruptcy statute came into force on July 1, 1950. The title of the statute was amended from the Bankruptcy Act to the Bankruptcy and Insolvency Act in 1992, to show the statute had matured into a full financial rehabilitation statute, that could be used to carry out a bankruptcy alternative. Further amendments were made in 1997 to deal with a number of practical issues that became problematic for Canadian society applying the BIA, including:
In 2005 there were another round of comprehensive amendments to the BIA mainly dealing with the new legislation of the Wage Earner Protection Program Act (WEPPA), designed to protect employees for their unpaid amounts when their employer goes either bankrupt or into receivership.
History of bankruptcy: Rehabilitation
It is a fundamental purpose of the BIA to offer the financial rehabilitation of insolvent persons. The BIA permits an honest but unfortunate debtor, be it a corporation or an individual, to secure financial restructuring through the Proposal provisions, or a discharge from bankruptcy for people. It allows for a fresh start for the debtor to resume his or her place in the business community and society.
The BIA attempts to offer balance by allowing an investigation to be made of the affairs of the debtor and setting aside fraudulent transactions so that ordinary unsecured creditors can share in a distribution, rather than someone else being the beneficiary of those questionable transactions. Finally, the BIA allows for creditors to purse actions against the bankrupt either through the Licensed Insolvency Administrator or directly by a creditor or group of creditors.
History of bankruptcy: The Courts
The general approach to the BIA by the courts is that it is a commercial statute. To administer the process it is left largely in the hands of business people. Technical and legal objections and manoeuvres are not given weight beyond those that are necessary for the proper implementation and interpretation of the BIA. Settlement and resolution are rewarded, litigation and court proceedings are not.
History of bankruptcy: What to do if you have too much debt
I hope this history of bankruptcy provides you with a good look into how the bankruptcy system developed in Canada and how it works. If you’re suffering from too much debt and are seeking debt relief options, contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
Back to school is the second busiest retail time of the year, second only to Christmas. We’ve all seen the commercials with happy families skipping up and down stores aisles filling up shopping carts with knapsacks, lunch boxes, note books, pencils, pens, etc. Unfortunately this happy picture is not indicative of many Canadian families for who back to school is a terrible financial burden.
91% believe that back to school shopping is becoming more expensive year after year
This year, Canadian parents are expecting to spend an average of $472 on their child for back to school shopping, $143 more than what they expected to spend last year ($329)
University students are the most expensive to shop for with those parents expecting to spend $1,630, compared to $412 for high school students and $318 for elementary
8 Tips for beating the financial stress of back to school
Only buy what you need. Reuse items when possible. If the knapsacks and lunch boxes are still good from last year, reuse them. The same goes for pens, pencils and other school supplies.
Hand down clothing or do a clothing exchange with your friends. It’s a common sense way to save money.
Create a budget and stick to it. We can’t stress enough the importance of a budget to maintain control of your finances.
Search for the best prices: Don’t just walk into a store and pay full retail price. Search online, look for coupons and promo codes and wait for sales.
Shop any time of year you find a sale and put the items away for back to school. Shop the Boxing Day sales or Thanksgiving Day sales and put away the clothes, shoes, knapsacks, etc. for back to school. It’s a great way to save money.
Designer brands are not a necessity. Although many parents feel pressured into buying the latest designer brand for their kids, it’s not worth going into debt for.
Go shopping with a friend and split bulk purchases. Buying in bulk is not always cost-effective for a single family but if you can split a bulk buy with a friend you may be able to save a considerable amount of money.
Pay with cash. When you shop with a credit card it’s easy to lose track of your spending and then next month you’ll get a bill that you can’t pay.
What to do if you have too much debt and back to school costs will put you over the edge
If back to school is a financial burden, then you need help from a debt professional now before your situation becomes critical. The Ira Smith Team is here to help. Meet with us for a free consultation. We’ll evaluate your situation and come up with a solid financial plan so that Starting Over, Starting Now you can be well on your way to conquering debt.
Seniors and debt is a growing problem. This past Tuesday, we published our blog titled “SENIORS ARE CARRYING DEBT: WILL RETIREMENT SPELL POVERTY FOR YOU?” This is such a serious issue that we have written a series of blogs on the topic which delve into WHY seniors are carrying debt.
One year ago, CBC News ran a feature on how more Canadians are outliving their savings and spending their golden years in debt. Shortly after that, a new study from credit firm Equifax said seniors are increasing their debt loads at a faster pace than the population at large. This was the first time that such a phenomena had occurred, and it continues.
In September 2015, the Financial Post reported that Canadian seniors are ramping up debt to soaring new heights. They reported that Canadian seniors are getting a lot more comfortable with debt, adjusting to a lifestyle where debt will get them nicer things. It seems that seniors and debt go together very well, which historically was never the case. This is a recipe for disaster.
The image of the frugal senior is waning. They are still around but they have gotten a lot older and do not form the bulk of seniors. The current group of seniors entering retirement have grown up carrying more debt than their parents, so, to have debt in retirement does not faze them. It is a habit that has not been broken yet, in spite of the cost of their “wants” in retirement, as opposed to their “needs”, is greater than their income can sustain.
The baby boomers are the ones who have been the prime generators of big debt loads in Canada. They know how to live large while they were working. The problem is that once they are in retirement, they have even more time now to consume, but are living on a fixed income. All of a sudden, for many it is the first time in a very long time, they need to constrain their spending because they are living on a fixed income. However, not all can change their behaviour, leading to the serious problem of seniors and debt.
Many of today’s seniors are entering retirement with a mortgage outstanding on their principal residence. This is a sign of living large throughout their working years. The baby boomers spent money on more acquisitions, and not paying down debt. This is the first time this is happening in Canada.
The latest facts and figures will not offer any comfort I’m afraid. According to a report by the Broadbent Institute on seniors’ finances:
47% of Canadians aged 55 to 64 don’t have an employer pension plan
50% of Canadians aged 55 to 64 who don’t have an employer pension have less than $3,000 saved up for retirement
Of the Canadians without an employer pension plan those who earn $50,000 to $100,000 a year have saved up an average of $21,000
Of the Canadians without an employer pension plan those who earn $25,000 to $50,000 a year have saved up an average of $250
Less than 20% of people over age 55 who don’t have an employer pension have enough to live in retirement for five years or more
The poverty rates for single seniors, especially for women, is nearly 30%
What can I do now to avoid being a seniors and debt casualty?
The sooner you address debt issues, the better. Eliminating debt is an excellent first step. Contact the Ira Smith Team. We’re professional, federally licensed trustees who can help you conquer your financial problems so that Starting Over, Starting Now you can put debt behind you and start saving for the future. Contact us today so you will live a financially healthy life, and not be one of the seniors and debt casualties.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
A balloon payment is one example of financial lingo that can be very confusing. Often we get involved in situations that we don’t really understand. We’re going to be delving into financial terms that not only cause confusion, but can cost you more than you bargained for. Balloon payments are a perfect case in point.
What is a balloon payment?
A balloon payment is a lump sum payment that’s attached to a loan which could be in the form of a mortgage, car payment or personal loan. It has a much higher value than your regular repayment charges and is typically applied at the end of the loan period.
What is the advantage of a balloon payment?
A balloon payment allows you to defer a predetermined amount or percentage of the total amount of your loan to a lump sum at the end of your finance period. This allows you to make much lower repayments than you would if the entire amount owing was spread out during your finance term.
What is the disadvantage of a balloon payment?
The disadvantage of a balloon payment is that at the end of the term you have to come up with what can be a HUGE lump sum payment to pay off the remaining balance of the loan in full. Unless you’ve been very diligent about budgeting and squirreling away the money for being able to make that special payment, chances are you’ll be left in financial hot water.
Is a balloon payment right for me?
If you are VERY sure of what your financial situation will be by the end of the loan term and you know with certainty that you’ll be able to make your balloon payment, then it may be right for you. However, for the majority of consumers, this type of financing may pose too big a risk. At the end of the loan term if you don’t have the money for the larger repayment amount and if refinancing isn’t an option you could lose your car or house (or whatever you’ve financed).
Are you heading into financial trouble due to an upcoming balloon payment?
Are you in financial hot water as result of an upcoming large loan repayment? Are you struggling with debt? Contact the Ira Smith Team. We’ve got the solutions to your debt problems. Book a free consultation today and Starting Over, Starting Now you can rid yourself from an unmanageable debt load. Watch for future blogs when we’ll be discussing other confusing terms that can impact you financially.
