Tag: monthly payments

Categories
Brandon Blog Post

THE HOUSEHOLD DEBT-TO-INCOME RATIO: HOW COVID-19 CHANGED THIS 1 SIMPLE EFFECTIVE MEASURE

We hope that you and your family are safe, healthy, and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Household debt-to-income ratio: Understanding the debt-to-income (DTI) ratio

Your household debt-to-income ratio indicates how much of your gross monthly income goes toward paying off your debt. In order to find your DTI ratio of household debt percentage, multiply the result by 100. The debt-to-income (DTI) ratio is a measure of how much income a person or organization generates in order to service household credit market debt.

Based on income, the household debt-to-income ratio, or as it is also called, the household debt service ratio, measures a family’s ability to pay monthly debt obligations. Divide the monthly debt obligations by the gross income to calculate the DTI ratio.

When considering a mortgage or loan, the household debt-to-income ratio is a critical metric. You may find it more difficult to get a mortgage if your household debt-to-income ratio is high, or you may end up getting smaller loan approval. Your household debt-to-income ratio is calculated using your income, debt, and credit (mortgage) accounts.

I wrote a blog almost one year ago on the Canadian household debt-to-income ratio at that time. At the time of the COVID-19 pandemic, I discussed what happened to the household debt of Canadians.

I provide an update one year after discussing a recent report by Statistics Canada about the household debt-to-income ratio in Canada during the fourth quarter of 2021.

Household debt-to-income ratio: Debt-to-income ratio example

Here is an easy-to-understand example. Sally is looking to get a loan and is trying to figure out her household debt-to-income ratio. Sally’s monthly bills and income are as follows:

  • monthly mortgage debt payment (P+I): $1,000
  • monthly auto loan payments: $500
  • credit card debt monthly payment: $500
  • household gross monthly income: $6,000
  • Sally’s total monthly debt payment is $2,000:
  • Sally’s household debt service ratio is 0.33:
  • 0.33 x 100 = In other words, Sally has a 33% household debt-to-income ratio.household debt-to-income ratio

Household debt-to-income ratio: Pre-pandemic debt pressures

Prior to the pandemic, household debt Canadians carried increased steadily. During the last decade, more and more Canadian homes carried debt. Canadian household debt-to-income ratio was 150% in 2012, according to Statistics Canada.

In other words, the increase in debt was rising at a rate of $1.50 for every dollar of income. A DTI ratio of 175.4% was reached in the first quarter of 2020. Before the pandemic, Statistics Canada estimates the household debt-to-income ratio was 181.1 percent.

Debt increases can negatively affect a household’s bottom line, and the larger the debt, the greater the negative impact.

The impact of COVID-19 on the household debt-to-income ratio in 2020: The temporary income boom of 2020 supported Canada’s household debt.

Even if the federal and provincial government financial income support payments given to Canadians through the COVID-19 Economic Response Plan aren’t considered an income surge, it is an income rise.

Fndings released by Canada Mortgage and Housing Corporation (CMHC) in November 2020 showed that the government assistance did help Canadians cope with their household debt.

In the CMHC report, the following were the key findings in Canada:

  • By the end of Q2 2020, Canada’s household debt ratio is 17% lower than Q1’s 158%.
  • Likewise, the home mortgage DTI ratio fell from 115% to 105%.
  • A rise in household disposable income caused these declines.
  • The amount of outstanding household debt in Canada did not change.

Canada’s household disposable income increased by almost 11% between Q1 and Q2 of 2020 and by 15% year over year. The extra cash doled out by governments caused this. This new cash in bank accounts was not from greater household savings.

After the government temporarily transferred money to Canadian families, the household debt-to-income ratio declined to the lowest level since 2010.

Household debt-to-income ratio: Uncertainty in household debt during the second wave of COVID-19

During the second wave of the COVID-19 pandemic, the financial situation of Canadians had changed significantly. Especially in the financial real estate industry, the DTI ratio is an indication of financial obligations as a vulnerability.

The Canadian financial institutions stopped deferring mortgage payments at the same time. Even with the then extremely low-interest mortgage rates on mortgage loans, this obviously led to concerns about Canadians’ ability to make their mortgage payments. Other government assistance programs ended.

With the end of government support programs that temporarily boosted monthly household income, Canadians faced uncertainty about how they will be able to carry and pay down their household debt.

In the second quarter of 2021, the household debt-to-income ratio of Canadians decreased in all significant Canadian cities. Normally, such a decline would indicate a general improvement in families’ monthly income, their ability to afford monthly payments and pay off financial debt, be it mortgage debt service or consumer debt such as auto loans and credit card debt service.

Subsidies from the federal government effectively helped households to pay off debt. Canadians were more than likely able to lower their non-mortgage debt during those months. However, the mortgage component of Canadian household debt has increased in the majority of metropolitan areas while employment has decreased.

household debt-to-income ratio

Canada household debt-to-income ratio: What my predictions of financial challenges for 2021 were

I predicted that as the economy recovers from the economic effects of the Coronavirus, Canadians will be facing a great financial challenge. As a result of the COVID19 pandemic crisis, Canada’s economy pretty much stopped.

Many Canadian families have experienced extensive income losses as a result of this. For those who are heavily indebted, this is particularly true. A key concern with regard to financial stability is whether homes can keep up with their financial obligations. A financial crisis may very well befall highly indebted Canadians.

Bank of Canada was concerned about the financial challenges that Canadians will face in 2021. Can Canadian homes withstand the storm? The answer lies with:

  • household financial health as of February 2020;
  • the effectiveness of the Canadian Government’s recovery support measures and policy activities; and
  • the pace of the labour market’s recovery.

As the economy recovers, the Bank of Canada looks at a variety of household debt factors. Those with greater financial vulnerability are of particular concern. Some factors that will cause concern among the Bank of Canada are:

  • The homeowners with few financial safeguards.
  • Although it does provide a financial reserve, home equity lines of credit are also associated with increased borrowing.
  • Will the government’s fiscal policy help support Canadians until incomes recover to pre-pandemic levels or exceed them?
  • In some cases, unemployment rates may not be a reliable indicator of household revenue losses.

We have entered the first quarter of 2022, so let’s see how the economy and Canadians fared in 2021.

Statistics Canada says household debt-to-income ratio hit a record high in Q4

In the fourth quarter of 2021, household disposable income declined as housing prices, housing costs, and mortgage borrowing rose, according to Statistics Canada. As a percentage of disposable income, financial markets saw that household credit market debt rose to 186.2 percent in the fourth quarter, up from 180.4 percent in the third quarter. Credit market debt accounted for $1.86 of household disposable income for every dollar of disposable income.

Consumer credit market debt rose by 1.9 percent in the fourth quarter, while consumer disposable income decreased by 1.3 percent. Household debt increased by $50.0 billion seasonally adjusted in the fourth quarter. A total of $46.3 billion was attributed to mortgages, while $3.7 billion was attributed to non-mortgage loans.

Household debt service ratios increased in the 2021 4th quarter, measured as total obligated payments of principal and interest on credit market debt as a percentage of disposable income. The ratio stood at 184.7 percent in the third quarter of 2018, and the previous record high was 181.1 percent in the fourth quarter of 2019.

Canada household-debt-to-income ratio summary

I hope you enjoyed this household debt-to-income ratio Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today Call us now for a no-cost consultation We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are remaining safe, healthy and secure during this current pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

household debt-to-income ratio

Categories
Brandon Blog Post

BUY NOW PAY LATER IN CANADA: 4 PRACTICAL THINGS TO KNOW BEFORE GETTING A BUY NOW PAY LATER PLAN

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Buy now pay later in Canada plans: Introduction

The holiday shopping season is over. Your bills have arrived. A buy now pay later in Canada program attracted many Canadians. In Canada, people may not realize that they are borrowing money to pay for their purchase when they opt for a buy now pay later in Canada plan. Such a financial product is also known as a BNPL, instalment loan, or retail credit services. A BNPL is a credit product that is best suited for purchases of large-ticket items such as furniture, televisions, and home appliances. This kind of payment option is available both from brick and mortar retailers and for online shopping too.

The buy now pay later in Canada industry is pumping out millions of dollars, as many people rush to buy big-ticket items. However, many people can’t afford to pay for these items, and the buy now pay later in Canada industry is swallowing these people up. We are talking about people who have a bad credit score, unpaid bills, could not pass credit checks and just plain don’t have the money.

In this Brandon Blog, I discuss how for some people a buy now pay later in Canada plan might be too good to be true as there are hidden risks.

buy now pay later in canada

What is a buy now pay later in Canada plan?

The buy now pay later in Canada plan is popular with consumers who don’t qualify for a credit card or other financing, but who would still like to purchase a large item and spread out the payments. Customers can make purchases and pay them back at a future date, often interest-free, using this short-term financing vehicle.

Examples of BNPL agreements include:

  • an agreement where the purchaser commits to purchase a product or service from the retailer;
  • the retailer’s agreement with a lender to finance purchases;
  • the customer’s agreement with a financial service provider which usually specifies:
    • The amount of each monthly payment.
    • Payment frequency.
    • The number of payments.
    • Rate of interest. If there is an interest-free period, the rate of interest upon default of making either a monthly payment or paying off the balance on time.
    • Any fees.
    • The payment method.

Retailers can obtain BNPLs from a variety of financial service providers. This type of financing option is available from financial institutions, such as banks, credit unions, caisses populaires, financing companies and money services businesses, including fintech.

buy now pay later in canada

Buy now pay later in Canada plan: Here are some things to consider before choosing to use one

With a buy now pay later in Canada plan, you can pay for nearly any large household item such as appliances, furniture, a furnace, or a central air conditioning system. BNPLs have their advantages for some people. These plans have the risk of getting you into uncontrollable debt very (very) quickly.

Pros of buy now pay later in Canada plans

Buy now pay later in Canada programs offer consumers some benefits. No fees, no interest, and you know that unlike with a credit card, the full amount of your purchase will not hit you all at once. Retailers bear the fee involved.

A soft credit inquiry is all that is required to approve a buy now, pay later loan. A soft credit check with the major credit bureaus does not impact your credit score. Furthermore, BNPLs have the advantage of being different from traditional layaways. Layaway plans entail making a down payment to the seller and paying a small amount each week for the balance. Only after you have fully paid for the item can you take it out of the store. A BNPL allows you to leave with your item or have it delivered so that you can use it immediately without paying the entire purchase price.

A buy now pay later in Canada plan allows consumers to obtain instant gratification.

Cons of buy now, pay later plans

A BNPL is ideal for those who can make all the payments on time and pay the outstanding balance in full on the due date. It is also good for those who have a steady income and the discipline to make sure the entire amount is paid off at the end of the interest-free period. There are unfortunately more cons than pros to a buy now pay later in Canada plan.

They are:

  • Depending on your payment history, as well as the policies of the retailer, financial tech companies set limits on the amounts you can defer.
  • It’s convenient to spread payments out, however, there are fewer protections than if you used a credit card.
  • BNPL programs also present the risk that those seemingly affordable payments may lead you to splurge.
  • The BNPL statement is strangely designed. According to one buy now pay later in Canada study, two-thirds of those who fell behind said they simply forgot about the payments, not that they did not have the cash.
  • In lending, a company wants to make sure the consumer can handle the new account and will be able to repay it. An unpaid buy now, pay later balance will be sent to collections, damaging your credit.
  • By transforming one big price tag into an array of smaller payments, deferred payment plans in BNPLs lower sticker shock. Impulse spending goes up as a result.
  • This can lead to a rapid accumulation of debt. You may forget how much you need to set aside for your BNPL payments if you’re not tracking your expenses and budgeting.
  • Not all BNPLs require regular payments. They instead require the sum to be paid by a certain date in the future (usually 6-12 months from the time of purchase). Notices, reminders, and invoices may not be sent until almost the end of the period. Once the BPNL due date passes, the full sum becomes due, plus interest and late payment charges and fees for missed payments.buy now pay later in canada

Buy now pay later in Canada: 8 Options when you buy now and can’t pay later

During the interest-free period, you can spread out large expenses over a period of time, but you should be ready to pay the full balance by the due date. If you cannot pay off the balance on your account after the interest-free period expires, what are your options? Unemployment or a family emergency may have changed your financial situation due to circumstances beyond your control.

Here are some options you can consider:

  1. Speak with your lender. There may be a financial hardship program that you can utilize, enabling you to get more deferrals and thus more breathing room. Changing the due dates may also be an option.
  2. Take a look at your finances and household budget to see where opportunities exist. Focus on saving money in other areas while prioritizing essentials like housing, food, utilities, and medicine.
  3. Let go of the purchased item. You might be able to return the item to the merchant for a refund. Although some buy now, pay later companies do not refund interest payments, you may be able to get your money back. During the refund process, payments may still be due. Consider selling the item to recoup some of the money if a merchant won’t accept a return. Online marketplaces, apps or websites may help you find a buyer. It’s important to understand the terms before listing an item on an online marketplace since they may take a cut of the sale.
  4. Get a side gig to make money. Increasing your work hours or earning supplemental income through a side job, such as driving for a rideshare company or delivery service, can help you pay down your buy now, pay later debt faster.
  5. Perhaps you can qualify for a debt consolidation personal loan if your credit score is good enough in order to reduce the interest charges on all high-interest rate debts, such as credit card debt. The cash you free up can be used to pay off the BNPL.
  6. Contact a non-profit credit counselling agency for free help. Avoid going to a for-profit debt relief company.
  7. To discuss your realistic options, contact a licensed insolvency trustee for a no-cost consultation.buy now pay later in canada

Buy now pay later in Canada plan: Summary

In summary, you may find that getting a buy now pay later in Canada plan is a good option for you and your financial situation. A buy now pay later plan could help you with those unforeseen expenses, such as when an old furnace breaks down for good. Just make sure you understand everything involved in the buy now pay later plan before signing up, and you can see yourself being able to be debt-free when the interest-free period ends.

I hope you found this buy now pay later in Canada Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

buy now pay later in canada

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Categories
Brandon Blog Post

CONSUMER PROPOSAL STUDENT LOANS STEP-BY-STEP DEBT RESCUE: HOW TO FIX YOUR STUDENT DEBT PROBLEMS

consumer proposal student loans

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Consumer proposal student loans: Student Loans and Consumer Proposals

In the event of student loan debt, you may be able to eliminate certain student loans through a bankruptcy or consumer proposals. Student loans are given special treatment under the Bankruptcy and Insolvency Act (Canada) (BIA). The seven-year waiting period is a requirement for consumer proposals related to student loans (by the way, the concept is similar in personal bankruptcy).

Throughout this Brandon Blog, when I refer to student loans, I am referring to loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or any provincial act that provides loans or guarantees for student loans.

I am not talking about any loan debt not meeting this definition. A private loan or a loan from a financial institution that is not covered by the above-noted legislation would be examples, including other loans taken out for professional training.

Consumer proposal student loans: Filing a consumer proposal for student loan debt

In previous posts, I discussed consumer proposals and how they can be used as an alternative to bankruptcy and as a means to negotiate repayment terms of your entire debt with creditors. Canada’s only federally authorized debt settlement program is the consumer proposal. Only licensed insolvency trustees (formerly called bankruptcy trustee) can administer consumer proposal student loans or for any other kind of debt. By using consumer proposals, you can negotiate away the majority or all of your debt in return for making monthly payments for a fraction of that amount and over an extended period of time, not exceeding five years, without incurring any interest. The seven-year rule affects consumer proposal student loans under the student loan legislation.

When you submit a consumer proposal, one of the major benefits is a stay of proceedings, just as in bankruptcy. You will no longer be subject to collection efforts including collection calls, legal action and wage garnishments. Private or financial institution loans taken out while you were a student, not covered by student loan legislation, may be eliminated under the BIA without regard to the seven-year rule. Private student loan debt such as a line of credit or credit card debt incurred while you were a student would be examples.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Think of insolvency waiting periods like a clock with a start date and an end date

In either personal bankruptcy or consumer proposals, student debt is treated differently under government student loan legislation than normal ordinary unsecured consumer debt. The 7-year waiting period is a mandatory waiting period set by the BIA. This is why it is so important.

Student loan debt relief under section 178(1)(g) of the BIA is not available to people who have filed for bankruptcy or a consumer proposal and have not yet ceased to be a full-time or part-time student or who are within 7 years of ceasing to be a full- or part-time student.

A consumer proposal or personal bankruptcy can be filed by insolvents after they stop being full-time or part-time students more than seven years after ceasing to be students. In that case, the student loans debt can either be discharged by bankruptcy or by consumer proposals.

Counting the 7 years may also not be as straightforward as it sounds. In most cases, students take out a series of loans for each year of college or university. Do the 7-year counts take place on a loan-by-loan basis individually, or is it treated collectively? If in doubt, group them together.

The person must consider all three aspects of the calculation in order to do the calculation correctly:

  • the date the personal bankruptcy or consumer proposal was filed;
  • When the insolvent person ceased to be a student;
  • After ceasing to be a full-time student or part-time student, the length of time the person must wait before a consumer proposal student loan compromises the debt or the loan is discharged through an absolute discharge from bankruptcy.

Consumer proposal student loans: Potential “Court-Ordered Discharge” under hardship provision where 5-year waiting period satisfied

Under section 178(1.1) of the BIA, there is a provision that only applies in bankruptcy. It does not apply for consumer proposal student loans. Since we are discussing student loan debt, I would be remiss if I did not mention it.

Under this section, the court can order that the 7-year waiting period does not apply to a bankrupt who has student loan debt under federal or provincial student loan legislation 5 years after ceasing to be a full-time or part-time student. It would then actually be only a five-year waiting period.

Only a five-year waiting period can be allowed by the court if these conditions are met:

  1. the bankrupt acted in good faith in connection with its student loan debt; and
  2. it is likely that the bankrupt will continue to face financial difficulties to such an extent that it is impossible for them to repay their student loan debts.

What does the compulsory waiting period entail? When should we choose between a 7-year and 5-year waiting period? The 7-year waiting period has already been discussed. In determining whether a bankrupt is entitled to the hardship reduction for the lower 5-Year waiting period, the court considers the following factors:

  1. How was the money used? For the purpose, it was borrowed for?
  2. Was the bankrupt honest in his or her attempt to complete the educational program?
  3. Has the bankrupt gained employment in an area directly related to his or her education?
  4. Did the bankrupt make reasonable efforts to make monthly payments or otherwise make student loan payments against the loan or did the bankrupt make an immediate assignment into bankruptcy?
  5. Are there any repayment assistance programs options for student loan debt relief that the bankrupt can take advantage of concerning the outstanding student loans, such as interest relief or loan forgiveness and has the bankrupt applied for such repayment assistance programs?
  6. Did the bankrupt overspend or behave irresponsibly with personal or family finances?
  7. When the loan applications were made, was the person’s disclosure about his or her circumstances fair and accurate?

The court decisions on obtaining financial hardship relief show that it is not easily obtained. A bankrupt normally have to show that they have exhausted all efforts, their financial hardship is not a result of their actions or inaction and that their financial situation cannot reasonably be expected to improve without the undue hardship relief.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Paying Student Loans During Your Bankruptcy or Consumer Proposal

What if:

  • Your financial circumstances are you have too many unsecured debts and your unsecured creditors are taking legal action against you?
  • You have a history of rolling over payday loans and are deep in financial trouble.
  • You have to go see one of the licensed insolvency trustees in your area and ultimately use one of the debt-relief tactics of bankruptcy or consumer proposal.

If you stopped being a student:

  • 5 or 6 years ago but you know that you could not qualify for the financial hardship provision relief; or
  • the last time you went to school was less than 5 years ago; and
  • you need to start repaying your student loans.

To rebuild a solid foundation for a good financial future in such a situation, either bankruptcy or a consumer proposal would have to be filed. Despite the fact that you would not be able to eliminate or compromise your student loans, you would be able to escape the clutches of your otherwise crushing other unsecured debts.

In such a case, it may make sense to file for an insolvency process, even though you would be paying student loans during your bankruptcy or consumer proposal.

Consumer proposal student loans summary

I hope you found this consumer proposal student loans Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

consumer proposal student loans
consumer proposal student loans
Categories
Brandon Blog Post

FIGHT FOMO-RELATED DEBT: FOLLOW OUR STEPS TO FINANCIAL RECOVERY

fomoWe hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Why is FOMO a thing?

Are you experiencing FOMO right now? In the modern-day, FOMO, or fear of missing out, is a significant stressor in people’s lives. You’re wondering how you are going to make it through life at such a fast pace. Social media posts constantly tell you what your friends are doing, what you should do with your life, and what to buy. People suffering from FOMO have lost track of what’s important in life, and you have lost track of what you want to accomplish. If you want to keep your mind (and your bank account) and financial situation healthy, there are steps you can take to make sure that you have proper spending habits.

Missing out on important events or social gatherings is the feeling of being excluded. The term FOMO was coined and popularized by Patrick J. McGinnis in The Harbus, the Harvard Business School’s magazine, in 2004.

It is often difficult to bring up the subject of money with friends, yet it is one of the most important. I discuss how FOMO can lead to runaway debt and how to avoid it, in this Brandon Blog.

FOMO and the rise of social media-induced debt

The internet has created a social media engagement platform for bragging; things, events, and even happiness itself can appear competitive on social media. You do not just feel as if there are better things that you could be doing at this moment, but you also feel as if you are missing out on something fundamentally important that others are experiencing right now.

It is difficult to identify the nuances of FOMO since social media users have different social priorities. FOMO users share one common characteristic: the feeling of social exclusion.

Self-concept and perception of oneself play a role in FOMO. Individuals’ perceptions of and experiences of the world – and what they feel they are excluded from – play a critical role in their fear of missing out. There is a very strong connection between self-perception on social media and FOMO.

FOMO has become an all-too-common affliction. FOMO can strike anyone at any time, but it is usually strongest in children, teenagers and young adults. FOMO can also have serious financial repercussions.fomo

FOMO debt on the rise: Nearly 50% of millennials overspend to keep up with friends

Credit Karma/Qualtrics surveyed 18-38-year-olds in both Canada and the United States prior to the pandemic. With November being financial literacy month in Canada, the topic of FOMO debt is timely, notwithstanding when the surveys were done. Findings were strikingly similar in each country. Millennials are overspending on food and drinks, music events and tattoos because of rising social pressures.

In the Credit Karma surveys, 48% of Americans and half of Canadian young adults reported spending money they did not have and going into debt to keep up with their peers. Over a third of respondents said it is hard to turn down friends who suggest activities they cannot afford.

Almost one-third of young Canadians who got into FOMO-related debt owed more than $500. Key survey findings show that among those who have borrowed to keep up with friends:

  • 49% said they did it to avoid being excluded from future events if they did not participate in spending time with friends.
  • A similar 49% said they didn’t want to miss something once-in-a-lifetime or novel in their social lives.
  • 45% of respondents said they didn’t want to be seen as an outsider.
  • 34% feel it is the way to keep friendships strong because they feared losing friends.
  • 29% feared being judged.

According to Credit Karma, the items and experiences that push Millennials into FOMO-related debt include:

  • social situations requiring the purchase of meals and alcohol (47%);
  • clothes (41%);
  • travel (38%).
  • Autos (15%);
  • body art (11%); and
  • residential (9%).

In other words, FOMO-related debt is a real problem among young adults.fomo

How to Avoid Overspending Due to FOMO

The temptation to think you won’t have it later or your friends won’t like you if you don’t buy it now can be quite strong. This may not always be true. Perhaps you would be better off finding new friends who don’t spend money so obsessively all the time.

Simply stopping spending is the first step toward overcoming FOMO unnecessary spending! Not forever, just until you figure things out. You might also consider limiting your use of credit cards or even debit cards and making most of your purchases with cash. If you feel FOMO creeping in, you will be less likely to impulse spend. It will also prevent you from incurring more FOMO-fueled debt.

You can avoid FOMO-fueled debt by working within your budget and becoming comfortable with saying no to overspending. Having a budget doesn’t mean you have to give up every nice dinner or outing, but you have to understand what is within it.

I have written on the need for household budgets many times on my Brandon Blog. You can prevent FOMO-fueled debt by creating a monthly budget or even a weekly budget.

Buying things out of impulsiveness might seem to make us feel better because we’re getting what we want right away, but there’s actually another side effect to consider. In the end, we pay more interest and fees when we buy items without considering future needs and end up falling behind in monthly payments.

Whether you’re trying to pay off debt, add to your savings, create an emergency fund for unanticipated events, plan for retirement, or save for a new home, be sure to keep your bigger goals in mind. There’s no reason to let your friends get in the way of your longer-term goals, such as paying off your debt, saving for retirement, or buying a house.fomo

FOMO summary

I hope you found this FOMO Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is FOMO-fueled debt or too much debt for any other reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

 

Call a Trustee Now!