Tag Archives: Debt

Gas Price Frustration

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GasFrustrationI find it funny how people are frustrated with the price of gas going up.  It’s not new news, gas prices have been going up ever since I was alive.  I remember prices around $0.35 cents a litre however we will never see that price ever again.  Just like eventually we will never see sub $1.00 / litre prices.  Its a fact of life and no matter how many emails go out asking people to boycott the price of gas, it will never change the fact gas prices are going up and will continue to go up.

This recent frustration comes as gas prices in Edmonton just went up over $1.20 / litre and everyone is up in arms.  They are frustrated and I believe for most (not all) people they are frustrated because they are busted financially and have debts that need repaying causing them to have no room in their budget to take into account the additional hike in price.  I was asked today how debt has anything to do with the frustration of gas prices going up.  It’s very relevant because people who have debt and are busted with other commitments are going to be frustrated when things go up and affect their budget.  Someone who doesn’t have debt has a lot less frustration (yes it’s okay to be frustrated) because there are no other debt commitments pulling them from side to side.  Lastly there are those who have no debt and have low income and yes for those people it will be tough and frustration is truly understandable, however there are many opportunities out there to better your situation, that’s my opinion.

How do I know? Well we are going to be debt free in a few weeks here and I know our frustration level have gone down to the point I honestly don’t care how high it goes, we will make changes in our lifestyle and look at ways of increasing our means if need be to afford the gas.  When you don’t have debt you have other options.  Honestly it’s not like this news is new, I’ve been mentioning since September interest rates will go up, prices will rise, and so have others such as the government and people like Garth Turner.  People who choose not to listen and take their debt seriously will be the people who complain and are frustrated the most.  Stop complaining and start putting a plan of action together and kill that debt!

Comments Welcome for relevant conversation.

Borrow to Get Ahead?!

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Borrowtogetahead2The latest marketing campaign from Scotiabank is enough to make me puke.  Their latest tag line is “Borrow to Get Ahead”.  On one of the pictures they show a middle aged couple on a beach making the appearance they borrowed money to “get ahead” by taking a vacation.  Its this playing on the fears of Canadians who are already up to their ears in debt that sickens me.  People need to stop borrowing and start paying down their debts and that means to stop taking that yearly all inclusive trip they feel entitled to.  If your in debt and need to pay for that trip on your credit card then maybe you should re-think that idea.  Its this thinking in this simple example that has Canadians living paycheck to paycheck complaining they don’t have enough money.  Scotiabank’s new tag line really should be “Your broker than you think”.

The solution isn’t borrowing from the bank to “get ahead” it’s making smarter choices and maybe streamlining your life.  It’s living on simple principals that have been around for thousands of years in a book called “Richest Man in Babylon”.  Where do you think the pay yourself 10% came from?  Your parents, yup, but before them it came from the ancient Babylonian times and yet is still applicable today.  I highly suggest picking that book up, it was just one thing that helped us get out of debt.

What’s sad is that people are so desperate these days they will walk into Scotiabank or some other bank and fall pray to these gimmicks that really only make the bank more money.  Why not go talk to someone that had massive amounts of debt and ask them what they did to get out of it.  The people at the bank more than likely are just in as much debt as you are so why the hell would you take their advise?! Not that I’m big on investments but if someone at the bank pushes an investment on you, why not turn around and ask them how much of the investment they are pushing they have.  Tell them you’ll take as much as they have invested, which 9/10 will be nothing.  Funny how that happens.

Start getting educated and stop relying on gimmicks as “borrow to get ahead”.  You CAN get ahead on your own as long as you have someone else coaching and or mentoring you that’s been through the tough times on debt.  If you do that, you’ll get out of debt 10 times faster than any other way.

 

Borrowtogetahead

Gas Prices

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gas_stickupI heard a great quote the other night that I quite like and was able to relate to it which is why I like it.  The quote is “If the cost of gas is a topic of conversation in your family, your broke”.  This had quite a few friends disagreeing with the quote and some people actually agreeing and understanding.  Both opinions are just fine, I don’t expect everyone to agree with the statement but I agree with it 100% because we were in that situation until recently.

We were in quite a lot of debt until we’ve put our head down for the last 16 months to get rid of all our debt, that includes consumer, mortgage, lines of credits, etc. ALL of that debt it will be gone in a few weeks, which I’ll blog about later.  Before then we were broke and living a lifestyle of debt.  Yes BROKE.  In my personal opinion if you owe another man money and for us that includes a mortgage then you have shackles on and you are broke.  When you live a cash flow lifestyle then you are not controlled by another man and are no longer broke and have that freedom.  So before, Lindsay and I would always complain about gas prices in Alberta/Canada and would in some cases let it dictate our life.  I let it dictate what I drove as the last time we saw prices this high I sold my 2003 Ford Ranger 4×4 truck.  I loved that truck but it cost so much in gas and when prices went up it affected me because I was living pay check to pay check and having that additional cost made a big impact in my wallet.  I’m not the only one in that situation, a lot of people are, hence if you constantly need to discuss the price of gas then you are broke.  The sooner you can get real and stop lying to yourself about your finances and where you are in debt the sooner you can get a plan of action together to get rid of it.

Do you think people that are wealthy and successful who live that cash flow lifestyle even think about gas prices?  I’m not even including people in our business or anything about our business here, but anyone that’s successful and has that cash flow lifestyle that lives out of debt.  They don’t let gas prices dictate their life by what they drive or where they travel to and they sure as heck don’t even talk about it.  That’s what I believe the quote was all about and why I agree with it because I was there and experienced it personally.  However that is no any longer us because we’ve taken measures to ensure the price of gas is never a conversation in our household.  If it goes up, so what!

One last thing, those emails that say don’t buy gas on such and such day.  Those will never work because people are to self centred and self involved to even think about banning together to accomplish something like that.  Even if we did it, it wouldn’t have an impact and we’d be back at square one.  Do I have an answer? The only answer I have is to find another way to create some wealth to afford the gas.

Again you don’t have to agree with me, but I’ve been there in huge amounts of debt and have a real personal testimony.

Have a High Debt Load? Watch Out for the Fallout

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DebtLoad

Yet again another debt warning message this time from BNN about the fall out of having a high debt load.  While everyone is lounging around in the debt buying ways and enjoying the “high life” with stuff they cannot really afford the big issue that is going to sink people is the risk of higher interest rates which ARE coming.  We are not just talking about consumer debt here, we are talking about mortgages as well and while you lock your mortgage in right now at the low rates, you better pray because after 5 years when your mortgage comes due, you could be walking away from that new house you just bought.

“The story is not about subprime in Canada, that’s not where the focus should be…the story is that higher interest rates will shift consumption from what we buy towards servicing debt,” he says. “As a society we became more sensitive to the risk of higher interest rates.  The result of such a shift in consumption will alert the standard of living. The credit that was there to support a life style that you could not afford will not be there because you will not have the wealth effect [from rising real estate values].”

So what should we be doing now?  We should stop buying stuff we cannot afford and look to reduce or eliminate our debt.  Its the ones without debt that will be laughing all the way to the bank where the people with huge amounts of debt will be crying as they walk away from the bank.

I’m not saying don’t buy a house, I’m saying whatever you do, you need to be taking into consideration the future and not just the immediate present day.  Some interesting times are coming and you better be keeping an eye on the financials.

Yet Again, More Debt News

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DebtWell not more than a couple months later Canadians are in even more debt. Back in December I wrote an entry that Canadians had 148% debt to income ratio, apparently that is now up to 150%.  People are just not getting the message.  People won’t likely make a change until they are knee deep in doo doo and that’s sad.  I have to say I’m blessed to know some friends who don’t live in debt, as well as associate with many people in our business who are moving towards debt free lifestyles and ARE living debt free.  We are a couple months away from being debt free and that’s a very exciting feeling.  More on that later.

Here is the news article from CTV: Average Canadian family debt hits $100,000.  To give you an example of what 150% debt to income ratio is, it means for every $1000 in after-tax income that a Canadian family earns, it owes $1,500. BRUTAL.  That is just the average too.  That’s a pretty high average compared to 20 years ago when it was only 93% which family debt stood at $56,800. 

In 2010 families only managed to save $2500 dollars or 4.2%.  In the 1990’s people were putting $8000 into savings.  What the heck is going on here?  Something is pretty wrong when people continue to be selfish, full of status and think they are entitled to having whatever they want.  Just as long as the Line of Credit or VISA pays for it.

So yeah we are just about debt free and I’m pretty pumped for that.  We took some perspective from people we respect and read a few success books on debt and then made our own plan to kill down our debt.  We’ve made some DRASTIC changes in our finances and because of that we are almost debt free, can most of you say the same?  Why did we do that?  Because we wanted a family, and we were not going to be able to start a family with over $80,000 in consumer debt not to mention living in a condo that was losing money or just lost a ton of money after we sold it.  That’s pretty sad when money controls your choice of having kids and for us it did.

I’ll make a few points very clear here that some people out there seem to think otherwise:

  • I didn’t really have a pension plan from the government, since the year 2000 I had $4,600 in Canadian Pension. Where I currently work and also in the past three jobs, nobody had any pension plans to contribute.
  • I don’t have a 401k
  • I never had any TFSA (Tax Free Savings Account)
  • My RRSP’s were my only “large” investment with maybe $8,000 in them.  So I cashed them in, OOOoooHHH, such a taboo. To be honest once we are debt free in a few months, if we wanted to replace that we could WAY faster then it took to pay off our debt.

So to dispel and be forthcoming about where some money came in to help pay off the debt it was from those puny accounts.  The rest was being on budget by actually following it, sticking to it, and putting 30% of my income onto debt and 100% of Lindsay’s previous day job income onto debt.  Maybe some of you out there cannot be that drastic but with stats like the above news article sometimes you need to be a little fanatical. 

Take note of all the news articles about debt, bankruptcy, and interest rates, because SOMEONE is trying to send you a message.

Update Feb 19th: I did some digging around to find the report this CTV news article is based on, here it is.

http://www.vifamily.ca/media/node/783/attachments/familyfinance2010.pdf

Also here is a nice chart to show where we’ve come from and where we are at and going.

AverageDebtPerHousehold

Also here is a chart to show you the consumer debt, I know I got questions on that and found it out. So to put it in perspective, consumer debt has been on the rise as well.  It’s not just all about the mortgage.  In 2010 (Q3) outstanding debt is $36,346 compared to $25,306 10 years earlier. Pretty bad.

ConsumerDebt