The Dangers of Payday Loans

I was on Facebook this week and I saw an Influencer campaign for a payday loan company.  A Canadian payday loan company was using mom bloggers to shill the benefits of payday loans.  Let me be very clear about my take on payday loans and why all Canadians should try and stay clear of them. first, these high-interest loans simply do not make economic sense.  I knew I had to write about this topic as well I have taken out several payday loans and getting out of that cycle of debt took hard work.

Payday loan companies say they are a quick and easy way to take care of an immediate financial need. They even tell you there interest rates which in Canada average anywhere from 15-23% per hundred dollars borrowed in 2019. They tell you it is an easy simple way to meet a financial burden. I am here to tell you they are wrong.

Payday loans are like gateway drugs, they can lead to a heap of trouble. Let’s look at the stats:

  • Most Canadians carry some sort of monthly debt forward every month. That number continues to grow.
  • 37% of all bankruptcies in Canada include payday loan debt.

The fact is those that take out these loans are often living payday to payday and can’t really afford the loan in the first place.  Like me, back in the day, I lived payday to payday and struggled to get by. Payday loans came into play when I had maxed out the credit cards and needed to survive.  A simple loan of $300 was repeated several times before I finally got wiser and started adding up the numbers.  Payday loans have the highest interest rate when it comes to loans in Canada and they prey on the poor, that is why in recent years most provinces have capped the interest rates. The law across Canada is currently a Canadian can not pay more than 60% per annum.  Here in Ontario for a $500 loan for 2 weeks, you will have to pay back $575.00 and if you are late there are fees on top of that.

So what can you do if you need money in a hurry instead of a payday loan?

Take a credit card cash advance. Yes, it still has an interest payment but it is far less than a payday loan.

Apply for an overdraft on your chequing account. Again, it has a far lower interest rate.

Already maxed out these resources?

Sell something. Find something you have of value and sell it.

See yourself in need of extra cash, pick up a side gig. Here in Toronto on the Bunz Employment page, I often see someone looking to hire someone for all kinds of temporary gigs. There are at least 50 different ways you can earn $100 online.

Ask to work overtime. Many employers will allow you to work up to their provincial maximums. Here in Ontario that is 44 hours.

Plan ahead. I have written time and time again about the need for an emergency fund and getting one started when you live payday to payday, its hard work. My suggestion, start small even $25 every pay is a start.

Negotiate a late payment.  If it is a car payment, rent payment or the like and you normally pay on time call the lender/landlord and see if you can work out a plan.

Last but not least you can ask for help from family and friends. Get a loan from them just make sure you pay them back in a timely fashion.

 

 

 

6 Money Rules for Teens and University Students in 2016

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When I was a teen I wished someone had sat me down and taught me some basic money rules. I went to university got my first credit card and by the end of my first year I was in debt. Not good!  With this being the last year my teen is taking high school courses I want her to know how to me money smart. So what rules would I want for my daughter? For any teen getting ready for the next stage in life? Here are my money rules:

Keep a Money Journal

By writing it down and keeping a money journal you can see where you are spending your cash. By doing so, you see your money habits and where you might want to change things. Get a small notebook you can toss in your bag. Yes, you could use an app to do this. There are several now available.

Save for a Rainy Day

You never know when you may experience an emergency, and no an emergency is not the purchase of a want like the newest tech toy. Try and save at least 10% of what you bring in till you have enough to cover at least three months of expenses. This is your emergency fund. My teen has become an expert in savings, and I am proud of her efforts in this area. She saves 25% of her monthly income.

Spend Less than what You Earn

When you spend less than you earn now, you are caring about your future. Does your future matter to you? Then you want to take care of it by watching what you spend now.

Watch Out for Credit Card Debt

Your need to be very careful in how you use your credit card. Think does that night out warrant it going on your card? Do you need that interest adding up? Are you able to pay the balance at the end of the month?

A Sale is Not Always a Good Deal

People often think that a sale means a great deal. What if you do not need that new pair of shoes? That new tech toy? You need to learn to shop with a list. What do you really need? Buy with a purpose and a plan. As well if you are putting that sale item on a credit card that you do not pay off every month, you lose the savings.

Set Money Goals

What do you really want? What are your plans? Do you want to travel? Graduate debt free? Have money for the future? Set your goals, then put a plan in place to help you get there but remembering these rules you are well on your way to achieving them.

Let me know what money rules would you want your kids to know.

 

How Far From the Brink are You?

An emergency department sign.

I was reading the newspaper with my tea this morning, yes, I am old fashion like that when I came across an IPOS Reid survey that scares me. For as long as I have had this blog I have shared my story of debt and how hard it is to rebuild after debt destroys your life. It’s hard, it takes work, it takes time. One simple emergency and things change.

A new poll stated that many Canadians are less than a paycheque away from being able to pay their bills in fact many where already there. That should scare you. I know it scares me. Many are on the road to bankruptcy. They see bankruptcy as an option. Bankruptcy doesn’t change habits. It doesn’t change mindsets. Emergencies happen, they are a part of life. I have lived through divorce, fire, flood and hurricane.

I know of more than one who declared bankruptcy only to have to declare it again within years. Why are we allowing ourselves to live so close to the brink? Many Canadians live with no savings and live paycheque to paycheque. I was one for many years. It’s a scary place to be. You have no safety net. You are not prepared for any emergency.

As a nation, we are a nation of debtors. Us Canadians carry the highest debt load in the G7.  We believe because of the low interest rates we can afford more, need more. We no longer save for what we want, we go and buy it and then worry about the payments. We buy furniture, clothes, travel, cars, education all on credit. What does it all this credit do to us. It makes us slaves to those we owe.

Have you ever stopped before you bought on credit? before you took that deserved trip? bought that pair of shoes? took that night out? They all have ramifications if you don’t have the money in the bank.

Getting out from under your debt load takes hard work. It takes taking a step back and seeing how close to the brink you really are. It takes realizing you made a mess and being willing to clean it up. It means being willing to do the work. It may mean some major life changes. I know for me it did.

If you are in consumer debt, figure a way out, stop spending your tomorrow. I know for me it meant being real about my debt, it meant hard conversations, it meant making choices and realizing I really did want a better tomorrow and I would make sacrifices today. Do you know how close to the brink you are?

Things like seeking a professionals help are ok, so is building a nest egg of savings to keep you away from the brink. Build an emergency fund. Start with a $1000 in the bank that is there for emergencies, and build from there. How do you get that first $1,000. Most who have huge consumer debt loads, have stuff. Sell some of it or get a part time job or create a secondary flow of income. Do the hard stuff to get where you want.

Trust me it takes time and energy to move away from the brink but it is worth it for the peace that comes.

Get Out Debt Now

budget © by 401K

 

We all want that get out of jail free card when we play Monopoly but the reality of life is there is no get out of jail free card. There are consequences that come up in life. One of the biggest consequences Canadians are facing today is debt. We are taking on more and more debt, and seriously we are not getting a great handle on it. Do you know according to a recent Canadian Living article almost half a million Canadians are behind on their credit card bills by more then 90 days! That number is huge. We do not need a get out of jail card to fix the problem. We need a plan.

So what do you do when you find yourself buried in debt, YOU, have to have a PLAN!

1.First OWN your debt.

List it all out. Know how much you owe, and where. Know the amount of interest you are paying each month. You dug the hole, and now you need to know how deep it is.

2. Pay HIGHEST interest rate first and more often.

You want to get rid of that interest rate. Why spend what you work hard for on interest, so tackle this first. The more you can lower your interest payments the better for you.

3. TRACK your spending.

You need to know how you got to this hole in the first place. Track your spending for 90 days. Look at your habits. Do you go out for lunch often, shop for junk or do other things that are driving your debt load higher.

4. Set a BUDGET.

In our world today there are many ways you can set a budget. Use paper and pencil, software or even an app. All of these can help you as you learn to budget your money.

5. Get HELP if you need it.

I had to go so far as to speak to a bankruptcy trustee. There are people out there who can help you get through the dark days of debt, and trust me living debt free is so so much better. If you need help, ask, don’t be ashamed. I learned a lot going through my bankruptcy.

 

 

Money, Money Fixing a Broken System

Money © by AaronPatterson

There is an old saying money doesn’t grow on trees, but sometimes we live like that. We have been living like it sprouts from the ground for years. We have taken on personal debt, provincial debt and country debt..we are a globe in crisis, really. We are on the brink.

Canadians really have had it lucky in the overall scheme of things but we have not been unscathed. The Occupy protests that began on Wall Street in New York have a reason, and as much as we may not want our downtown core disrupted we actually do need the wake up call.

Having lived in both the United States and Canada, I have seen some differences but here too we have the corporate draining our system. These protests will not go away for a long time nor should they in my opinion and here is why we need them- We need more accountability in place.

Having been amongst the poorest in this country for many years, I learned it is important not to just give a bail out like we did with the corporate world in 2008, and then we turned around and threw money into the economy that was literally coming out of no where. So now there needs to be a day of reckoning. If I spend money I don’t have, or write a check for money that is not in my account it is called fraud. We have overextended ourselves and there has been no day of reckoning, no accountability. That is what has really been missing.

Along with the accountability, we need to get back to when it was good to help your neighbour succeed, instead of giving hand outs, give skills, educate, teach, share,in that way we can make better communities. Banks need to get back to helping the little guy. Small businesses globally make sense. Buying in your community makes sense, sharing makes sense. Lets start using some good old fashion common sense and look at the hard issues.

 

5 Reasons Why We Get Into Debt

Debt has become a common fixture for so many people today.  Sometimes it climbs and it seens to have a life of its own but the reality is all the debt we own today comes from a source, a reason.  If you know what is the reason for the debt it  makes it easier to fix or prevent the problem. There are 5 common reasons for debt:

1. EMERGENCIES: Sometimes debt is a nessecity.  Sometimes there are real reasons why one might borrow money. There are many reasons for this kind of debt: storm damage not covered by insurance, an illness, a much needed home repair, etc. These debts come out of the blue. They were not planned for. Do you plan for your emergencies? Do you have a savings account that can help offset some of these costs? The best way to avoid this kind of debt is to have a plan.

2. THE I WANTS  Weare  living  in a world that is fast, digital and instant. If you want something you literally can have it in an instant.  Credit has played a huge role in this. A quick swipe of a credit card and you get to go home with that impulse buy.  The I want attitude is giving birth to a burden that people are not even thinking about. If you dont have the cash for it, are you really going to appreciate it in the same way.

3.KEEPING UP WITH THE JONESES: Do you get the green eye monster creeping in when you see your neighbour, friend, family member get the newest and latest item?  Jealousy, greed, showing off, pride… there are a lot of diseases at work for this one.  The need to show others up, or have the better, latest, greatest and more expensive is unnecessary and damaging.

4.NEEDING THE LATEST AND GREATEST: It’s good to have interests, but if they require a person to always upgrade to the next, best, latest and greatest version, then its an expense that is neither necessary nor important.  Too much indulgence in any hobby can cause a person to spend more money than intended. When I think of technology especially do you really need that new cell phone, tablet, laptop simply because it is the newest?

5. LACK OF KNOWLEDGE AND SUPPORT: People need to learn how to manage money, and the right support system is so important to  keep you on track otherwise it is very easy to lose control of one’s spending.  This has to do with the ease we can get credit and lack of finicual training.   We need to learn how to manage our cash flow.We need tools to manage debt on a daily, monthly and yearly basis.

Do you think about the reasons for your debt? Do you plan your debt load? What tools are you using to manage your finicial life?