Tag Archives: car payments

Would You Like Me to Just Send You $1000 a Month?

Leave a reply

 

Whenever I get emails from people asking for feedback or help with a financial mess, I’m more than glad to help. No, I don’t charge for it. I believe God gave me a purpose and passion and it’s called paying it forward.

But at some point, most people are really not interested in doing much (or any) heavy lifting. And I can’t fight harder for them than they’re prepared to fight for themselves. That was confirmed again by the last BMO Savings Survey. 30% of people want to save more but do not want to change their spending habits. Sorry: You can’t get there from here – it can’t happen.

The emails have a pretty consistent theme: Someone is spending more than they’re earning and they’re in pretty deep debt. I’m not in the middle of their mess, so it’s easier to see the fixes that’ll turn things around. Here are some of them that will sound so obvious, but they’re anything but when you’re in the middle of it:

No, you can’t send your two kids to private school when your income is $45,000. You can’t afford it. It doesn’t make you a bad parent, it makes you a great and responsible parent who can do 5th grade math.

You have a cell bill of $140 a month. That’s insane. It wasn’t that long ago you managed to live without a cell. Now anything but a full unlimited plan is  a necessity that you can’t do without? Mine is $39 with data.

Sell your car and get out from under the $1,100 car payments. They’re killing you. Drive a $3,000 used, reliable car that you buy for cash until your debts are paid. When you can afford it, you can turn right around and get an idiotic $1,100 car payment again if the debt-free thing doesn’t work for you. But you won’t do with, giving me two or three totally bogus reasons…actually…excuses why you love that $1,100 payment more than you’d love saving the same $13,200 a year.

You say you need to keep $4,000 in your savings account at half a percent while paying 22% on your credit card. Keep $1,000 as a starter emergency account; pay the rest on your credit cards today!

You don’t know the interest rate on your credit card and only know that you’re paying minimum payments of around $200 a month while charging about $800 or more. So you’re going further in the hole each month and tell me you have to have your credit card. Yes, you do. Because you’re so far in debt, that’s your only way to buy groceries and gas right now.

That’s just some of the very common ones. So what exactly do you want help with? You won’t downgrade your car, your cell phone, switch to an 11% credit card instead of 22%, or stop your credit card addiction. News flash: I’m out of ideas to help you. The only other thing left is for me to send you $1,000 a month. Is that why you got in touch with me? That’s not being rude, it’s caring enough to be honest, and seeing the reality of your income and expenses. Numbers don’t lie.

You don’t have a money problem as much as a spending, thinking, planning and discipline problem. You want your toys, gadgets, and vehicle more than you want financial freedom and becoming really wealthy.

A $400 Raise & Six Ways to Go Broke This Christmas

Leave a reply

Wow! Someone at the radio station this weekly program is on just got a $400 raise! THAT is the greatest Christmas present to get, isn’t it? But he didn’t get it from his boss – he got it from and for himself. He just finished his last $272 car payment that had been around for six long years. Adding tax back (since all your payments are made with after-tax money) that’s $400 he’s no longer sending off each month.

He’s spent $29,000 gross income on a stupid car that isn’t worth a tenth of that today. If that car payment hadn’t been around, the same $272 a month for the last six years would now give him $25,000 in his bank account. Hmmm…out a net of $19,600 versus $25,000 that could have been his: That’s a $44,000 difference!

If he can suppress the “stupid” gene in all of us and keep driving the same car payment free, that $273 over six more years would have been $62,000. But the car financing was P.G. pre-George and I hope he’s now re-allocating that same amount to a savings account and paying cash for the next one.

And  from Dave Ramsey…. Six ways to go broke this Christmas season

Keeping up with the Jones…Newsflash: The Joneses are broke, too – it’s just that you don’t know it! The last thing you need is their debt load. Image isn’t everything.

Confuse toys with food: You NEED food, shelter, clothing and utilities. After that, it’s a want. Don’t confuse gifts and gadgets with necessities and remember the priorities in life – and in Christmas.

Presents for everyone: Newsflash: You can’t afford to give every third cousin in the family a present this year – or any year. Forget that sense of obligation and get real.

The store picks the present: The mall will eat you alive and spit you back out. Do not go without a list of people to buy for, the cash in your pocket, and a plan. Wandering around aimlessly for ideas will cost you a ton of extra money. All the specials and cool stuff will empty your wallet and fill your credit card statement in a hurry!

I’m number one: No, you’re not. It’s Christmas – the money you spend on yourself, even before Christmas, shouldn’t exceed what you’re spending on others. Make a rule for yourself: For every dollar you spend on yourself, another dollar goes to charities. It may help re-focus your priorities.

Christmas travel: Few things will speed you along the going broke plan than trying to fly a family of five to grandma for Christmas. It’s fine to travel, but make it reasonable. Besides, your grandparents are retired and THEY can afford to visit you if they want to!

Survey Says: We’re Worried About Our Debts…Ya Think?

Leave a reply

This week, RBC released their Consumer Outlook survey, and it shows that more and more of us are worried about our debt load. I think that’s great news in that we’re finally getting real and seeing that borrowing money does not work, and being broke is not a fun way to go through life.

Fundamentally, it’s a real problem when we stay optimistic about our debts. THAT is what gets us broke! When we talk ourselves into buying this or that on credit, thinking that the payment isn’t that big a deal, we’re on a slippery slope of trouble. We block out the fact that it might take two minutes to spend it, but it’ll take years to pay it off!

A way better mindset is to be pessimistic about our debts and optimistic about our incomes. Instead, the survey shows that we believe we can become debt free reasonably quickly, but we’re worried about our job security. To me, that’s the wrong way around. We should be pessimistic about our finances. It’s what makes us realize maybe we can’t pay that payment for years, what happens when rates go up, I’m going to be in trouble if I carry my credit card at the max, and so on.

Yet, on the income side, 24% of us are worried about a job loss. To put it in perspective, however, the unemployment rate is 8.5%. But 5.5% or so is full employment. We know that from just a year or so ago. So, the real unemployment rate is around 3% and 24% of us worry. That’s a total disconnect between the two!

On the optimistic side, thinking we’ll pay off our debts pretty quickly, the numbers are even more surprising:

18-34 year olds expect to be debt free by age 43.
35-54 year olds think it’ll be at age 59. Yet, the group that’s closest to that age, those age 55 and older, think it’ll be at least until age 66! So a heads up to those under age 34: It ain’t going to happen! No way, no how – honestly. Sorry to be the bearer of bad news, but the reality is that you’ll likely have a mortgage payment of 25 to 30 years which right there, alone, makes it impossible.

And almost everyone under age 54 has a car payment. The average car payment is $480, financed over seven years. What’s a seven year old car worth? Exactly. So what happens then? We finance another one and go on another seven year broke cycle. Skipping one of these seven year finance cycles and putting that money into an investment account or RRSP will be over a million dollars when you retire. Instead, we buy something that’s worth less and less each month and keep paying and paying.

Keep in mind that every time you commit to a payment, you’re voluntarily taking a pay cut! That payment has to be made, so it’s money you no longer get to keep! It may be that $200 credit card payment, $400 car, the financed furniture, or whatever. Yet, if our boss wants to give us a pay cut we go insane. But we do it to ourselves every time we borrow!

One more thing which will become really important to all of our finances over the next year or so: The RBC survey showed that only 57% of us think interest rates will go higher. Excuse me? Rates are the lowest they’ve been in generations. So when they move, where do they HAVE to go? Up! And every line of credit and every variable mortgage will take some big jumps. The It’s Your Money book has a chart that asks how ready we are for the next rate increase. Anyone with just $150,000 of debt being hit with a 3% rate increase will spend another $329 after tax for nothing but more interest. And if we say we’re broke now, where’s that $329 going to come from?

What can we do? The really easy basics that 90% of us won’t do:
-Stop borrowing – period. When you’re in a hole, it makes sense to stop digging. Debt is NOT your friend.
-Do a written budget each month to know, not guess where your money is going
-Stop going to a restaurant unless you work there
-If your car is financed – sell it, no matter what you owe. That saved payment alone will likely get all your other debts paid off within a year. Drive a $2,000 beater for a couple of years until you’re debt free.
-Pay yourself first: Have some money taken right off your pay, or out of your bank account towards savings. If you don’t see it, you can’t spend it.
-Leave the credit cards with a relative. Out of sight, out of mind, and start paying in cash or by debit card.
-Get an emergency savings account of two weeks income so the next crisis will just be an inconvenience.