Tag Archives: credit card debt

Great (and common) Listener Question

Good afternoon George: I have been listening to you on the Phil Johnson show. I have also purchased 4 of your signed books.   One for each of my children and one for my Husband and I. Sadly, I have to admit that we have not been good money managers. With your books help I have been able to put away $10,000 this last year while paying off many more bills.  I have a question: I have a credit card with $11,000.00( the last thing to pay off) on it. I also have a line of credit for $29,000.00 with zero owing.  

Do you think it would be a good idea to pay the credit card off with the line of credit….. the interest on the LOC is way lower.   S.

Hey, S:

You saved WHAT? THAT is incredible! That HAS to mean you and hubby got on the same page on some of this…because that’s the only way it happens!

I only ever answer questions of what I would do because I never have all the information. I would do that immediately, but, and it’s a BIG but:

Have you learned your lesson and don’t want to get burned again? Over 80% of people who do a consolidation or move a credit card debt to line of credit have it back up to the same or higher balance within 24 months. That’s the “but.”

If so, and the odds are high, you’d have the $11,000 on the LOC AND another $11,000 or so on the credit card again, and have made things so much worse.

If you can save $10,000 in a year, you can pay this off by September….so transfer it and then take the $11,000 with tiny new interest divided by 9 months (or you pick the months) and  pay THAT every month. Don’t get complacent and drop down to the new minimum payment of maybe 200 bucks.

If you did not have a LOC and the credit card rate were 60% how ticked off would you be – and how motivated would you be – to pay that off NOW…no vacations, no eating out – every dollar going to get this insane rate paid off.

Take THAT attitude and pick a month you want it gone! And next date night with hubby spend five minutes discussing how the credit card got to $11,000, who thought it was a good idea to get it that high, and what’s going to stop you from ever letting that happen again. It didn’t sneak up on you and it didn’t happen overnight. You need to find a way to hit the stop and panic button at $2,000 and not $11,000 of credit card debt.

You’re doing GREAT – keep going!!! And, if they’re over 15 or so, tell your kids about your credit card issue. It’s a BIG lesson for them, makes you sound human and not “parent” sounding, etc., because it WILL happen to them…at some age…to some degree…and it’ll guarantee they’ll be comfortable in talking to you about it, instead of hiding it, and feeling all that stress…

Bankruptcy Stats Are On the Rise…and Alternatives…

There were multiple media stories a few weeks ago that the bankruptcies and proposals in Canada are rising rapidly. They were up over 9% from April a year ago nationally.

OK, that’s true. But…First, it’s comparing a pretty low year, so the percentages are quite misleading – percentages almost always are. Just look at the report that Vancouver home sales were up 44% last month over a year ago. Yes, but off an incredibly brutal April last year. So I always want to see the real numbers and not the percentages. In BC there were 22 more actual bankruptcies than a year ago, in Alberta exactly 100 more, and less than 150 for the whole country. (That’s bankruptcies and not proposals where there is some kind of payback set up through a trustee).

Every single bankruptcy is a very personal and often tragic or heartbreaking story. Yet, every person who has to file, should also be admitting that they caused it and are responsible in one way – some small or big way – or another. There is zero chance someone who is debt free will ever file for bankruptcy.

For anyone coming out of bankruptcy the question to ask is if they’ve learned that lesson and will never go down the debt road again. Then, read the rebuilding credit chapter in the Money Tools book for the five steps (and only five) to rebuilding your credit.

For anyone wondering if they can make it back from the edge of financial trouble, here are a few things to consider:

-There is a recession coming. I first started talking about it a year ago. It’s going to rain – get an umbrella now. Pay off what you can. Not a few bucks extra here and there – read the step up plan to pay off your debts smallest to largest.

-Most people also don’t need to file for bankruptcy. Canada does not have a debtor prison. It’s perfectly OK to stop paying your credit card. They’ll call, they’ll have a fit, they’ll send you nasty letters but that’s it. Tell them calmly that you don’t have the money and you can email them your bills in order of priority and your income. They’re not even going to want it – trust me.

-Ask  yourself if you have your priorities straight: Food, shelter and utilities are fist. If you have enough income for a roof over your head and food you’re doing OK. Everything else comes after that. When you’re out of money on paying your priorities – the rest will have to wait – period.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

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

 

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.