Debt Free in 30

A debt collector does just what the name suggests: they collect on unpaid debt. They won't review all your debt relief options with you or give you a plan that makes debt repayment realistic and affordable. Their only goal is to recover as much debt for the creditor as possible. That's how their business makes money.

You might be shocked to learn that some big not-for-profit credit counselling agencies are now operating the same way. In fact, they are registered with the Ontario government as debt collection agencies. Credit counselling agencies have changed. Many are no longer registered charities. Credit counselling agencies don't do a lot of budgeting or actual in person counselling anymore either. Credit counselling organizations in Canada today are often big, national call centers. Now when you call a credit counselling call centre, you may be sold a debt management plan (DMP), where you repay 100% of the debts you owe, but with a lowered interest rate. Credit counselling companies sell this regardless of whether that's the right course of action for you because they are sponsored by financial institutions to do so.

We take a deep look at why not-for-profit credit counselling agencies have become nothing more than debt collectors. We also examine the implications for you as a debtor in need of help.

But it's not all bad news: We believe that there is a very important role that not-for-profit credit counsellors can play in helping Canadians with money problems, so we end the show by laying out our solutions and recommendations.

A home equity line of credit (HELOC) is a loan secured by the equity in your house. A HELOC is often presented as a great borrowing tool because unlike with credit cards or unsecured loans, you have access to a large amount of revolving cash at a lower interest rate.

But what you probably don't know is that your bank can change the borrowing terms on your HELOC whenever they want. I talk with Scott Terrio and he shares why you need to think twice before signing up for a home equity line of credit.

If you can sell your assets, pay the taxes (there's a tax hit when you cash in an RRSP), and have enough to pay off your debts, it may make sense to sell your assets to pay off your debt. But, if your assets won't cover your debts in full, there may be a better option.

On today's podcast we discuss how to determine if selling assets is a good debt reduction strategy.

Whether your inheritance is included in a bankruptcy depends entirely on when you become entitled to receive the proceeds. As this is a complex issue, I talk with Ted Michalos and we take a detailed look at bankruptcy implications for inheritances.

While we discuss inheritances and bankruptcy specifically in this podcast, the advice applies to virtually any cash windfall including a cash gift, work bonus or lottery winnings.

The best way to control your auto expenses is to buy a car you can afford. This keeps your monthly car loan payments low (since you borrow less) and ensures that you don't over-finance. But how do you buy an affordable car that fits within your budget? Should you buy new or used? If it's used, how can you know it's reliable?

Enter Scott Marshall. With 30 years of experience in the driver training industry, he shares his first-hand knowledge of how to make car ownership affordable. He also suggests that there is a correlation between safe driving and saving money.

Scott shares the following tips for successfully keeping your car buying costs low:

1. Buy used. According to Scott, a used car is a great way to achieve affordability. A used vehicle can be reliable if you're strategic in your purchase and maintain your car well.
2. Buy a car that's only 3 or 4 years old. Your car will still be very close to the most modern vehicle, but at only 60% of the cost. Don't worry about newer features because the most important ones (anti-lock brakes, electronic stability control, and airbags) are all standard anyway.
3. Buy from a credible dealer. Browse websites like Auto Trader, where you can find a car that is certified pre-owned, meaning it's backed by the original manufacturer. That also means it's been through rigorous inspection.
4. Save on insurance proactively. Your insurance payments depend partly on the type of car you buy. Minimize these monthly costs by asking your insurance company how much your payments will be based on vehicle models.
5. Test-drive more than one car. Don't give up if you're unhappy with your first test-drive. If you've found a model that fits your budget, test multiple cars. They will each drive differently, even if they're the same make.
6. Save money on tires by alternating them. Scott suggests buying winter tires in the colder months to replace your all-seasons. Even at a temperature of plus 7 degrees Celsius, all-season tires will harden and wear more quickly. By investing in winter tires, you can extend the life of your all-seasons by 3 or 4 more years, saving you a lot of money in the future.
7. Consider getting a CAA membership. CAA memberships cost less than $80 a year. While this still sounds like an added expense, it saves you hundreds of dollars on a towing service in the event of a roadside emergency.
8. Determine the kind of car you'll need 5 years from now. Think carefully before you buy your vehicle. If you think you'll need a bigger car in the future, don't buy a smaller one now. You'll save a lot more money because you'll avoid rolling over auto loans and risking financial trouble.

Every financial guru says that achieving success starts with setting a goal.

I disagree. While there is some benefit to setting goals, you are more likely to achieve success if, instead of focusing on goals, you have a system. I discuss goals vs systems on today's podcast. Listen or read the transcript below.

This is our first episode of 2019, and I've got a question for you: how did you do with your New Year's resolutions last year? How are you doing with your New Year's resolutions this year? If you're like many people, you've probably already given up.

If your goal is to get out of debt or to save more money, you might be a little frustrated knowing another year has come and gone without improving your finances.

So what if your goal this year is to get out of debt? Or save more money? What's the best way to achieve any goal?

The answer may be to not focus on the goal at all, but instead to create a system to reach that goal.

Today on Debt Free in 30, I want to explain why, in most cases, systems are better than goals.

It's been a long time coming, longer than Ted Michalos and I predicted in our past year-in-review podcasts. We predicted that 2014 and 2015 consumer insolvencies would remain flat, and they did. However, last year, we predicted that the seeds of a debt crisis had been planted, and we fully expected consumer insolvencies to begin to rise. And they did, albeit not until the end of the year. As of October 2018, year-to-date Ontario bankruptcies and consumer proposal volumes were up 0.6%. That growth came mostly in the latter part of the year, with 5 of the previous 7 months showing year-over-year.

We believe a consumer debt crisis will hit us in 2019; on today's show we analyze the numbers, and give you our predictions for 2019.

If you just earned a bonus from your employer or received an unexpected sum of money, how should you use that bonus if you also have debt? On today's show we talk with Scott Terrio and we outline what to prioritize to get the most bang for your buck. We also take a look at common mistakes people make when they receive a surprise lump sum of money and discuss the impact a bonus can have on a bankruptcy filing.

Financial technology, or fin-tech, has come a long way. Much more than just a budgeting app, now you can do your banking, money management, investing and even borrowing, online. In addition to apps, fin-tech companies are following the chatbot trend. On today's show I talk with Alan Whitton, (known as the Big Cajun Man), who has spent 35 years working in the tech industry, about whether chatbots are good for us financially and security issues around fin-tech in general.

Alan interestingly points out that there isn't a lot of fin-tech companies helping people get out of debt. Most fin-tech companies go where the big money is - and that's selling new stuff. There are very few apps that tell you to prioritize savings, create an emergency fund, or pay off debt. Instead, we hear about robo-investors and companies like Borrowell that make a lot of money offering 'free' credit scores to entice you to borrow more.

Are chatbots just a sales pitch, or can they really help us? Tune in for more on today's show.

When you have debt, Christmas is a stressful time. With pressure to spend on family, friends, co-workers, and maybe even your barber, the season turns into more of a financial burden than a time to be merry. And even though you want to give, your budget is limited. Is it possible to say no to holiday spending without feeling guilty?

Actually, it is. It's all in your approach.

On today's show I talk with Lisa Orr, an etiquette and protocol consultant, and we take a look at how to navigate the holiday season without awkwardness and forced overspending. Lisa also shares etiquette advice on common and sometimes uncomfortable spending scenarios like charitable donations, tipping, and re-gifting.