Debt Free in 30

Every year, the focus of the holiday season is on consumerism and the need to spend money on the perfect gifts, the perfect decorations and creating the perfect dinner. And every year, Canadians end up spending too much money, putting them at risk for financial difficulties once the holiday season is over.

On today's show we rebroadcast a podcast from 2015 where my guest is Heather Cudmore, who at the time was the manager of Credit Counselling at Carizon Family Services in Kitchener, and is now a credit counsellor in the Hoyes Michalos London office.

Heather has lots of great advice on how to make a memorable Christmas, without spending a lot of money.

Should you ever loan money to family and friends? It's a tough question. Some of you might say, "sure, why not?" And others might think, "Maybe just to family."

Well, if you do decide to loan money, I'd recommend asking yourself this question: Do I have to borrow money to do it?

If you do have to borrow to help, you shouldn't loan money… even if it's to family and even if they say they'll pay you back. Now I realize that sounds harsh, but it's in your best interest to not get yourself into financial trouble.

On today's show I discuss why you should never loan money to family and friends, and I explain how you should help them if they are in need.

On today's show, I review 10 personal finance books that would make great gifts and/or would be a great start to your own personal finance library. All 10 books are listed below, with the time stamp from the podcast, if you wish to jump ahead and listen to my comments on a particular book:

General Money Management

1. The Wealthy Barber Returns by David Chilton (2:35)
2. Wealthing Like Rabbits by Robert Brown (3:20)
3. 397 Ways to Save Money by Kerry K. Taylor (9:40)
4. Stop Over-Thinking Your Money by Preet Banerjee (11:06)
5. Debt-Free Forever by Gail Vaz-Oxlade (11:54)
6. Protecting Your Money – A Guide to Identity Theft and Fraud by Kelley Keehn (14:24)

Real Estate

1. When the Bubble Bursts by Hilliard Macbeth (19:32)
2. Burn Your Mortgage by Sean Cooper (23:26)

Retirement

1. Victory Lap Retirement by Jonathan Chevreau and Mike Drak (27:19)

Thinking

1. Thinking, Fast and Slow by Daniel Kahneman (28:48)

Of course, I am also quite proud of my own book, Straight Talk on Your Money, which I discuss briefly at the end of the show.The first five books on the list are great for all age groups. Books #6 and #9 are particularly good for either seniors or adult children of seniors, and book #10 is great for anyone who wants to take a "deep dive" into how our brains work.

I hope you enjoy the list!

Have you ever wondered why a credit card isn't called a debt card like it should be? Think about it. That's what a credit card really does – it gives you debt. Well, I'll tell you why. Because it's not good marketing. And credit card companies know this.

In Myth 4 of my book, Straight Talk on your Money, I point out that financial institutions know we are guided by our emotions. Banks and credit card companies have manipulated you into thinking that credit is good, and they do it constantly.

Credit can also be used to describe a source of pride or honour like, 'you are a credit to your family.'

Here's another example: "I'm a good person because I have a high credit score." How many times has been idea been shared? That maintaining a good credit score means you're responsible with your money and you're not a reckless spender.

I disagree.

Although my focus today isn't on credit scores - I already discussed that on my podcast a couple weeks back, episode 167 - I will say that a credit score, which should (once again) really be called a debt score, is another example of using positive language (aka good marketing) to make us think differently about financial concepts than we're supposed to.

Calling it a credit card does not change the fact that it is really a debt card.

Personally, I'd rather be blunt with these terms. All I'd really like to accomplish is to have you consider being more honest about the terminology too. See how it affects your decision-making.

I share more details on why words matter in this podcast and why financial institutions benefit from their manipulation.

On today's show we discuss the different forms of income that can be garnisheed (or not). Here are the types of income, with the time stamp if you want to fast forward to that section:

• Wages – 3:21
• Ontario Works – 8:31
• Disability Pension – 9:58
• ODSP – 10:00
• Retirement Pensions – CPP – 12:36
• OAS – 13:35
• Basic Income – 19:19

Full links to all legislation mentioned in the show are on our website at https://www.hoyes.com/blog/wage-garnishments-what-income-can-be-garnisheed/

How important is your credit score? In my book, Straight Talk on Your Money, on page 48 I discuss the "Credit Score Scam", and on page 52 I say that you should not focus on your credit score. (Apparently I'm not a fan of credit scores). It was those passages from the book that prompted Ross Taylor, a mortgage broker, to email me and say:

I noticed when reading your book we do not completely agree on the importance of one's personal credit history.

I emailed Ross back and said "great, come on the podcast and let's discuss it!", and that's exactly what we do on today's show.

My view is that credit scores are for the benefit of the bank, not you. I explained this in a past post Why our credit reporting system is broken. Credit scores are a tool to help a lender decide how much money to lend you. A person who has never borrowed money but has $1 million in the bank may not even have a credit score. A person who has five credit cards and owes money on each of them may have a high credit score, because they are servicing their debt. So to get a high credit score, you need to borrow money. In many cases that's a bad idea, and that's why I don't believe in making a high credit score your top financial priority.

While Ross Taylor doesn't necessarily disagree with any of those comments, as a mortgage broker he also knows that to get the best rate on a mortgage, you need a clean credit report, and a high credit score. That's why he believes you should pay attention to your credit history, and take steps to improve your credit score. In his words you need to look at:

Your score, your history, the content and what comprises it.re

Which approach is correct? Are we both right? You be the judge.

November is financial literacy month in Canada, and for the seventh straight year the government will encourage Canadians to:

take concrete actions to better manage their money and debt, including making a budget, having a savings plan and understanding their financial rights and responsibilities.

So, the solution to all of our financial problems is to make a budget.

I disagree.

In my experience, budget's don't work for most people, because they don't stick to them. They get discouraged, and they end up worse off than before.

I've talked a lot about what I believe is a better alternative to budgeting, and on today's show I'll give a better alternative to how we are currently promoting financial literacy.

Registered Disabilities Savings Plans are geared towards helping families and individuals who are living with a disability. RDSPs can only be setup for someone who is eligible to receive the Disability Tax Credit.

If this is for your child, you can only begin making contributions after your child is diagnosed with an eligible disability. This is one of the main reasons RDSPs aren't as commonly used, or as frequently discussed.

On this week's podcast we're welcoming back Alan Whitton, the voice behind the Canadian Personal Finance blog. This is a subject close to Alan as he and his wife found themselves having to set up an RDSP for their son. After familiarizing themselves with the ins and outs of the Disability Tax Credit, they sought help from their doctor to obtain it.

On today's show we discuss how they work, who is eligible, and what happens if you have an RDSP and file bankruptcy.

Everyone thinks that a house provides both stability and financial security, but on today's show, we'll explain why that is not always the case.

It is true that if you live in the same home for many years, you have stability. But there are significant costs to owning a house.

You pay real estate commissions when you move, but you also pay a penalty to break a fixed mortgage. As we explain on today's show, the penalty for breaking your mortgage can be a lot higher than you expect.

The big banks have found a loophole that allows them to charge a bit Interest Rate Differential penalty, even when rates are rising, and if house prices are not increasing, the penalty to break your mortgage and closing costs can eliminate the profit on your house.

Before you buy a house and sign up for a five year mortgage, be sure that you are not likely to need to move for five years, and confirm that you can afford to pay all of the costs of living in your house (since costs are more than just a mortgage payment).

In some cases it is your fault, if your debt was a result of reckless spending but, in my experience, most people get into trouble because "life happens". Many of my clients have debt problems caused by a job loss, or reduced income, or a life event like a relationship break-down or a medical condition that forces them to take time off work.

On today's show we hear the story of Mary, how has debt problems. I'll leave it to you, the listener, to decide if her problems are her fault, or if there was anything she could have done to prevent her money problems.