Gails Blog

Okay, the news on the recession front is that we’re in one and we better start doing things a little differently. And while the lenders of the world would like us to keep borrowing - more in a minute - the University of Toronto’s Institute for Policy Analysis says that Ontario’s economy contracted .4% in the first quarter of 2008, and is in the midst of shrinking again. Since Ontario makes up almost 40% of Canada’s economy, an Ontario downturn, no matter how mild, is going to be felt everywhere. So maybe it’s time to step cautiously.

The new head of domestic banking at the Royal Bank, Dave McKay, doesn’t agree. He says that the Canadian consumer is very healthy right now, and being in such good shape could probably afford to borrow even more. Really? Course, Mr. McKay is praying that Canadians keep borrowing because the investment banking business - the other big money-maker - sucks. So lenders have to pick up the slack so the banks’ profits don’t drop off.

Bankruptcy professionals have already begun to sound the alarm. All that go-go spending on credit has put many people precariously close to the edge. Hopefully, we’re waking up to the reality that we’ve spent money we won’t earn for the next two, three or even four years - if we’re lucky enough to have a job!

There are pundits who believe this “waking up” doesn’t bode well for the economy as a whole, since when people stop spending money that just makes the whole thing come crashing down. But I’d argue that we haven’t been spending money in our last mad dash to the mall, we’ve been spending credit - money we haven’t made yet - and so all we’ve really done by shopping ourselves silly using our credit cards is delay the inevitable in the cycle of the economy.

Like the seasons, the economy has a cycle. We can’t change that. As much as we try to wish it away with dumb terms like, (said in a deep voice with a very serious face) “the fundamentals have changed,” that’s a load of rot. Fundamentals don’t change. That’s why they’re called “fundamentals.” What changes is our willingness to follow the basic common-sense rules.

Rules like: You don’t spend money you don’t have. Why is that rocket science? If we don’t have the money to pay for the furniture, the new dress, the vacation now, why do we thing this money is going to magically appear in 30 days, 6 months or a year. And why - if we’re having trouble making ends meet now - would we add the extra cost of interest to our outlay? Are we dopes?

I started working with a new couple yesterday - lovely people. I have high hopes. But when I took her credit cards away, she looked like she was going to toss her cookies. “Suppose I need something?” she said, a look of utter panic on her face.
“Need something like what?” I asked.
“Well, suppose I see something that’s a really good deal that I need?” she queried sincerely.
“Need or want?” I asked.
She paused. He laughed. She was stuck.

We can’t even tell the differences between things we NEED and things we WANT. We’ve been so busy satisfying our every whim RIGHT NOW, that we’ve totally lost perspective. Hell, we’ve totally lost our senses.

What did people do before there was a Starbucks on every corner? Do you NEED to have a cup of coffee that costs three bucks? Really?

How often did your parents eat out when they were raising you? Every second day as many of us do? Really?

And they took you on exotic vacations every year too, right? Hmmm.

So when did we begin to think that nice-to-haves are have-to-haves?

I’ll tell you when. We began to spend indiscriminately when we were introduced to the idea that we could have whatever we wanted right now and would only have to pay a fraction of what it would cost - somewhere between 2-3% — in monthly payments. That 2-3% minimum payment feels painless, and so we got in the habit of spending without thinking. We want it, we buy it. No money in the bank, no problem. We can whip out our credit card, or take a cash advance, and we’ve got it. No harm, no foul. Really?

We’ve swapped poker night with friends for a trip to Vegas. We exchanged fixing the car for buying a new car. We’ve substituted borrowing for saving. And with all these changes we have been doing ourselves harm, and we’re about to find out how much.

It’s time to prioritize where our money goes. Video games aren’t a necessity. Nor are new clothes, furniture or eating out. And as much as you think you could never survive without that coffee in the morning or that glass of wine in the evening, I’m here to tell you those aren’t priorities either. They are nice-to-haves. If you’ve got so much as a dollar of debt, you’ve got to put the brakes on the nice-to-haves until you’re out of the hole.

It’s also time to go back to bargain shopping. I don’t want to hear the yada yada on quality versus price. Bargain shopping doesn’t mean buying crap. It means buying quality at the best price going. And it means only buying what you NEED.

And it’s a time to lower our expectations about what life should be like. Since when does a trip to the amusement park beat a day playing baseball, volleyball or soccer at the local (free) park with friends?

While you’re at it, consider what skills you have to offer in exchange for things you need done so you can help someone else save some money too. Consider swapping what you have for what you need. There are people out there who are car mechanics, contractors, home-care providers, sewers, bakers, cabinet-makers. Figure out what you have to swap and do the deal to save some money.

Of course, you can’t say you’ve SAVED anything if you immediately turn around and spend the money. Nope. You’re just deluding yourself. Instead, every time you SAVE a dollar, immediately apply it to your debt. You can keep a simple chart on the wall to keep track of how you’re doing. Get some momentum and you’ll be shocked to see how quickly you can get out of debt.

Hey, you can believe me or you can believe The Banker. You decide.

I am frustrated by people’s willingness to accept the options offered by Unworthy Lenders simply because those options feel easy. When did we lose all our backbone? And when did we decide that someone else had to right to dictate our realities?

Did you know that the type of credit you choose to use can negatively or positively affect your credit score? Yup. If you’re smart about the type of credit you use, you can influence your credit score, which will impact on the interest rate you have to pay. Put if you’ve made some bad mistakes in borrowing, it’s not as easy to fix as catching up your outstanding balances. Nope, credit black marks stick to you like gum on your shoe.

I saw direct evidence of this when I worked with one couple that had a fabulous income, but because of poor choices, also had a really crappy credit score. I knew they were in trouble the minute I looked at their creditor list and saw the types of credit they were carrying:

• loans from Last Chance Lenders
• credit cards that were at or over their limits
• way too much consumer credit relative to credit for assets.

It’s been estimated that the type of credit you use can affect up to 10% of your credit score.

Head into your local pay advance store, or borrow money from a Last Chance Lender and your score will go down because it looks like you might be a high risk and can’t qualify for mainstream financing. And if you have loans with really high interest rates that tells other lenders that you’re a bad risk and your cost of borrowing will go UP UP UP!

That’s one of the problems for people who feel their credit is spiraling out of control. They may take steps to fix the problem, but if they are the wrong steps, then their efforts simply make the problem worse.

The couple of spoke of earlier - that’s what happened with them. Once their debt seemed to become unmanageable, they decided to get a consolidation loan to make the whole miserable mess more manageable. But they borrowed from the wrong place… they ended up at a Last Chance Lender, which charged them over 28% interest on their consolidation loan. Ouch! Costly in terms of interest, and the impact on their credit score.

Using a credit card that you consistently pay on time and keep well below your limit will help your score. Installment loans, like a car payment, can also help your rating if your payment record is good and you have paid the balance down.

If you want to consolidate, but can’t find a reasonable interest rate, consider your debt management strategy. I ran into this again last week when one of my couples decided to approach their lender for a consolidation loan. While the going rate for unsecured loans was running at under 7%, their lender wanted to charge them more than double that — 13% interest. OUTRAGEOUS! I told them to tell their lender where to stick their 13%. They’ll have to fix their mess some other way.

There are always other ways. This is where the idea that this is your life and you can make decisions to be in control of it really becomes paramount. If you think you’re at the whim of any ol’ lender, then you give up that control. If you believe you can make choices that will end up serving you better, then you’re in control.

So how will my fam have to deal with this set-back. They’ll have to make more money or cut their budget back, so they can come up with the money to get themselves out of debt fast. Then they’ll have to be vigilant about doing the right thing until they’ve reestablished a good credit score.

The alternative - a consolidation loan at an high interest rate - may seem both smart and easier in terms of the cost to their cash flow (yes, their payments would be lower), but the long-term cost to their credit score, and the amount of interest they’d end up paying, makes it a dumb thing to do.

Sometimes, it’s not the clear-cut, easy path that’s the right path. Nope. Sometimes having to cut through the brambles and fight through the undergrowth gets you to where you want to be in better shape. It takes more work. It takes more courage. It takes more stick-to-it-ivness. And not everyone has the gumption. Do you?

I got a letter from Tracy saying that her sister and brother-in-law are spending their way into a bankruptcy and perhaps even a divorce. She wrote:

HELP GAIL! How do I approach them to tell them to work TOGETHER on their spending? After all, the goal is to be together and happy not to self-justify and out-spend each other into divorce, right? I am very worried that if they keep going like this bankruptcy and blaming, and divorce will be inevitable, then what happens to the kids? HOW can I help them? HOW can I talk to them? HOW can I get them to apply for your show?!

 

It might be time to sit down with your sister and brother-in-law and have a conversation - as opposed to a confrontation - about your concern.

Keep in mind that interventions are very tricky and not always successful. If it doesn’t work, it could affect your relationship with your sister and/or brother-in-law — and the kids, if you become persona non grata.

I think the first step would be to open up a conversation with each of them individually to see if they perceive that they have a problem. If they think they’re fine, you might just have to butt out baby. If either thinks things aren’t all that rosy, you might offer your help as a mediator while they have a discussion with each other about their issues.

I often advise people who are trying to open up conversations to do it on a secondary issue: you might ask your sister if she’s see TDDUP and then tell her it’s fun and make a date to watch an episode with her. Or you could talk about a book you’ve read, or a conversation you’ve had with a friend. Whatever it takes to open the door.

Also consider involving someone else in the intervention. If you have another sister, and she believes as you do that things are bad, then ask for her support in approaching your brother-in-law and sister. The more people who come together to support the need for the intervention, the more likely it won’t be seen as “your perception” of a problem where none exists. And if you can involve a spiritual guide - priest, minister, rabbi - whomever your loved one respects, all the better.

And then, of course, you have to have a plan of action. What are you going to ask your sister and BIL to do differently? How are you going to help them change their bad habits?  If you can’t come up with a plan, something to show them how it could be different for them, then you may be spitting in the wind.

Interventions are successful when people are lovingly forced to look at the ways that their behavior is hurting the people they love. The idea is to bring them out of denial, and get them committed to seeking help.

But stepping in and telling someone they are screwing up their lives — and, perhaps, their children’s lives, that they can’t manage their money, and that they’re failures isn’t going to go over like a chocolate sundae. You could very well be told to mind your own beeswax. And you could be censured by other family members or friends for having the audacity to try and tell someone else how to live their lives.

Proceed with caution. Love must be the source of your motivation, not judgement. And you need to be well armed with friends, family and other professionals who can help.

Ultimately, the toughest part will be when the request for the bail-out comes, if it does. Then you’ll be in a quandary:

• help, and you will be enabling your loved one to continue down a rocky road,
• don’t help and you’ll be a selfish, mean, horrible person who can just stand by and watch the kids go hungry

I’m sorry this is something you’re having to deal with. It isn’t easy.

It’s a fabulous Saturday morning. It’s going to be a slow day. I need a slow day to recover from all the fast talking I have to do during the week. The sun is shining through the budding trees, there’s a lovely breeze blowing and the air smells like honey. I am very grateful to all the powers for giving me another beautiful day full of joy and song. Days like this help me to remember what’s really important.

Last night I cooked up a storm so today I can just eat my face off! Jamaican rice and peas, chicken done with coconut milk, ginger and kaffir lime leaves, and pork in an all-spice, ginger, sesame and oyster sauce. Whenever Alex declares my meals, “delicious”, I always respond, “Enjoy it!” which translates to “I have no idea what I did so don’t ask for it again.” I cook by magic combining ingredients I feel attracted to, and crossing my fingers. It’s one of my favorite things to do. And I’d much rather cook than eat out.

Alex is in the play at school and Sunday is the final dress so I’m planning to spend my day sitting on the gym floor watching these kids have the time of their lives. These are good, focused, hard-working kids. They have been rehearsing Beauty & the Beast since October last year, working until 9 p.m. on Wednesday nights and most of Saturday. Which means Sunday has been HOMEWORK. It’s a cast of about 30, I think, and these kids just love each other. When Martha, who is Belle, started getting butterflies, Alex took her aside and told her that butterflies were good, that they’d help to lift her to where she needed to be for her performance.

So I was thinking, when did life become so much about having, instead of doing and being? After all, these kids don’t have squat - they’re always whining about not having any money — and many come from homes that offer no privilege. Some are the children of farmers (I live in the bush), some are the children of townies of modest means. Some have wealthy parents who can afford to give them everything. And yet these kids live on an even playing field. They don’t compare themselves to each other in terms of stuff (but do in terms of their brains), and share everything, swapping clothes, eating each other’s food, making sure everyone has some.

What happens to us? When do we lose the sense of camaraderie, the sense of belonging, and turn into consumers? When does WHAT WE HAVE become more important than WHO WE ARE?

I wonder how much happier we’d be if we used all that time we spent going shopping helping other people or just doing stuff with other people. I mean, instead of going shopping, maybe we could help a neighbour garden, get groceries for a friend, look after a niece or nephew for a day, cook a meal for someone, offer to read to a person who can’t, teach a child something new, volunteer at an animal shelter, drive someone to visit a friend… the list goes on forever.

I read a posting by a woman this week that really hit home. She was responding to another woman who was saying how hard it was to buy stuff for her children and grandchildren because they already have everything. So this woman suggested the gift of time and individual attention, the alternative of a day spent focusing on the birthday girl.

When I think back on all the crap I received in my life, most of it falls into shadow. There are a few gifts I remember really well, but most of it was just filler. Can you imagine if we took all the money we’re spending on filler and used it to enrich our lives with activities, with sharing, with focused attention? Wow!

There are still things I like to shop for. I’m a sucker for books. And I love everything green-and-growing. I’m going to buy some new pots today, some dirt, some seed. I’m going to start my back-deck garden this weekend. It’s not the stuff I’m buying, as much as it is the hours of experience I’m looking forward to. I’m not much about what kind of containers I get: plastic and cheap are great. But I can hardly wait to plunge my hands into the dark earth, to smell the warmth of all that growing. And all the hours of deadheading, watering, pruning, picking are going to help me stay in my quiet zone, the place where my soul rejuvenates by connecting with something real.

Have a great weekend.

Lots of people shop emotionally instead of with their heads, buying stuff they don’t need because they’ve had a bad day, had a great day, or been with someone who is very convincing - be it a salesman, a best friend, or a wife/husband with a itch to acquire.

So, have you ever bought something you just couldn’t live without and afterwards find yourself scratching your head and wondering, what the hell was I thinking? Then you’ve experienced something called “buyer’s remorse.”

Want to avoid that horrible sinking feeling, the guilt, the wish-I-could-take-it-back sense of waste? Here’s what you should do.

1. Make a list, and never buy anything that’s not on your list. If you see something you really, really want, add it to your list.

2. Once you’ve added it to your list, go home and sleep on it. If you want it tomorrow, go to step three.

3. Do some research before you buy. Buyer’s remorse often climbs on our backs when we find out we’ve paid too much for something. Make sure you know how much the item you’re buying is really worth.

4. Get a second opinion. Take your sister, your best friend, your mom or dad with you, and ask if they think it’s worth the price.

5. If there’s any financing involved, figure out what the item will end up costing you once you’ve paid the financing charge. If you don’t do this step, you’re deluding yourself and you deserve to feel like a dope.

6. Ask yourself, “Do I need it or do I just want it?” If it’s a need, put it on your list in a position of priority. If it is simply a want, it goes at the bottom of your list. Take care of your “needs” before you start scratching your “want” itches.

7. Ask yourself, “What else could I do with the money I’m spending on this item?” Are you working towards a goal that would be served well by this money? Is there another priority that should take precedence? Put your money where it will do you the most good.

Guess what my first answer to this question is. Go ahead. Guess. Right… any consumer debt - that’s stuff on your credit card or line of credit that went towards anything you didn’t need - is too much debt. Pretty hard-line, eh? Yup.

That being said, I do allow for the fact that people have some debt. On the “Life Pie” you can spend up to 15% for debt repayment (not including your car payments and your mortgage). To calculate what percentage of your income you’re spending on debt repayment, add up your monthly debt repayment amounts (not including your car payments and your mortgage), divide that by your monthly take home pay, and multiply it by 100.

If you’re spending $670 a month paying off your credit cards, student loans, line of credit, furniture loan, or whatever else, and you make $3100 net a month, your calculation would look like this:

670 / 3100 x 100 = 21.6%

If you’re spending 15% or less of your monthly income paying off your debt then you’re okay. Not great, but not drowning. If you’re spending more than that, uh-oh!

The words “paying off” are important. If you’re spending 15% or more of your income just meeting your minimum monthly payments, then you’re in trouble and headed for a fall. Making just the minimum payments on credit cards means you’re gonna be in debt FOREVER and you’re going to pay GOBS of interest.

If you have a $3,000 balance on a credit card charging 14.98% interest, and pay a 2% minimum every month it will take 26 years to pay off your balance and cost you a total of $7,440 in interest. Yuck!

There are some other signs that you may be in over your head. If you find, for example, that you seem to have less and less money for things like food because you’re spending more and more money trying to keep up with your debt, that’s a bad sign. And if you keep dipping into your savings, keep trying to refinance, or have to take a payday advance loan, it’s a sign that you’re over-extended.

Another big clue: you keep hitting the ceiling on your credit cards. If as soon as you pay down balance, do a balance transfer to reduce your costs, or refinance in some other way, you’re right back to the limit on your credit, you’re in deep doo-doo.

Ditto if you can’t find two red cents to put into an emergency fund. No emergency fund means that the first time Old Man Trouble rears his ugly head, you’ll be right back using your credit to fill your financial gap. That’s no way to live.

And, finally, if you can’t sleep at night, if you toss and turn or awake in a cold sweat, you’re in trouble. Why are you doing this to yourself? Taking care of the problem is so much easier.

First, admit you have a problem. Say it out loud right now: “I have a problem with my debt.” If you aren’t prepared to admit you’re in trouble, no one can help you. If you aren’t prepared to add up the mess you’re in, you’re not ready for help yet. Quit your whining. If you want things to change, start by saying, “I have a problem with my debt.”

Second, start writing down every penny you spend. Whether you spend $1.25 for coffee or $600 on a fabulous new pair of shoes, write it down. This is how you become accountable for forfeiting your future in the name of an immediate pleasure. When you look over your list at night - yes, you have to look over the list every night - ask yourself why you’re really buying. Did you get a rush? Did you feel pleasure? How are you feeling now?

Third, switch from credit to cash. It’s way easier to charge something than it is to fork over cold, hard cash, particularly when you’re getting to the bottom of the jar.

Step four: commit to paying off your debt. Allocate a fixed amount to each debt, paying off the most expensive debt first while you make smaller payments on the other debts. Once your first debt is paid off, reallocate that money to your next most expensive debt. Keep going till you’re out of the hole.

Don’t have the money to make a dent in your debt? GET A JOB! Another job, a better job, I don’t care. MAKE MORE MONEY! Hey, you’re the one who went out spending money willy-nilly, without a thought to how you were ever going to pay your creditors back. The time has come to pay up. So suck it up, find a way to get out of debt and get your life back!

Staying out of consumer debt isn’t an impossible feat. It’s a matter of not spending more money than you make. That’s right. It means not buying something when you don’t already have the money to pay for it. Life is expensive enough. Why would you add interest to the equation?

One of the challenges I give my fams is to find a way to swap bad habits for good ones. It’s a great challenge because it makes people both think and act. And since they’re usually fighting internal demons on the bad-habit-front, they’re grateful when I make ‘em stop.

Sometimes, in anticipation of my arrival, people will change what they’ve been doing before I even get there. There’s the guy who watched me flush Dan’s cigarette’s down the toilette, who gives up smoking before I even get there. And there’s the chick who having watched me toss Bev’s credit cards behind the fridge, decides to stop carrying her credit card so she won’t be tempted.

One of the best ways to get rid of bad habits is to replace them with good ones. It works because if you just take away something, you feel a loss. And the loss is all you can think about. But if you substitute something else for what you’re eliminating, then there’s no LOSS, just CHANGE.

If your socializing is costing a ton of money because you meet in bars, over dinner in restaurants, or at expensive outings, you can substitute a less-expensive, equally as satisfying social encounter. Instead of meeting in the pub on Friday night, have a Friday-night-game-night. Each week you decide what your next week’s location, game and food theme will be, and then you all chip in. If it’s taco night, someone brings the cheese, someone else the vegis, someone else the salsa and shells. That’s no more expensive (except for the gas) than having dinner at home.

Okay, here’s the kicker when it comes to replacing bad habits with good ones: Figure out what you’re saving a week by eliminating your bad habit.

Let’s say you’ve decided to eliminate coffee on the road by substituting home-made coffee and you’re saving $20 a week.

You take that $20 and multiply it by 52 to get how much you’d save in a year.

Then you go to an online savings calculator plug in your annual savings, a reasonable interest rate (say 6%), and the number of years until you retire.

If you’re saving $20 a week and you’re 30 years old, eliminating that one bad habit will mean $84,000 in your pocket. Yup, $84,000! That some pretty expensive coffee.

Now, I know money isn’t a motivator - Yeah, yeah, I read Abraham Maslow too - but often people aren’t aware of the long-term financial cost of sticking with a bad habit, and this exercise puts a positive spin on it.

You can’t say you don’t have the money to save if you smoke, drink booze, buy lottery tickets, have more than four pair of shoes, eat cookies, never drive car that more than four years old, pay more than $20 a month for bank charges or carry a balance on your credit cards. Since you have the money to waste on bad habits, you’re just making excusing for not saving.

What you need is a good habit. Then saving will become a snap.

So, how much are you planning to save this year?

I was intrigued to read in USA Today that baby boomers are losing confidence in retirement savings. While 20% of those surveyed felt they were “equally confident”, a whopping 56% are “less confident.” With the financial marketplace in a constant swirl, it’s no wonder really.

Are interest rates going up or down? Can you trust investments that have been previously touted as “secure” when 32  BILLION DOLLARS in asset-backed commercial paper are frozen?  And remember when they said gold would never see $800 again? Ha! Never say “never.”

The uncertainty about what we can trust has sent sales of money market funds through the roof. While Canadians continue to pour gobs of money — $2.6 billion in net sales per month - into the mutual fund sector, according to the Globe and Mail, in March ALL of it went into money market funds, which now hold over $66 billion of our hard-earned dollars. People are parking their money in the hope that some clear signal will come from above telling us its safe to invest our money again.

There are a lot of people who are saving (or planning to save) for retirement, but just don’t have a clue where they should be putting their money. I keep saying, “Get a handy-dandy advisor; I have one.” But I’m beginning to think the questions I’m getting are even more fundamental than “where.” So I’m going to do a series of articles for you on how to save to retirement.

The decision on where to invest is at once complicated and simple.

“How much do you want to have saved when you retire?”  seems like a simple enough question, right? But if it were, then there wouldn’t be this constant chatter about how much you’ll need, and the fact that a million bucks won’t cut it in the future. And there wouldn’t be this quiet sense of desperation on the part of people who believe they are doomed, so they might as well just stick their heads in the sand and pray nothing creeps up behind them and bites them on the butt.

“How greedy are you?”  would be another of those simple questions that has a ton of implications. If you’re content to hold an investment paying you a 2% return, and can stand the scorn of all your friends and relatives at your niativité, your lack of ambition, or your sheer stupidity, then you’d been pretty low on the Greedy Scale. If you’re insisting on an investment that will turn your $1,000 into the Magic Million in ten-seconds-flat, then you’d be right up there with Gordon Gecko.

“How committed are you?”  is a simple question, that has a wide range of answers from  not at all committed, to somewhat committed, committed, very committed, and passionately committed. Do you know what you are?

“How much time do you have?”  How long you’re planning to invest has a big impact on the investment alternative you might choose. Pick the wrong time-line and you could find yourself a little sad when cash-out time comes.

Along the way, you’ll have to learn what an RRSP  is, the various types of investments available to you and where they fit on the Investment Pyramid, and how to diversify your portfolio to create the Asset Mix  that’s right for you.

These articles cover the basics of what you have to think about as you plan for the future. Whether you’re investing for the long-term for your retirement, or for the medium-term to send your kids to university, or for the short-term  to buy a home, the fundamental issues remain the same:

• know how much you’ll need,
• know how long you have,
• know how brave or chicken you are,
• know what you know - and DON’T know, and
• mix it up a bit.

With a little determination, you CAN have what you want.

Whether you did it as an act of desperation, or you were just dumber than a sack of hammers, your decision to go to a pay advance loan store is costing you big-time and you’re ready to do whatever it takes to get out.

The pay advance loan biz has been growing by leaps and bounds. In the past ten years, over 1,300 have opened in Canada. According to a story in the Toronto Star, more than 2 million Canadians are using pay advance loans, and they borrow more than $2 BILLION annually. Whazzup with that?

The pay advance loan people say they’re providing a service: helping people who can’t find help anywhere else. Really? Well, if they’re so interested in “helping” people, then what’s with the fees, the outrageous interest rates, and the never-ending cycle?

Since pay advance loans are offered by privately owned loan companies and cheque-cashing outlets, up until recently they haven’t been regulated by the government. Hey, there’s even an outlet located in the federal Department of Finance building in Ottawa.

Interest is charged from the day you take the loan until the loan, and all the fees, are repaid in full. Payday lenders are supposedly not allowed to charge more than 60% interest on a loan, and according to the government, that’s supposed to include everything from administration fees, to convenience and/or verification fees, broker’s fees, collection fees, early repayment fees, set-up fees, loan repayment fees, rollover or renewal fees, and extension fees. OMG!

Of course, while they’ve been taken to court for charging more than the allowable 60%, they’re still doing it. I’ve seen people paying anywhere from 700-1,000% when all the fees are accounted for. Really! This became so much of a thorny issue that the Federal government didn’t want to have to deal with, so they made it a provincial issue, and provinces are still trying to figure out what to do.

Several provinces have stepped up to the plate including the Ontario government, which introduced legislation to cap how much companies could charge and ban practices like issuing concurrent and back-to-back loans. But, hey, since we’ve had a usury rule that’s been widely ignored by the pay advance industry for quite some time now, I think it’s going to take more than new legislation to make these people stop sucking the blood of the most desperate borrowers.

So what do YOU do if you’re in the cycle and are desperate to get out? You’re going to have to suck it up and either:

• be short for a couple of weeks, while you repay the loan and DON’T borrow again, or
• find a way to make more money so you can get the life-sucking debt off your back

There ain’t no other way kids. You’ve just got to get serious about getting out of debt and do WHATEVER IT TAKES to break the desperate cycle of borrowing and then borrowing again to make up for the cash flow shortage caused by the outrageous interest and fees charged.

It’ll be hard. It’ll hurt. But, hopefully, you’ll have learned an important lesson, and you won’t do that again.

Do you guys know how FABULOUS y’all are? I’ve been reading through your blog comments and the comments on the Have Your Say and I think you’re all pretty neat. I love the way you’re talking about money, sharing your ideas and giving advice to each other. That’s exactly why I set up this site, and I’m so glad it’s working.      I’ll be in Niagara Falls at the Meridian Credit Union Annual Meeting on Tuesday evening at the Americana Conference Resort and Spa, 8444 Lundy’s Lane. So if you’re a member, come say “hi” and get a hug.   I’m working on a series of articles on Retirement for y’all. I’ve had so many requests from people who want help figuring out the retirement thang. I think I’ll have 7 articles in all, and I’ll blog when they’re ready. If there are things that you still need that aren’t covered in the articles — you will read the articles BEFORE you ask questions, right? — comment on the blog and I’ll see what I can do for you.   I’ve been enjoying the fine weather here at Wits End. Man, am I ever glad to see the back of winter.  I can’t wait to get my pots started.  Since a big part of the country was hit with a snowstorm, I’m holding off for a while yet. But I’m itching. So much so, I went to my local greenhouse and bought a bunch of succulent, then repotted them into lovely containers for my sunroom and kitchen. I love succulents. I think it’s because they’re wonky-looking. Anyhoo, a morning’s worth of entertainment, and opportunity to get dirt under my nails and a lovely set of arrangements that are going to multiply and require division — more puttering around — in a year or so.   One of the questions I had running through my mind as I played in the dirt is this: How can I spread the word about getting money smart in ways that will draw more people in and will help people see that this isn’t as hard as some think it is?   Remember that old commercial for shampoo where the screen splits and the pretty girl says, “And I told two friends”, and then it splits again, “and we told two friends,” and it splits again, “and so on, and so on, and so on.”  That image has always stayed with me. Malcolm Gladwell calls it “buzz.” I want to find a way to use buzz to get to more people than I’m currently reaching. What do you think?  Do you have any ideas about what we could do, as a money-smart community, to attract more people to financial enlightenment (hey, how’s that for inspirational), and help them recognize that their money can’t be ignored forever?  What do you think it would take to get people focused on fixing their messed-up money?    Well, I’m off to listen to my son, Malcolm, practice guitar. Then I have to get ready for my interview. Hope y’all have a wonderful week.   TTFN