Gails Blog

I’m about to become the proud momma to two new Bichon Frise puppies. They were just born and will be ready to come home to momma in about eight weeks. Coincidentally, I just got a credit card statement with a stuffer for pet insurance. Hmmm. Signal from the Universe? So I got to thinking about the issue of pet insurance and whether or not it’s worth the money.

Pet insurance is becoming very popular because vet costs are rising and interventions are becoming much more expensive. According to the American Veterinary Medical Association, Americans spend more than $20 billion dollars a year on veterinary care.  In 2003, fewer than 1% of an estimated nine million Canadian pets were insured. ConsumerReports.org says that’s because pet insurance doesn’t offer good value for the money you have to put out.  And I quote:

The problem with pet insurance is all its fine-print pitfalls. Indeed, buying a policy may end up increasing a pet owner’s total expenditures on veterinary care by thousands of dollars, according to our analysis of five plans. That’s because on top of deductibles required by all the insurers, plus any co-pays, unreimbursed costs, and exclusions–all of which you pay out-of-pocket–you also pay premiums. Seemingly small $11 to $50 per-month premiums can add up to $2,000 to $6,000 or more over a pet’s lifetime.

See their take on it. (http://www.consumerreports.org/pets/0307vet2.html)

If you decide in favour of pet insurance, it appears you have to be careful; you don’t want to just pick any old plan. There are policy options you’ll want to ask about such as benefit limits, deductibles, and, most importantly, what’s covered. Ask about:

• enrollment period: from what age to what age. Some plans cover critters from 8 weeks old to death; other cut off coverage at 8 years or so (hey, isn’t this exactly when you’re most likely to need coverage?)
• wait period: Plans often have a wait period of up to 21 days from the time you fill out the application until the plan goes into effect. Some plans also require a vet checkup before the plan is activated. 

• benefit limit: the maximum the plan will pay out a year or over the life of the plan
• deductible: how much you must pay from your own pocket for each claim; some companies let you choose a deductible and reduce your premiums (by a smidgeon) based on the deductible you’ve chosen; with other plans, the deductible increases as your pet ages. Keep in mind that low premiums with too-high deductibles just aren’t worth it.
• co-pays: the plan pays up to 80% (or whatever your plan pays) and you pay the difference
• discounts for multiple pets
• coverage for pre-existing conditions: some plans will cover if the condition has been completely cured; other plans consider genetic conditions to be pre-existing. For example, Doberman Pinschers tend to suffer from Wobbler’s Disease and cardiomiopathy so those might not be covered for your Dobi.
• coverage for cancer
• coverage for sterilization
• coverage for preventative care: which would take care of your vet visits (most plans require at least an annual vet visit to keep the plan in effect)
• monthly cost: costs vary tremendously with the type of plan you sign up for, running anywhere from $10 to $100 a month. Basic plans cover the costs of accidents (like being hit by a car) and some common illnesses like eye and ear infections. Top of the line coverage may cover routine preventive care (such as vaccinations and neuters/spays) and even alternative therapies like acupuncture and hydrotherapy. Some even cover the costs of cremation or burial of a pet, and include extra coverage upon accidental death. (You should also check to see if the premium will change after you’ve taken out the plan, and by how much.)

I got quotes for insuring one of my puppies from a variety of sources and it looks like it might cost about $60 a month for a good level of coverage. And since many of the plans I looked at have a cut-off when the dog turns 8, after spending almost $6,000 in premiums, I’d be back on my own. Also my last Bichon Frise, Sabrina Sabu-Yabu, never had a day of illness and lived 14 great years, so the breed may be hardy enough to not require pet insurance.

So I’m looking for some feedback. What’s your experience been with pet insurance? Worth it or not? And were there any surprises when you tried to make a claim or after you had had the plan for a while?

One of the couples I worked with is setting some bad examples for their kids. He is stressed out by work, by the debt, by his failure as provider and gets angry quickly. Then he begs forgiveness by buying his daughter something. Mommy is substituting spending for doing, dropping an average of $150 a month at the local dollar store on crapola. Geepers creepers.

This got me thinking about how complicated we make our lives with our children. We want to make all their decisions, creating total dependency, and then we whine because they can’t do anything for themselves. We’re so obsessed with them not making a mess we won’t let them pour the juice. We’re so nuts about the image they’ll create we won’t let them wear mismatched socks. We’re so focused on them having fun, we don’t let them have any downtime to just goof off.

I’m not sure when parenting became a University course, but it has. Just look at the proliferation of books on the subject – mine included, on how to teach kids about money – and you’ll see that raising kids is such a complicated thing we need to have a doctorate to do it right. 

How about some simple rules, which not only apply to teaching kids about money, but also to teaching kids about life.

Rule #1: Remember that they’re always watching you. You know that old saying, “Do as I say, not as I do”? Well, kids learn from what you do. Shop without a list and they’ll learn that when you go into a store it’s to impulse shop.

Rule #2: It’s just as easy to learn bad habits as good ones. Browsing serves a purpose. Unfortunately, in our time-pressured world, we haul our kids in and out of stores, seemingly without purpose, always buying something. If you never leave a store without buying SOMETHING, your kids will quickly learn that their purpose in going into a store is to find something to buy. You can’t then turn around and say, “Do you think we always have to buy something?” because the answer is, “Yes.”  That’s what you’ve taught them. Bad habit. And all because you don’t follow…

Rule #3: Explain everything you’re doing. Yes, it can become tedious, so it doesn’t have to be EVERYTHING, just most things. You can’t take cash from a cash machine without explaining how it works or your kids will think, “the machine just gives you money.” You can’t write a cheque without explaining how it works or kids with think, “cheques are money.” You can’t leave a tip on a table without explaining what you’re doing or your kids will think ,“Mommy forgot money on the table, I better pick it up.”

Rule #4: What goes around, comes around. If you’re truthful with your children, you have the right to expect the same from them. But if you lie, obfuscate, and only tell part of the story, why would you expect any less from them. Remember rule numbers 1 and 2? Hmmm.

Rule #5: Keep it simple. The more complicated you make something, the harder it is to deal with. Complicated outfits mean kids will get it wrong and look dumb. Simple colour combinations help them get it right.  Complicated rules for how kids can get and use their money are hard to understand and keep straight.  That why the Magic Jars work so well (for both kids and adults); the system is simple to understand and use.

Rule #6: Don’t try to do too much at once. Over-scheduling kids lives doesn’t make them happier. Kids need down time to just hang, think, imagine, process, cope. And jamming a whole bunch of money lessons into a day, week or month won’t work either since time is important for practicing and processing. Here’s a line from a Joanie Mitchell song (or was it Joan Baez?)… “Take your time or time takes you and drains your soul away.”

Rule #7: Prepare your kids. Telling your kids what you’re going to do helps them create a mind-map of what’s going to happen. Ditto teaching them about money.  Lay out what you’ll be teaching them before you get into the actual lesson so they know what to expect. If you’re going to teach about allowances, tell them you’re not going to get into loans, advances, work for pay or all the other stuff that can make the discussion really complicated, you’re just going to be talking about how much, how often, and what they can do with their money.

Rule #8: Be prepared. Just as you wouldn’t dream of heading out without bag of clean-up stuff and a set of nibblies to hold hunger at bay, you also have to be prepared when you’re teaching kids about money. Don’t trying giving a kid her $7 in allowance using a five and two ones. How will she put away her 70¢ for saving, or divvy up money between her Planned Spending (for that new CD) and her Mad Money?

Rule #9: Routine is your friend. Keep switching the day when you give the allowance and watch your kid eye you suspiciously. Forget to give the allowance and you’ll prove you’re not trustworthy. Change the rule on how the allowance can be used based on every new situation and you’ll teach your kids you’re a scatterbrain.

Rule #10: Know when to let go. It’s not worth all the hassle to get on your kids’ cases about everything. Know when to let things go and just relax. As long as you deliver a consistent message, love them and have their best interest at heart, they’ll turn out fine. If you’re doing anything “because of the principal of the thing”, it’s because you’re too lazy to weigh each decision on its own merit.

I’m a very happy woman.  I’m convinced that one reason I’m so happy is because I see the donut and not the hole.  Lots of people I know can only see what’s missing in their lives, so they head out to the mall to fill the holes. Me, I only buy stuff when I’m bored or really need something. So if I’m bored I find something constructive to do, or I stay out of the stores. If I really need something, I make sure I have the money for it or I find something constructive to do to get the money, or I stay out of the stores.

Back to being happy. My happiness is part contentment. When I first got him, my husband used to quote me this poem (while smiling):

Contentment
is for babies
and for cows
To live life
vibrantly
is to dangle
securely
from a
frayed
string.

I said, “Hogwash” and set out to prove that contentment wasn’t something to be despised. I’ve converted him.

My contentment is hard earned. I’ve read a lot to find answers to the questions that have plagued me and come up with some nice guidelines. Here’s one of my favorites quotes from Zen Master, Thich Nhat Hanh:

Whatever the tasks,
do them slowly

with ease,
in mindfulness,
not with the goal

of getting them over with.

Resolve to do each job
in a relaxed way,

with all your attention.

Our lives are busy and we tend to rush through things to get to the next thing to rush through. So we forego all the pleasure we would derive from completing the task. I find this with cooking. When I have to just Get It Done, I don’t get any of the pleasure I normally derive from Creating a Masterpiece. When I Zen Cook, I have way more fun and the food usually tastes much better. And I am content.

If, at the end of the day, you are exhausted and stressed out, it may be that you are rushing through your life, taking no pleasure from the completion of tasks and the achievement of contentment. And if you’re only pleasure today was from shopping, it may be that you’re filling the hole in your life with the wrong thing.

Try this:

Think about what’s important to you. What do you really want to be doing? Who do you like to spend time with? What do you want to accomplish? Make a short list of 4-5 answers for each of these questions.

Assess your commitments. Are you trying to do too much? Is your plate too full? Are you over-committed? You can’t possibly enjoy your life if you’re trying to do too much. Accept that you can’t do everything, know what you want to do, and work to eliminate the commitments that aren’t as important.

Leave space in your life. Put in time to do nothing but sit, think, imagine. It doesn’t have to be a lot of time. But you do have to make time to be with yourself in joy. Another mistake is trying to schedule things back-to-back, which leaves no space in case things take longer than planned or something unexpected crops up. It also leaves us feeling rushed and stressed.

Prioritize. You can’t do everything on your to-do list, so begin by deciding what you MUST do. Write an “A” beside those things, and focus on getting them done. “B” things come next, and “C” things can fall off the list, please! Now, slow down and enjoy doing each “A” task. This is the most important step, so read it again.

Finally, take pleasure in the simple things you do throughout your day. Knowing what your simple pleasures are, and putting a few of them in each day, can go a long way to making life more enjoyable. I commute my kids to and from school – half-hour each way — and I could make it into a chore, but instead I look forward to that time. I can use it to plan, to work through stuff I’m trying to figure out, to look at the beautiful scenery, to listen to an audio-book, to plan dinner, to talk to my children… the list goes on and on. I use it for pleasure.

I am a happy woman. Some of it’s natural. Some I’ve worked hard at. And I’m content in the happiness I’ve achieved. From time to time something comes along that pushes me out of The Happy Zone, but I fight like a fiend to get back into it. I guess I’m an addict. A happiness addict. I will not settle for less.

Some of the people who watch the show who don’t make a ton of money are often dumb-struck that a couple can be making $100,000 a year or more and still be in debt. “Where’s the money going?” they ask. “How can you make that much money and still need to use credit?” they wonder. “How much would they have to make to not go into debt?”

There a couple of problems with the way people look at their money. The first is that many people think of the money they earn in GROSS dollars – that’s before taxes. But if you make $100K and pay 30% in tax, you’re left with $70K. “That’s more than enough,” you say. Maybe. But if all your thinking is based on $100,000, then you’ll be in the hole $30K every year and you’ll never understand why.

So we think of our incomes in GROSS dollars. But we think of our expenses in NET dollars. Yup. And that adds to the problem. Can you see why?

The other thing that adds to the problem is that $100,000 doesn’t buy what it used to. According to the U.S. Federal Reserve, between 1960 and 1990, money lost a whopping 77% of its buying power. That means if you paid a buck for something in 1960, you’d have to come up with about $4.40 to buy it in 1990.

So did incomes rise four-and-a-half times over the same period? Not on your life. Which means a $100,000 income doesn’t buy all the bread and butter it used to. But it still sounds like a lot of money, right? So we still THINK it should buy everything we need. There ya go: another gap between perception and reality.

If $100,000 doesn’t buy all it used to, how come we have more stuff than ever before? That’s easy. We’re using credit. Gobs and gobs of the stuff. We’re borrowing against the equity in our homes. We’re using lines of credit in record numbers. And we’re carrying more plastic than ever before. And we’re giving no thought to how we’re ever going to pay back the principal.

Sure, we’re careful to make our minimum payments. We don’t want to ruin our credit histories, after all, and limit our access to even more credit. But a suggestion that someone pay more than the minimum is met with a laugh… ha ha.. it must be a joke. Who’d be silly enough to do that?

The media has also been lying to us. They’ve been telling us we’re rich. We’ve lots of money in terms of home equity, after all. And that’s money in the bank.

Well, it’s not. It can evaporate – as it has in the U.S. – even more quickly than it grew. And since you have to sell your home to use your equity as money, you better have a nice rock picked out that you can crawl under when the caca hits the fan and you HAVE to sell your home to pay for all those toys you put on your credit card.

It’s time for us to grow up and act like adults. We can’t keep operating under the delusion that just because the amount of money we make sounds like a lot, that we can buy whatever we want whenever we want. And we can’t keep talking about our income in gross dollars while we spend in net? We have to come to terms with the reality of our money and our lives. If we put only $100 in the bank, then we can spend only $100 – at the most. (We should save $10.) And we can’t put $100 on a credit card if we don’t have $100 in the bank to pay it off IN FULL when the bill arrives.

People who aren’t aware of how much they make, how much they spend, and how much their debt is costing them in terms of money and life’s energy expended are not heading anywhere good. It really doesn’t matter how much we make. What matters at the end of the day is what we do with it and how truthful we are with ourselves.

Have you ever thought about how much money it would take to make you happy? Is that net or gross?

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Here comes another beautiful summer weekend and you probably have a place or two to go. So pack up your car and have fun. Speaking of your car, in my experience, car-owners fall into one of two categories:

• there are the people who loooooovee their cars. They name them. They treat them like babies. They’re obsessed with polishing them and adding accessories, and
• there are the people who no nothing ’bout cars. I fall into this category. I think the dirt is fine since it’s probably holding my car together. I don’t sweat the dings and bumps. And the inside of my car always looks like I’ve just come back from a long car-trip with a band of wild children.

Sadly, both these groups of people may be wasting tons of money with their cars. Look through the following list and see if you’re doing anything wrong that you can cut out and save yourself some cash.

1. You pay to have someone wash your car. I can’t believe what a carwash costs. Every time I drive through the gas station that offers a car wash and see what they’re charging I shake my head. If you’ve got a bucket and some soap and water at home, why would you fork over $10 or more to have some machine wash your car. Why not turn it into a family affair, bathing suits and all, and have a car-washing-soap-and-water fight with the kids.

2. You never put air in your tires. Tires that need air use more gas and wear out more quickly. Don’t over-inflate though. That can be dangerous since not enough rubber hits the road to keep you safe.

3.  You buy premium gas.  Rumour has it if you use only the best gas your car will need fewer tune-ups and get better mileage. Yes, if you’re driving a high-performance vehicle, you need super-de-dooper gas. But most of us don’t, so don’t waste your money. According to them that know, the difference between 87 and 93 octane is so small that you won’t get better mileage or see lower maintenance bills.

4. You don’t bother to maintain your car or keep records. According to Natural Resources Canada Office of Energy Efficiency Auto$mart Thinking program, a well-tuned engine alone can improve fuel economy by up to 4% while a poorly maintained vehicle can increase fuel consumption by up to 50%. And if you aren’t keeping records, how will you know when someone’s trying to talk you into something you don’t need?

5. You haven’t raised your deductible on your car insurance. You wouldn’t make an insurance claim for less that $1,000 so why not raise your deductable that high and boost your emergency fund.  Make the call to your insurance company and see just how much you could save.

6. You’re a speed demon. Cars are most economical at about 100 kph. Driving faster uses up more gas.  According to one European study, rapid starts from traffic lights and hard braking consums 39% more fuel. And accelerating and braking is not only hard work on the car, it’s tougher on you as a driver. So relax, which brings me to…

7.  You’ve never turned on your cruise control. I love my cruise. It keeps my pace even, eliminates my sometimes leaden foot and makes my ride that much more comfortable. Just don’t turn it on when it’s pouring since there have been problems with cruise control causing hydroplaning.

8. You “warm up” your car. Really? You let your car sit there burning gas going nowhere. So you don’t think your mileage is crappy enough? According to Transport Canada, if every Canadian motorist reduced idling time by just five minutes a day, carbon dioxide emissions would be reduced by 1.6 million tonnes per year. Whew!

9. You never ask for directions. I know more than a few people who fall into this category. Okay, so if you get lost and end up driving around for an extra ten minutes, you don’t think that affects how much you’re spending on gas? Hmmm.

10.  You refuse to turn on your air conditioner because it wastes gas. Yah, A/C makes extra work for the engine, increasing the amount of gas you burn. But air conditioners are very efficient so around-town driving using the A/C will reduce fuel economy by about a mile a gallon. The highway is a different kettle of fish. Since driving at higher speeds with the windows down greatly increases drag, using your A/C is the more efficient choice.

11.   You don’t plan your trips. You need milk, you jump in the car. Your kid has hockey practice, band practice, skating practice, you jump in the car. You forgot to get the gezunta that goes with the whatchumacalit, you jump in the car. Since trips of less than five kilometres don’t usually allow the engine to reach its optimum operating temperature, particularly in the colder months, you burn more gas.

12. You drive around with your trunk full of crap. For every extra 45 kg (100 lbs) you carry in your vehicle, your fuel efficiency can drop by 1-2%. If you’re not using your roof rack, take it off. Not only is there a weight factor, it affects the aerodynamic efficiency of your vehicle reducing your fuel economy by as much as 5%.

BTW: Now you can save your favorite blogs using any of the bookmarks below. Hope you like this added feature. cheers, and have a great weekend. g

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One of the biggest issues for people who are having financial difficulties is the fact that everything about their money is disorganized. They pay bills late, don’t pay them at all, or pay the same bill twice. Yup, I’ve seen it with m’own eyes, people. They transfer money back and forth between numerous accounts, often incurring overdraft fees because they miss by minutes. They take $100 out of the bank and 20 minutes later they’re back for another $20. Whazzup with that?

Most of us are disorganized in some way. I can never seem to find my keys. No matter how many “spots” I have in my purse, in my fanny pack, on the hook, I seem to spend more time than I should looking for my keys. Some people can’t keep their shelves organized. Other people have a junk drawer where they dump stuff until they “have the time” to get it put away. I’ve seen the Junk Drawer principal even applied to a whole room in a house. Sheesh!

Disorganization is one of life’s great stressors. Visual clutter makes us feel uncomfortable. Mental clutter keeps us awake at night. Taking the time to get your stuff organized, including your finances, will pay in time saved, reduced stress and a clearer path to being financially balanced.

People want to be organized and they’re constantly looking for an easy way to put things in order and keep them that way. When I did my speaking engagements last year, we gave away an Office in a Box at each session. People cried when they won the Office in a Box. It was relief, I think.

Build your own Office in a Box. You probably have lots of this stuff just sitting in a drawer somewhere. All you need are:

• Box of file folders (approx 30)
• Box of hanging folders + tabs (approx 25)
• Box to hang folders in
• Lables (1 box)
• Pens coloured (1 pack)
• Pencils plain (1 box)
• Eraser
• Small stapler
• Staple remover
• Scissors
• Scotch tape
• Paperclips
• IN box tray x 2
• Post-it notes
• Calculator
• Envelopes (letter sized)
• Stamps
• Accounting book — ruled

There’s no magic in getting organized. It takes time. It takes focus. And it requires that you have a process that you can follow. But it isn’t hard. Any dope can do it. 

When it comes to getting organized, everything needs a place. Gather all your paperwork and create a file folder for each of your accounts, forms of credit, home, insurance, estate, and taxes. You can use a filing cabinet or a box. The folders have to be able to stand up on their own, or you can use hanging folders to keep them straight.

Welcome to 21st Century banking.
 If you don’t already have it, set up telephone or internet banking. If you don’t have a “free” or almost free transaction account, you can reduce fees by setting up a buffer
 If you can afford it, transfer $1,000 float to your chequing account (pretend it isn’t there) and use that to minimize your banking costs. If you’re paying more than $20 a month (that’s high) for your banking, you’re a sucker!

Save automatically.
 Create an auto-debit from your chequing account to a savings account that will not be touched. Most people won’t put money into a savings account on a regular basis, opting to wait for a tax-refund or bonus before setting aside some money for the future. Establish an automatic savings deposit every month and your nestegg will accumulate faster than you think.

Create a Monthly Bill Summary. List your bills in the date order they need to be paid to prevent you from missing a bill. If you have bills that are paid automatically from your account, write an “A” beside these bills and remember to deduct them from your Spending Journal at bill payment time each month.

Set-up your in-baskets. 
Create an in-basket with two Unpaid Bills folders labeled “1-15″ and “16-31″ 
 Don’t let the mail pile up. As soon as you bring in the mail, look at the due date on the bill and put it in the appropriate folder. Recycle all the marketing crap in the envelope. 
Create a second in-basket with 3 folders labeled “bank statements”, “bills paid” and “tax receipts”.

Weekly


Make a date with your money. 
On the 12th and 28th of each month to pay bills, set aside the time in your schedule - you’ll need about 30 minutes, depending on your bills — to pay your bills.

Always pay your bills in one place that you’ve equipped with your bill paying system, spending journal, envelopes, stamps, pens, pencils, a calculator, tape, a stapler and return address labels and recycling bin for all that marketing stuff you’re going to dump.

When you pay a bill, write the cheque or transaction number, amount paid, and the date you paid it on the bill. Put the paid bill in your “bill’s paid” file. Deduct the amount you’ve spent from your Spending Journal. If a bill has not been paid in full (tax bills are paid over several months, for example) put it back in your Bills Folder so you don’t forget it.

Monthly

Reconcile you bank statements. When you bank statements come in, put them in your in-box folder. Make a date when all your statements are in (it’ll depend on when you receive them) to:

• review your statements to make sure there are no mistakes
• reconcile your Spending Register; clearly mark the cheques that have gone through your account and highlight the ones in your Spending Register that haven’t yet cleared the bank. A cheque that is taking a long time clearing the bank can lull you into thinking you have more money than you do. Go back at least a month to make sure all previous cheques have cleared.
• talk with your partner about anything unusual

Quarterly


File. 
Once a quarter, file all your paperwork to keep your system current.

Talk.
 Have a dinner with your partner and talk about the bumps, your goals and how you’re doing.

Annually


Re-vamp your budget. 
Review your budget using last years cc statements and bank statements to see what you actually spent. If you spent more on a particular category, make sure you know why, or look for ways to trim.

Clean up.
 Go through your files at the end of each year and throw out bills and receipts no longer needed for auditing/budgeting purposes.

• Tax Returns and Backup Documentation: Whether personal or business, the general rule is seven years.
• Insurance policies: Keep everything for as long as the policy is in effect. You can dump the old policy if you get a new one with your renewal each year. Don’t rely on the insurance company to provide copies of your records since any burden of proof will fall to you.
• Warranty Documents: Review your warranty file annually and get rid of documents for defunct appliances, telephones, or anything else that’s gone the way of the recycling bin. And, of course, when the warranty expires, you can chuck the paperwork.
• Home Repair Bills & Contracts: For as long as the warranty is in place, or longer if you want to prove upgrades for insurance or home resale purposes.
• Pay Stubs: Keep your last two year’s worth.
• Bank Statements: Keep a year’s worth in an accessible place so you can re-vamp your budget from accurate figures. File everything else for five years.
• Credit Card Statements: Keep the current year’s on hand for revamping your budget.
• ATM Receipts: Dump them once you’ve reconciled your bank statement at the end of the month.
• Investment Documents: If you have stocks, bonds, or mutual funds, you are buried in prospectuses, privacy notices, address confirmations, along with your regular statements. Keep the statements. Forever.
• Utility Bills: Writing off your utility bills for tax purposes? Keep them in your tax file. Otherwise, keep one year’s worth for comparative purposes. 
• Mortgage Documents: Until you die or the mortgage is paid off, whichever comes first.

BTW, people have been asking about The Budget Binder. There’s an example of how to make your own in the Your Questions section.

I recently worked with a new couple that made go, “hmmm”. She’s only 26 and already owes over $40,000 in consumer debt, even though she doesn’t pay a cent in rent and has virtually no real expenses. Sure she has a cell phone and a nice car, but they’re toys, not tools of her trade.

He went nuts with his credit cards when he first got them – yes, he join three separate gyms – and then froze his cards. He’s been working to pay them off ever since. He’s paying in the high teens and mid-twenties when it comes to interest, but has never considered negotiating his rate down.

So what happens to us to make us think that when we’re using our credit cards we aren’t really spending real money? How do we come to delude ourselves? What lets us rack up thousands of dollars in debt without batting an eye? And what lets us carry around balances on our credit cards, at huge interest rates, without losing our minds?

Hey, I know there are people out there who use their credit to make ends meet. Lose a job, have a child get sick, or watch your car die in the middle of a highway, and the idea of putting it on a card and carrying a balance becomes a secondary issue to taking care of the BIG problem.

I’m not really thinking of those people. I’m thinking of the people who bemoan their debt while booking their next cruise. I’m thinking of the people who can’t drive a regular car, they have to drive a car they really can’t afford. I’m thinking of the people who can’t seem to find the money to repay their old bad spending habits because they’re too busy traveling (on credit), eating out with friends (on credit) or shopping (on credit.) What makes those people immune to the gut-wrenching stress that other people feel when they owe money?

Is there such a thing as a debtor personality? Or is it simply a case of being clueless?

Psychologists have done some research on the issue of debt personality. Some believe that people who accumulate debt also:

• Lack the ability to plan
• Are not reflective in their thinking
• Have an urge to be active
• Are impulsive
• Can be anxious or apprehensive about making the wrong choices
• Need excitement and novelty
• Tend to disregard possible negative consequences.

When I ask my fams what they spent their money on when they were going into debt, they can’t tell me. When I look around their homes I may see some evidence of their debt, but very often they don’t have a lot to show for the amount of debt they’re carrying. And when I show them how much money they’re spending, they’re stunned. Some accuse me of making the numbers up. Ha! I don’t have to; they’re great all on their own.

So how do we get so far away from the idea that what we’re doing is SPENDING MONEY and that at some point in the future that money will HAVE TO BE REPAID?

Part of the problem stems from the “Minimum Payment” … the idea that you can have what you want now, for as little as $10 a month. Hey, but that’s $10 a month FOREVER. Do that a couple of dozen times and now you’re up to $240 a month. Do that four years and now you’re up to $960 a month… and you’re no closer to ever being paid off. Ouch!

It’s easy to use credit. It’s hard to pay it off. And if your circumstances change and you find yourself with less money in the family pot, you can really strap your ability to roll with the punches if you’re carrying around a bag of debt.

It’s time to become a little more reflective in your thinking. It’s time to learn to plan. And it’s time to stop disregarding the possible negative consequences of your rampant spending.

Want some real excitement? Try living on half your income so you can put the rest to debt repayment. Have the urge to be active? Get another job and use all the income to pay off your debt. Impulsive? Eliminate the temptation: don’t carry your cards and stay out of the malls.

There’s always a solution. If you really want one. So, do you?

It’s amazing the many ways in which we’re willing to delude ourselves so that we don’t have to face our realities. People are soooo willing to grab hold of a Maybe or a What If or a Perhaps, all so they don’t have to deal with their own crap. If you’re thinking that any of the following are in your future, you need to give your head a shake.

Prince Charming is Going to Save Me. Really? Prince Charming? Didn’t you see Shrek? He’s a Momma’s Boy who is so obsessed with his own future that you’ll only know he’s been there by the wreck he’s left behind: YOU! Despite all the stuff that’s been written about the Prince Charming Myth, there are still people out there – boys and girls alike — who believe that someone is going to come riding to their rescue with pots of money to bale them out. If he’s stupid enough to try and bail you out of the mess you made of your own life, why would you want him? Let’s face it, in today’s very complex world, one person with the “solutions to all your problems” is likely to come with a whole lot of baggage of his own.

My Parents are Going to Leave Me a Million. Let’s say they do. What makes you think you’re going to have any better luck managing an inheritance than you do managing the money you actually have to work hard for? But what makes you think they’re even going to have a million to leave you? After all, with rising health care costs and greater longevity, your parents could live to be ninety. And many of those years will be very expensive as they take medicine, hire caregivers and generally do whatever they can to extend their lives for as long as possible. Assuming you’re 25 years younger than your youngest parent, you’d could be 65 or 70 by the time both your parents kicked the bucket. That’s a hell of a long time to put your life on hold. And then, of course, if you have a sibling or three, you’re going to have to split what’s left once dear old mom and dad shuffle off this mortal coil.

I’ll Win the Lottery. Ha! This is one of my favorites. Do you know that you’re more likely to be struck by lightening TWICE than win the lottery? How about this one: you’re more likely to die in a car accident going to the store to buy a lottery ticket than win the lottery. I know someone has to win. I know it could be you. But do YOU know that it very likely won’t be. Besides, 1/3 of lottery winners end up bankrupt within five years of cashing in their lottery tickets. Why? Simple. We don’t value what we don’t have to work hard to earn

Oprah’s Going to Discover Me. Yeah. I’m waiting for her to call me too.

I’ll Get Rich Playing the Stock Market. “Playing” is the operative word here. If you’re “playing” then you’re not serious about investing. If you’re serious about investing, you’re using a buy-and-hold strategy, and you have an advisor who knows what she’s doing.

I’m Just Waiting to Land the Big Job. Which job is that? The one where they pay you oodles of money to do what they could pay someone else half as much to do? Hmmm.

Things Will Work Out. How’s that working for you so far?

Financial success is based on performing the essentials of good money management. You have to have a plan. You have to be organized. You have to have a goal and be committed to achieving that goal. And you have to work smart. 

Harbouring financial fantasies are detrimental to success because they encourage you to put the power outside yourself: you’ll be rescued, you’ll be left a ton of cash, you’ll be discovered. If you want to be successful, you have to take back the power and know that the best way to make it happen is to do it for yourself.

The old saying, “It took 10 years to become an overnight success” is true because success means learning from your mistakes, becoming knowledgeable about money and how it works, and knowing our own strengths and weaknesses.

So PJ and I were walking past a shop window on the way to a shoot the other day when we looked in at the washers and driers. PJ has just bought a new house, which came with a washer and dryer she doesn’t particularly like. She was looking at an energy efficient front loader with a little lust. The set was on sale; a good price we thought. Especially when we turned around and compared it to the Big Name set that was priced higher.

Funny that. It seems it’s in our natures to assume that because it has a higher price, it’s a better product.

To prove the point, researchers from CalTech and Stanford told their guinea-pigs that they were drinking five different wines at five different prices. You know what? Those tricky psychologist lied; there were only three types of wine because two wines were offered twice: a $5 wine was described as costing $5 and $45, and a $90 bottle was described as costing $90 and $10. (There was also a $35 wine with the accurate price given.)

The guinea-pigs not only rated a wine as tasting better when they were told it was pricier, but their brain scans showed greater activity in their pleasure zones. OMG! Just being told the wine was more expensive gave the drinker greater pleasure. How awful is that?

Perfume is another good example of a product whose quality is often measured by its price. You can buy a six-ounce bottle of a lovely perfume at the drugstore for $30.00. If you want Chanel No. 5, one ounce will cost you $250.

A friend of mine told me a story that made me split with laughter. It seems her cousin was in the drugstore where he saw an expensive brand of cologne on special, two-for-one. So he bought them. He didn’t need them, but the idea that he was getting something expensive for FREE made him bite. His perception wasn’t that the colognes were half the price they had been before. No. He kept the original price as his benchmark, and registered the other bottle as FREE to justify dropping a lot of money he could ill afford to spend.

Hey, nobody likes a BOGO sale more than moi. I’m talking averaging down two pairs of shoes to $20 each here, not popping for a $300 handbag so I can get the other one for $150. I guess, it’s all a matter of perspective.

While it is sometimes true that “you get what you pay for”, if you decide to pay two or three times the price for a particular product, does that mean you expect it to be twice or three times as good? Think about it. Is that Super-de-dooper Latte really three times better than the coffee you could pick up at Timmy’s?

This is where we get into the whole idea of “value.” Dollar for dollar if the more expensive item isn’t proportionally better than the cheaper one, should you spend the extra money? Would the lower priced item suit your needs just fine?

So how’s a body supposed to counteract the More-expensive-is-better syndrome? You could do some blind testing of our own. If there are products you pay extra for because you think their higher quality makes it worthwhile, maybe it’s time to check your assumption.

You could also be better informed by reading consumer reports available in magazines or online. You could ask for friends’ opinions on the performance of less expensive alternatives they may be using.

Okay, it’s your turn: Have you ever bought a premium anything only to be disappointed? Do you have substitutes that you routinely choose over more expensive items because they are just as good? 

I’ve had quite a few comments recently about the fact that many of the fams I work with make tons of money and couldn’t I do a show with people who make less. 

Pearl wrote:

re: the family whose income was $140,000.00 per year. It is a constant source of amazement that people with that kind of income are in debt!!! And don’t seem to know how to get out of it!!! Why don’t you give that $5,000.00 cheque to a more needy family that is in debt??? I would like to see a show where the family’s combined income is barely $55,000.00 per year, and then see how you can help that kind of a family!!!!

And SM wrote:

Why do you not do any individuals and/or couples that only gross 60k or less? It may be easier to help those with high income, however a good portion of Canadians make 60k or less per year.

I’m not sure why people are under the impression that we only work with richy-rich families on the show. If you haven’t caught these episodes, you should, because:

• Elizabeth & Wojceich only had an income of $3,400 month
• Corrina & Jay made less than $3,700 a month
• Kristy & Dean made about $4,300 a month
• Sharon & Dennis made just under $3,200 a month
• Natalie & Matt were earning almost $3,800 a month
• Jared & Christina were making just over $4,200 a month
• Tamara & Brandon made about $3,200 a month
• Andrea & Curtis made about $4,700 a month
• Evan & Jason made about $3,300 a month
• Dawn & David made $4,400 a month  

Several years ago, I had a “financial advisor” over to the apartment, believing that he would help us get on track to good financial health. We instead were convinced to purchase an expensive life insurance coverage, and he said he would support us with financial advice as a next step. I have all along felt good knowing my family is taken care of… but we are still financially sick- and have a huge debt from student loans etc. and have never seen this advisor again. I am NOW FINALLY getting on track with lots of support and information from this site. However this life insurance has always bothered me. Is $75/ month too much to pay for life insurance? It was explained at the time that i should purchase a lot of insurance now while i am young, and the premium would be lower when I am older, and in less financial need of the protection… ???? Have I been as dumb as I suspect?
 

I know you advocate checking your credit score annually or twice per year. I would like to know your thoughts on credit monitoring services? Paying a monthly fee to to Equifax, Experian etc. to keep you up to date on your credit report and score. They run about $15/mo. Is this worthwhile or overkill?
 

I have slowly paid off all my credit cards I was wondering whether to cancel them or put them away because I heard that if you cancel credit cards it will affect your credit score. I would also like to see awesome follow up shows to see if the people that you help are still on track. 
 

Your show is my daily inspiration to live completely debt free, sooner than most of my (lawyer) friends. I am 37, earning $72000 per year. I owe $6000 on my line of credit (used to finance a moderate used car), and $163 000 on my mortgage (my house is probably worth $220K). I am being highly aggressive in my debt repayment strategies: $1400 per month on mtg (PIT) and $1265 monthly on my line of credit. I have no other debt. I want the line of credit balance gone in 6 months, and plan to route the majority of the payment amounts between savings and extra principal payments once it is at a zero balance. I feel conflicted. Should I extend the payments on my PLC to one year in order to lighten up, or is it better to just stay on an extreme budgeted course and get the debt over with? I have some home reno dreams, and vacation dreams and am not sure where these should fit? I am conflicted between rewarding myself in the present or being completely debt-free and “rich” later. Thanks - your show and your website are invaluable.