Q: I am over-extended on credit cards, and my banker said I could use a consolidation loan to bring the payments down. She said it would be even better if I was to roll the credit card debt into my mortgage when it comes up for renewal in a couple of months. Which would be better?
A: Generally speaking, just as you can’t put out a fire with a match, taking on more debt won’t solve your debt problem. Furthermore, rolling your credit card balance into your mortgage would change that debt from “unsecured” to “secured by your house”. Worst case scenario; if you find yourself in further financial trouble down the road. It is safe to say there is a better solution than what your banker is selling you, though we can’t reasonably suggest what that is without discussing your personal values and goals.
Q: You mention that your advice is unbiased. How can I be sure of that?
A: A bias arises when your advisor has something to gain by you making one choice rather than a different choice. For example, your mutual fund’s salesperson gets a commission because people choose to invest in a mutual fund instead of going to a stockbroker, or your banker gets to keep her job because enough people choose to take out credit cards or borrow money instead of waiting until they can afford to pay cash. We do not loan money, we do not recommend any particular financial products, nor are we affiliated with anyone who sells any products. That means we don’t receive any commissions or finder’s fees: The only money we receive is what you paid us. We have no incentive to persuade you of anything, nor to hide anything from you. We are free to help you understand what is in your own best interests, financially.
Q: How can I check my credit rating?
A: Contact either www.equifax.ca or www.transunion.ca to obtain your credit report. There is a fee for instant access to the report, but you can get the report for no fee if you make your request via Canada Post or via fax.
Q: I make a fairly good income, but I don’t have much to show for it. I have no idea where the money goes every month. A friend says I should use a budget, but the idea of budgeting seems depressing, like wearing a ball and chain. What else can I do?
A: The way you feel about budgeting is pretty common, but I assure you, it comes from a terrible misunderstanding about budgets. Over the past couple of dozen years, I have worked with a great number of people, wealthy people and poor people alike. In my experience, most wealthy people use budgets, and most poor people don’t use budgets. That says a great deal about the usefulness of budgets! People who don’t use them believe they are restrictive, that they stop you from doing what you want with your money. A properly-prepared budget actually does just the opposite: It ensures that your money will be spent on the things that are most important to you, rather than allowing you to be swayed by moods or by marketers. What else can you do that would replace a budget? Nothing, really. Your budget is the only tool that can ensure your personal finances do what you most want them to do. As an added bonus, that means it can also make relationships better.
Q: I haven’t had much experience in handling money or dealing with financial issues. Do you work with beginners, or do I need to read a book or do some sort of study before I call you?
A: There is no need to do anything in preparation for financial counselling or tutoring. Together, we can explore your financial values and goals, and uncover personal barriers to achieving those. Most financial books and courses focus on performance issues, in order to show us what we really ought to be doing. This approach often fails, since personal beliefs and biases are a much stronger influence than a to-do list can exert, at least on a long-term basis.
Q: I have been trying to save some money for a rainy day, but I’ve had no success. Expenses keep popping up that I hadn’t planned on. Or sometimes I just see something I want to buy, and I forget all about saving. I’m further behind than I was a few months ago! What can I do to change this?
A: You are on the right track, with your plan to build a savings account. And the very things that have been hindering you from getting it done are the reason it is so important. The car breaks down, or the stove quits working, or the dog gets sick, and without savings stored up for emergency expenses, you are at the mercy of your credit cards. Just one tip for now: You will make more progress in saving if you crystallize a goal. Rather than simply agreeing that saving is a good idea, which still leaves it open to negotiation, you might say something like, “I am going to save $1,000 in five months from now, by setting aside $100 per pay cheque in an account I can’t access by a debit card.” I have no idea whether those amounts are reasonable for you, but this goal has clarity, and it can be accomplished. When the reward of having $1,000 in savings is clearly set before you, it is surprising how much easier it becomes to achieve your goal.