Seniors and debt

When you are retired and living on a fixed income, debt can literally creep up on you and before you comprehend your situation you could be thousands of dollars in debt. These debts could be credit card debts, a line of debt, an unforeseen disease which increased your amount of medical bills or other unforeseen circumstances in life that we could not control. 

There are people who love to spend money entirely too much, only they do not have the cash, so they charge they're purchases assuming they can carry the debt by paying off the minimum amount each month. The problem is that an unforeseen circumstance may increase their debt or decrease their income and when that happens debt completely take over their life.

When you are thinking of making some sort of purchase and you know you may not be able to afford the item, be careful. Think do I really need this or do I just want it? Understanding the difference between a want and a need is a good starting point for controlling your spending. 

One of the best course of action to reducing your debt is to cut up most of your credit cards and start on a system to pay off the debt. Set a goal for yourself as the first step. There are many ideas on how to best reduce debt, but the one I like is the Snowball Method.
Here's how it works The following is from the Credit Counselling Service of Canada:
Use any extra money you can come up with to pay off your credit card with the smallest balance first (ignore the interest rates and just focus on the card with the smallest balance). Paying off this card will give you a quick win and a sense of satisfaction and accomplishment use the snowball method to pay off and pay down credit card debt.

Don't pocket the minimum monthly payment that you used to pay every month on your smallest credit card. Instead, start paying down your next smallest credit card balance with that money. Of course, throw all the extra money you can at this debt to get it paid off as quickly as possible, but the key here is to free up money as you pay off your smallest credit card balances first. The monthly payments you free up will help you pay down the next larger credit card even faster. By doing this, you're essentially creating a snowball effect.


Repeat the process of focusing on paying off your next smallest credit card balance using the money freed up from the smaller cards you paid off earlier. With the snowballing monthly payment this method creates, your debts will get paid down faster and faster as you go, and you'll get more and more motivated as you pay off one card after another.

Once the debt is paid down Stay away from having too many credit cards and become more educated about finances and problems with debt. So, to all you grandparents and parents reading this blog post, speak to your grandchildren and children about the value of not spending money that you do not have and talk to them about the problems that can come from too much debt. 

The earlier that you can relieve or reduce your debt, the better off you are going to be in every aspect of your life. Nobody is going to fix your money difficulty, it is all in your hands. Nobody is safe from getting into in debt even if you are taught young about the risks and dangers of debt. Controlling your spending is hard, but is a needed life skill now that you have retired and are living on a fixed income. 

Thoughts about debt as we move to the end of the season of giving.

Rule No. 1: Never take on debt that you do not have the income to pay off.

It sounds simple, right. Yet every day thousands of us buy products, we think we need and pay for them with credit cards that we may someday pay off--(we hope)

Much of the mortgage crisis came thanks to home buyers with budgets dependent on rising incomes to pay the bills. Now it is home buyers who hope that interest rates do not go up too quickly. They took on a loan with no concrete way to pay it back and the banks were happy to give the loans.

Rule No. 2: Do not borrow money for assets that do not produce income or have any chance of appreciation.

This is why I urge you to understand that mortgages are not bad and yet car loans should be despised. It is also, why credit cards should be used wisely. Household debt is rising and I think that the real crisis is that most folks do not understand why this situation is so dangerous and, more importantly, how to protect themselves.

So during the joyous season, I hope that you have thought before indulging in a frenzy of spending that you will regret come January when the Credit Card bills come due.

Habits of Wealthy People

Thanks to Jim Yih for the idea and some of the content

There is not get rich scheme that will work for all of us, to get to be wealthy as the top 1% we have to be earning $215,000 a year or have a net worth of 2.5 million. Many Canadians have this net worth because they own property that has accumulated in value over time, but they do not consider themselves rich. In order to accumulate wealth in Canada or any other country you have to have some good habits.

What are these 20% doing right to accumulate the majority of the wealth in Canada? Numerous books and studies have tried to answer this question so here are some habits of wealthy Canadians.

Save regularly.

80% of the wealthy are first generation and they built their wealth one step at a time. One of the key habits wealthy people possess is a systematic disciplined savings plan. The best way for anyone to develop this habit is to start an automatic monthly savings plan where money comes off your paycheck or out of your bank account before any other expenses or deductions. Studies suggest that wealthy Canadians save about 20% of their income.

Live below your means. (Spend less than you earn)

According to the book the Millionaire Next Door by Thomas Stanley and William Danko, you may be surprised at what a wealthy person looks like. According to their research, the typical wealthy person might not be the one that drives the nice new Mercedes, living in the biggest house, wearing the top designer clothes. Rather, the millionaire next door is the person living in the same bungalow they have lived in for the past 20 years, they may drive a nice car but it is an older well taken care of car with lower mileage.

Have a Budget to know where your money is being spent.

If you want to become wealthy, you should develop a habit of tracking where you are spending your money on a monthly basis. Budgeting can be a very intimidating word but the fact remains, it is an essential habit for wealth accumulation.

Go into debt only when necessary.

Wealthy Canadians make a very conscious effort to avoid, minimize and pay off debts. It is so easy in our society to access debt. One of the habits you’ll need to build wealth is to avoid spending money you don’t have.

They maximize income.

In a study by Statistics Canada, there is a correlation between wealth and income. The more money people make the more likely they are to build wealth faster. Take time to train your mind to think outside the box about ways you might be able to increase your earning power. This might mean getting more education or starting a business or getting a part time job, etc. No one said building wealth did not take some effort.

Go into debt to own your home, or other assets that increase in value over time

The majority of wealthy people own their own home. Most wealthy Canadians have equity in other appreciating assets like business, stocks and real estate. The next time you put your money into something, ask yourself if it is an appreciating asset or a depreciating asset.

Use a team of Professionals to help you acquire and keep your wealth.

Wealthy people typically have a team of professionals to help them accumulate, manage and protect their wealth. This might include accountants, lawyers and financial advisers. Studies suggest that although they use professional advisers, they ultimately make the final decisions themselves. If you want to become wealthy, you must seek help but ultimately you must retain control over key decisions which means getting educated about wealth accumulation.

Credit Card Debt What You Should Do

Unfortunately, throughout the years, more and more people are becoming victims of enormous credit card debts that they probably will never get paid off. It is a shame to know that so many people feel that they NEED so many things but realize the only way that they could possibly get those things is by using their credit cards, and they normally have plenty of them to choose from!

Credit card debt has increased drastically throughout the past several years and it does not look like many people are yet realizing just how bad this problem is. If you are struggling each month, trying to figure out how in the world you will ever have the ability to pay all of your credit card payments on time, then you should definitely continue reading this article. 

It is very important for you to understand how dramatically credit card debt can affect your financial standing, or lack thereof. Credit card debt is one of the leading causes why an individual would end up having to file for bankruptcy or take out mortgage loans on their homes or other drastic things such as that. People become so caught up with trying to make purchases that are just not feasible, never considering how much it is going to cost them down the road, because of the enormous interest rates.

Start choosing to simply throw away all of those credit card offers that you get in your mail so regularly, trust me, you do not need anymore debt! These credit card bills will continue adding up and the next thing you know, you are going to be skipping payments and when that does happen, be prepared for an outrageous monthly bill, which you know for sure there is no way you can afford it!

To all of you young adults that have not yet gotten in severe credit card debt yet, do not do it, do not let this endless cycle of unbelievably expensive debts take over your life. If you can start your adult life out without too many unnecessary debts, such as credit cards, your life is going to be much more enjoyable and much much less stressful. 

Because of the fact that credit card debt has gotten so unbelievably out of hand, perhaps you could start a new trend and try staying clear from getting yourself into so much debt. So, start now by trying to focus on doing positive things to make your life easier and once you start achieving those goals, you are going to sleep much better at night and feel much more positive when it comes to every aspect of your life. 

Be responsible for your actions and if you have gotten yourself into a tremendous amount of credit card debt, make those monthly payments or try working extra hours so that you can start doubling up your monthly payments or even paying some of them off completely. 

The Jail Cell of Credit Card Debt

There is a thing as what the experts call “the problem solving process”.  This is a systematic method for solving problems that you always use to go from the starting point where the problem is to the ending point where the problem is resolved.  There are six basic steps to the problem solving process and none of them can be skipped.  They are…

1. Recognize the problem
2. Define the problem
3. Propose solutions
4. Identify risks and costs 
5. Select the best solution
6. Implement the solution.

This process always works because there is no room for emotions, excuses or procrastination.  You step from the first phase to the last in prompt fashion and the problem becomes solved.  

The purpose of this discussion is to get us to step one of the problem solving process.  It is to make us aware that we are being had and to make you good and outraged.  If you are outraged that you have a problem, then you can move on to step two and there and four and look for a solution and then do whatever it takes to make that solution happen.  And when you do that, you are well on your way to springing open the door of the jail cell of credit card debt and walking away a free man or woman, hopefully never to go into that jail again.

Many times when it comes to credit card debt, people don’t like to recognize the problem.  In 12 step programs like Alcoholics Anonymous, the first step is always to just recognize that you have a problem.  And this is very often the biggest obstacle for someone who is seeing their credit card debt begin to take over their lives.

The credit card companies are no help.  They like nothing more than to do all they can to make you incur more and more debt.  It isn't necessarily that they are evil but this is how they make a living.  The money from the interest you pay on your credit card debt goes to pay for the houses, meals, college educations and fancy cars of many credit card company executives.  That alone should make you want to pull the plug on this grand scam called credit card debt.

Let’s call a spade a spade.  Credit card debt is a loan that you don’t have to fill out any more paperwork than just to get the card.  Once you have it, the credit card companies are thrilled to jack up your credit limit to where you can buy more and more and more all the while your interest rate creeps up too.  Before long the debt level is huge and you are sending them hundreds of dollars and a big part of that payment is the interest.

Interest is money that doesn't buy anything.  It is money the credit card company gets for doing nothing more than housing your debt.  If we could get perspective on credit card debt, we would see that there is no rational explanation why one credit card can charge 5% interest and another one charge 25% interest.  The credit card companies owe us no explanation of what that money goes for.  

It’s not like when you buy a loaf of bread that may cost one dollar for one kind of bread but three dollars for another kind of bread.  In those cases you can easily see that the higher priced bread is of higher quality, tastes better or is more nutritious than the cheap bread.  You literally get more for your money.  When a credit card company charges you a higher rate of interest, there is no increased value for what they give you.  They don’t give you anything.  If a credit card company raises your interest rate from 10% to 20%, you don’t get twice as much good service or any kind of product for that extra money that are taking out of your product. 

Then how can they get away with it?  They do it because they can get away with it and there’s no indication that any governmental body is going to make them stop.  They get away with it because we don’t get outraged and drop them when they cheat us like that.  And they get away with it because credit card debt is a jail cell and we can’t get out. And at this time of year, the credit card companies are full of promises and that door can close quickly behind you if you believe their promises. Budget, plan, control your spending and you will walk away from the jail cell of credit card debt, sooner not later.

Your Secret Weapon Against Credit Card Debt

Tis the season to spend, spend, spend but you have a secret weapon to guard against running up credit card debt at this or any time of the year--if you choose to use it.

The television advertisements and dozens of junk mail advertisements you get all make big promises.  They are real good at selling the idea that they can get you out of credit card debt with some phenomenal program or secret weapon that you can find only by coming to them.  When you think about it, these people are pretty despicable. They are seeking to make money by preying on people who already are deep in debt.  The want to victimize the victims and in many societies, they put people in jail for that.

Anyway, you and I both know that most of those slick marketing productions that pitch getting you out of credit card debt through some sophisticated and costly program are a bunch of hot air.  But there is a secret weapon right under your nose that if you can set off its amazing power, it can get you out of credit card debt and keep you there.

This secret weapon is pretty amazing and you know we aren’t trying to market anything to you because this secret weapon doesn’t cost anything, doesn’t require you send off for anything and you can find it right in your own home and put it to work immediately at no cost to you.  But it is also a secret weapon that is not “sexy” and it will not make you go “OOO” and “AHH” by impressing you with its slick design.

The secret weapon is a budget.  See, we told you it wasn’t a sexy solution.  But when you analyze why you have the credit card debt in the first place, putting a rock solid budget in place is the foundation of a long term solution to your problem.  The marketers can give you all kinds of fancy analysis and discussion on the cause of credit card debt in your life that will put the blame on everything from the foreign exchange rate to immigration to global warming.  But it doesn’t do you a bit of good to point fingers about the problem.  The only thing that will do you good is to give you the tools and weapons to fix it.

There is just no getting around it, you are in trouble with your credit because you are living above your means.  In other words, you are spending more than you make.  This isn’t to throw a lot of blame and guilt around.  There are a lot of situations that can cause you to live above your means.  You could lose your job or have an emergency in the family that can cause you financial worries.  But when the money going out is the more money than is coming in, you have a problem that will drive up your credit card debt.

To write a budget, you simply sit down and take inventory of those two factors.  You inventory how much money you have coming in.  Then you inventory how much money you have to pay out.  This step alone is a huge step forward toward getting your debt problem under control.  A computer spreadsheet like Microsoft Excel is excellent for this kind of family budget planning and analysis because you can move things around and let the computer do the math for you.

Don’t make excuses about this.  If you don’t know how much a certain kind of spending costs you, dig out your receipts for the last few months and get a feel for it.  But once you know your income and your bills, you can tell if there is a gap.  Then you can make plans to close that gap either by getting more income or by cutting out some bills or both.  

It won’t be easy and it won’t be fun.  But if you get on a budget and stay there, you have the basic foundation for a solid family financial plan and you can move forward from there.  You may go on to use some other tools to bring your credit card debt under control such as credit card consolidation or balance transfers.  But don’t do a thing before you find that secret weapon and make it start working for you.  And that secret weapon is a realizing and reliable family budget and that includes gifts during the holiday season.

Time to Get Help

Do you ever wonder if there should be a 12 step program for people who have a problem with credit card debt?  The idea might not be as ridiculous as it sounds.  The 12 step program is one of the most successful therapy programs there is for helping people with addictions.  And in a lot of ways, our love of credit and of buying things using our credit cards amounts to an addiction. 

And like people who are suffering with an addiction, many times the biggest step forward is when you recognize that you have a problem.  Too often when someone has the beginnings of a credit card debt problem, there is a sense of ambivalence and “just let it go” because after all “everybody does it.”  And when you have a problem that threatens to become a huge problem, that is no time to be lazy and decide to just let it continue because you think everybody does it.

That attitude of “oh well” is exactly why the credit card companies are making record profits.  If we all would get mad because they are enslaving our family budgets, we would rise up and throw them off and the world would change dramatically for us.  But we can’t fix the world.  But you can fix our own world and start at home, with your own credit card “addiction” and maybe even use some of the principles of 12 step programs to get started.

Most professionals who work with people needing 12 step programs will tell you that the biggest obstacle is getting the troubled person to know they are in trouble.  We all live in a bubble where we tell ourselves and each other that “everything will be all right.”  12 step programs use tough love to tell the people who come there that everything will NOT be all right unless they take steps to change their addictions because their addictions will destroy their lives.

Well folks, we might need some tough love when it comes to us not taking action to fix our credit card debt problem before it destroys our lives.  We have to find a way to get over this idea that we should just endure credit card debt and get motivated to do the hard work to dig ourselves out before the task becomes insurmountable. In a lot of ways the problem is pride.  We may suspect we have a credit card debt problem but we don’t want to tell someone else we have one.  We are proud and we want others to think we always have it together.

That pride says “just take care of this yourself” and it will keep you from talking about the problem with your spouse, your family and then even going to someone like a credit card consolidation company to find out how to get this problem under control.  The big moment when an “addict” becomes a recovering addict is when he or she recognizes that the problem is there, that it is huge, that it could destroy their lives and that it is time to seek help.

Maybe that time has come for you.  Maybe its time to not let your pride be so stubborn that you wont turn and seek help from people who know how to help you get this problem under control.  So let this little discussion be your “intervention” to give you a slap in the face that the faster you let that pride go and seek some help, the faster the credit card debt problem will go away and you will be back on a solid financial footing once again.  And once you get this “monkey off your back”, you will never want to become enslaved to credit card debt again.

Taking Action on Credit Card Debt Before it’s Too Late

There may be some comfort for you if you are facing the rising threat of credit card debt in your family finances.  That comfort might come from the fact that this is a problem for thousands of families in the country.  But this is faint hope because it is still a problem that needs to be solved and solved by  you.

But before you start to examine what you can do about your credit card debt problem, you have to ask yourself why so many people in our country have let themselves get into this fix.  Well, there are a lot of reasons why a family’s economy goes negative so the bills overwhelm the income and the credit card debt starts to go up. It could come from a lost job, a health emergency, the need to get the kids through college or other reasons.  It isn’t always that you got into credit card debt because you were lazy or because you are the type of people who just like to live high on the hog.

It might also be comfort to know that there are people further along in the credit card crisis that they are having to think about selling their homes or declaring bankruptcy. But again, that may not be as much comfort as a cold warning of what might be lying ahead for you if you cannot find a way to put a stop to this rising flood of credit debt.  But there is one difference between those people who have reached that level of desperation and where you are today.  And this is the difference that you can take comfort in because this one fact will be the one that will keep you and your family from getting to that level of desperation.

That comfort is that if you are this worried about credit card debt as it is just not starting to become a problem, they are not too late in getting with it to stop the problem before its too late.  Its  really an amazing thing but one reason so many people are in deep trouble over their credit card debt is partly because they looked away from the problem for so long and did not decide to take decisive and serious action to stop the problem from overtaking them when it was still possible to stop it.

Psychologists have a word for what happens when you are in big trouble and you refuse to believe it.  That word is denial.  And even though these thousands of people who let their credit card debt problem get out of control are not in need of psychiatrists, for some reason there is a real tendency to ignore this problem month after month and year after year until it overwhelms you and its too late for some of the solutions that could stopped the problem early.

So if you suspect you may have a credit card debt problem starting to grow under your nose, take action now.  Don’t wait thinking it will somehow dry up and blow away on its own because it won’t.  Don’t spend time thinking that a few thousand dollars of credit card debt will cap and you will slowly work it down.  Go back to the basics and examine your budget and evaluate if you are living above your means.  And if you are, well to put it simply, fix it!  And when your lifestyle is in balance with your income, your budget will stabilize and you will be able to use credit cards wisely and not see massive debt result.  It’s never too soon to take action and if by taking action, you stop the problem in its tracks, you will be one of the families who handled credit card debt wisely, by avoiding it entirely.

Debt Can Make You Sick

There are many seniors that stay so stressed out and worried over the fact that they can not pay their monthly bills, that they are actually becoming ill from it. Debt stress is something that most of you out there know entirely too much about and if this sounds like you then perhaps you should consider reading this article very carefully. There are many things that you can do to help alleviate some of the current problems you have been undergoing each day. 

Being healthy is very important and preventing debt stress from causing this occurrence (poor health) is also very important and anything you can do to help keep yourself healthy should be important to you. Exercising and eating nutritional foods, along with possible meditation or some other means, to help relieve you from some of that stress that is bogging you down each day, you will be surprised by the difference in which you feel. 

Consolidating debt can be one thing you might want to try, this would reduce your monthly payments, because you are only going to be paying out one lump monthly payment, that will take care of all of those pesky debts that have been causing you so much strain, struggle and stress each day. Doing something positive to help get rid of some of your debt is always a good thing and for each individual it might be different. 

Your debt could be extremely different from the next persons and the relief from that debt could be gotten in a much different manner than with the next person. It does not matter how you achieve debt relief as long as whatever it is that you are doing is working for you and preventing you from being so stressed out that your blood pressure is always elevated and the threat of other health ailments are eliminated because of what it is you are doing each day to help yourself. 

Debt does not have to be a constant worry or concern of yours, yes, it will always be in the back of your mind, until you have most of it alleviated but letting it keep you down, upset or sick, is just simply not the best bet, it is not healthy whatsoever, so make sure that you think about that when you feel that it is bringing you down each day. Do something positive so that you can start feeling better each day that you step out of bed, with a smile. 

Seniors and debt part two of two

Life is very difficult for many seniors who anticipated that their golden years would be a carefree retirement. Instead, according to the Vanier Institute for the Family, Canadians over the age of 65 have the highest insolvency and bankruptcy rates in the country. With increasing expenses and a significantly reduced income and return on investments, more seniors are contemplating bankruptcy; but is it the best and/or only option?

While it’s true that bankruptcy can eliminate many of your debts, people typically file personal bankruptcy as a means of protection from creditors. If you are working, bankruptcy will protect you from creditors garnisheeing your wages. However, if you are retired and your sole source of income is your pension, then there are no wages to garnishee. It is very difficult for a creditor to garnishee a pension with one notable exception. If you owe the CRA (Canada Revenue Agency) for unpaid taxes, they are permitted to garnishee all types of pension income under Section 224.1 of the Income Tax Act. It is rare that the CRA will garnishee your pension income, but it is a possibility. If you have a significant tax debt and the CRA has threatened a pension garnishment, bankruptcy is an option that has to be considered.

According to Statistics Canada, one in three retirees over 55 and two in three over 55 who aren't yet retired are in debt.

A recent TD Bank study has shown that older Canadians have increased their debt load by 15% (an average of $6000/person) from the previous year. Seniors living in Alberta, Ontario and Quebec had the highest rates of debt accumulation in 2012.

According to Boomers and Retirement, a new survey by TD Ameritrade, the average Baby Boomer is about a half-million dollars short on retirement savings.

The most important piece of advice we can give you is to eliminate debt! Carrying debt into retirement is a recipe for disaster. Once you retire and begin living on a fixed income you will no longer have the funds required to service the debt. Here are 5 tips for seniors in debt:

• Postpone retirement if at all possible and pay down as much debt as you can. If working fulltime is not an option, consider part-time work.
• Pay down credit card balances as quickly as possible. They are generally the highest-interest loans that seniors carry. You can also call the credit card company and ask for a lower interest rate. They will sometimes agree.
• Limit the number of credit cards that you have.
• Stay away from debt settlement companies! Consumers are continuing to be taken in by false claims offering to settle your debts for pennies on the dollar quickly and easily. The reality is that when something seems too good to be true, it usually is. Debt settlement companies exist for only one reason – to take your money! They will not help you solve your debt problems. There is no instant or quick fix for serious debt issues.
• Protect yourself against fraud and/or abuse. Run away from get rich schemes. There are many scammers out there who have duped seniors out of their life savings and continue to seek out new targets.

Unfortunately too few Canadians are properly prepared for the financial reality of retirement. They get caught up in a downward financial spiral and some pass away leaving significant debt. The family is then left with the unpleasant options of paying the debt themselves or bankrupting the estate. If you are a senior in serious debt, consult a professional Trustee as soon as possible. 

Seniors in debt is a serious problem that continues to get worse. The right debt relief option you ultimately decide upon will depend on whether or not you have assets, who you owe money to, and how much you owe. For seniors in debt there are bankruptcy alternatives – credit counselling, debt consolidation, consumer proposals – which in many cases are better options than declaring personal bankruptcy.