Tag: money management

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Tips from the Frontlines: What We See Every Day in Debt Management

At Creditaid, we talk with people every day who are struggling with debt. Over time, you start to see the same patterns — and the same solutions. Here’s some of what we’ve learned.

  1. The ‘ostrich’ strategy is for the birds. Ignoring calls and letters, especially ones that involve legal threats, isn’t a great strategy. I’ve seen people ignore court summons, resulting in liens against their property and wage garnishment. Its much easier to reach an agreement to repay debts before this happens, as a lot more options are open to you. Even more importantly, the longer you leave debts festering, the more the interest will snowball.

Speaking with a credit counsellor sooner rather than later opens up far more options — and takes a weight off your shoulders. A professional can outline your options, develop a game plan, and help you avoid the stress of mounting interest and legal complications.

2. Stop giving away money to the banks. There are many bank accounts available for low ($5) or no fees- my local credit union waives fees if there is a regular payroll deposit. Most people I see need the money more than the banks do, so shop around and keep the fees in your pocket. If you’re thinking it’s not a big deal, that $15–17 a month adds up to about $200 a year. I bet you could think of some great things to do with $200 — and “giving it away to the bank” almost certainly wouldn’t make the list!

3. Challenge your spending. Look at where your money goes and ask yourself if you’re getting good value from it. One of the key points in budgeting is a spending analysis and reset- see my full article here.

When you’re buying items, especially non-essential ones, ask yourself: how long will I have to work to pay for this? Am I happy working X hours for it? Is it good value- will I be using it in a few years? If it’s a purchase that will incur interest, be sure to factor that into your thinking too. You’ll find that a lot of purchases drop off when you make a conscious choice about them. These can add up over time like the bank charges, every little bit helps.

As a bonus, you’ll find you genuinely appreciate what you do buy — and you’ll need less storage space too.

4. Sell off unused items. Whether it’s stuff you’ve been paying to store or an old car sitting in the driveway because it needs repairs, if you’re not actively using — or even missing — something, you can probably do without it. Selling it off means you’re no longer paying to keep it (storage, insurance, etc.) and you can put the money generated toward repaying debts or building your savings.

5. Pay off debt strategically. Make sure your money is working hard for you — allocate funds to paying off debt as a priority. Interest can be a real killer, so aim to pay off debts as quickly as you can. Your money works hardest when directed at the highest interest rate first.

If your debt is a challenge and you’re struggling to get the principal down, speaking with a professional like Creditaid can make a real difference. Credit counselling will typically eliminate or dramatically reduce interest on debts, which can change the whole picture.

6. Then, pay yourself through saving. Once you have a handle on debt repayment, turn your attention to savings — short-term emergency funds first, then long-term funds. Emergency funds are critical because they reduce or eliminate the need to take on new debt when life throws you a curveball. After you have a reasonable emergency fund in place, switch focus to long-term savings. It may not be the most exciting step, but it’s where you get to harness the power of compound interest working in your favour.

When deciding between debt repayment and savings, your money works hardest when directed at the highest interest rate first. Typically this means repaying debt before saving, since interest on debt is usually higher than returns on a TFSA. That said, if you’re already in a repayment plan like credit counselling or a consumer proposal, extra money will often work best going into savings.

Its always best to consider your unique circumstances and what makes you comfortable rather than blindly following a set of rules. The ultimate goal is to challenge yourself and make conscious, deliberate choices about how you use your money.

You work hard to earn it- make sure it works just as hard for you!

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You gotta fight… to protect your money

As a child of the 80s I love the Beastie Boys- Sabotage, No Sleep Til Brooklyn, and of course the classic You Gotta Fight for Your Right (to party) are anthems for me.

With apologies to the Beastie Boys, a situation the other day reminded me that you also gotta fight to protect your money. My family works hard to earn our money- I assume you do too- and so we need to watch it doesn’t get nibbled away by companies looking to pad their bottom line.

I was surprised at a recent bill from Rogers. We’re on a promo for $70/month internet, but our bill came in at $140. I checked our paperwork, the promo was supposed to run until next year so clearly something had gone wrong. I called to find out what had happened- it turns out that they ran the payment on an old credit card and unsurprisingly the payment was declined. We had updated the card info and ensured a payment was made before the due date and had figured everything was ok.

Wrong! Rogers decided to charge us a $70 NSF fee even though the payment was made on-time and it was their choice to run a card payment well in advance of the due date. I was shocked that a company would charge such a high NSF fee, especially as they don’t incur any actual costs for a non-payment.

While I didn’t want to take it out on the lovely lady helping me on the phone, there was also no way I was going to accept this- time to fight for my money. I pointed out we had made the payment before the due date, that we were a client in good standing, and then asked them to reverse the charge. No drama, it took 30 seconds for Rogers to agree to credit the amount against our next bill.

Rogers isn’t alone in playing these kinds of games. Hidden fees, billing errors, and charges that only get resolved when you push back — it’s more common than it should be. One area I see often: bank fees. Over the course of a year, these can quietly add up to $200 or more. Keeping that money in your pocket is as simple as switching to no-fee banking. We use Cambrian here in Manitoba, but many credit unions offer fee-free accounts, and some banks will also waive fees if you hold a few products with them.

If you want to protect your money, with a view to building your savings rather than hand it over to a large company, here’s what I’d suggest:

  1. Review your statements monthly. Are bills processing at the right amount, or have extras snuck in? Fee increases can slide by with barely a notice and quietly turn a good deal into a bad one. Make sure refunds have come through, and for the right amount.If you see anything that is wrong, contact the company in question.
  2. If something looks wrong, contact the company. Sometimes it’s a simple mistake that gets fixed in minutes. Sometimes the error is on our side, we’re all human. If the amount is incorrect, ask for it to be corrected- ideally refunded or at least credited to your account.
  3. Escalate calmly if needed. Ask to speak with a manager, but stay composed. The people in call centres are doing their jobs within a script — they’re not the enemy. I like to ask them to explain things clearly, then repeat my understanding back in my own words. I’ll point out where their explanation doesn’t quite add up and ask them to walk me through it again. More often than not, this gets things resolved.
  4. Go to your bank or credit card if you hit a wall. I’ve had situations where a company dragged its feet on a refund — until I started a dispute with my credit card. Things moved quickly after that. Disputing a charge with your credit card is fairly straightforward; going through your bank can be trickier. And if you’re confident in your position and haven’t had luck either way, small claims court is always an option. Many companies won’t even show up, since the legal costs typically exceed the claim. Just make sure you’ve kept any correspondence and can present a clear, logical case for why you’re owed the money.

Most of the time, it really is fairly simple- just a matter of spotting an error and pointing it out. I prefer calling, since I can get resolution quickly and it’s easier to work through the nuances in real time. That said, email works well for many situations, and for anything substantial you’ll want written confirmation anyway.

Whether it’s an unjustified fee or something that hasn’t been billed correctly, keep an eye on your accounts and push back when you need to. If you wanna party, you gotta fight for your money!

-James

About James

James is the Managing Director of Creditaid, a credit counselling firm based in Winnipeg. He serves clients across western Canada, providing debt management plans and budgeting and money management advice. He enjoys going to bat for his clients against banks and lawyers alike. Growing up, money was tight so he understands the challenges many of his clients face and is passionate about helping people understand their options.