Month: June 2019

My Financial Story – Then And Now

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I was fortunate enough to grow up in a middle-income family, living a middle-income lifestyle, learning the same financial mistakes that most other middle-class kids learn growing up. There was very little discussion of personal finances except for the one piece of advice that if I put away $100/month starting when I was 18, I would be a millionaire when I retired. Although it sounded like an astronomical sum of money at the time, I never took that advice and it turns out the numbers don’t quite work out anyway.

I spent the first 35 years of my life learning two things: no matter how much space you have in your house/apartment, you will fill it with stuff and no matter how much money you make, you will spend all of it (and sometimes a little more).

I never had much money in my teenage years but whatever I made I spent on stuff. I spent my college years living off the money I earned working part-time during the school year and full time in the summer (I didn’t receive much financial education when I was young but I did learn the value of hard work). I got some help from my parents as well and the balance was made up with a few student loans. I finished school with only about $15,000 in loans so I had some money sense back then.

And Then There Were Two

When I got married, my wife and I spent the first 5 years living under the burden of servicing a $10,000 credit line that we used to pay for the wedding. My wife had (and still has) a good paying job in a profession that is very stable so she was the breadwinner and since our expenses were low we got by just fine. We accepted the debt we were carrying to be a normal part of life and just continued on spending a little more than we made.

Fast forward a few years… As our incomes grew and I got a better job, we continued spending more and more. We bought a house and I renovated most of it myself. We took vacations to Hawaii and Napa Valley. We were making about $140,000 combined and slowly falling deeper and deeper into debt. None of it was credit card debt, I could never stomach the interest rates; our debt drug of choice was the credit line and when we finally came to our senses in September of 2009, we were almost $28,000 in debt.

It wasn’t like I didn’t know we were in that much debt. I have always been interested in personal finance, budgeting and investing so I always knew the status of our finances but I never cared. We were young and we had plenty of time to pay our debts. We had managed to save a small nest egg in RRSP’s (very similar to a 401K in the US), and the equity in our house was over $100,000 (the real estate market on the west coast of Canada was virtually unaffected by the economic downturn of 2008/2009). We felt pretty good about our situation and our growing debt was considered a necessary evil to continue to buy the things we wanted.

Time To Change

In July of 2009, I started listening to the Dave Ramsey show podcast and it changed my view of our personal finances and the role that debt plays in our lives. Our growing debt was no longer ok, it was unacceptable, and on September 1st, 2009 my wife and I pledged we would get rid of our debt. We reeled in our spending and paid off $28,000 by May 21st of 2010. In nine months, we paid off all our debt and it felt great; it felt like a weight was lifted off our shoulders.

And Then There Were Three (Four Counting Murphy)

Since then we’ve had a baby and my wife has resumed her career working part-time. We had an emergency fund built up but a bigger vehicle (older and used of course) to accommodate our growing family, some sloppy spending, and an emergency roof replacement on our home has eaten up the emergency fund plus a little more. We are once again in a small amount of debt (something I swore would never happen again) but we are confident we will have things under control again by Christmas.…

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If Debt Consolidation Sounds Too Good To Be True, Trust Your Instincts

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Americans have historically loved to rack up debt — so much that the average household has nearly $15,000 in credit-card debt. But today’s staggering consumer debt loads are usually about a lot more than shopping sprees. The economy has taken a very serious downturn, bringing job losses and the disappearance of accompanying medical insurance benefits. Sinking house values have wiped out homeowners’ equity. In this unstable financial climate, people have maxed out their credit to handle medical crises, divorces and debt schedules that were manageable in good times. In these difficult times, paying off mountains of personal debt has become downright impossible for many individuals and families.

Among the millions of Americans who can’t pay their bills, many have considered turning to questionable debt-consolidation firms that promise the moon and the stars. Their advertisements may claim that they can erase much of your debt simply by having you make regular payments to them, and promising to negotiate lower principal and interest payments with your creditors.

However, the reality of the situation is often far bleaker. For example, many of these firms charge high upfront fees; and often pay themselves first out of your money and apply small amounts, if anything at all, to your debt. They may get your debt consolidated into a smaller overall monthly payment, but because of more interest due over a longer debt term, in many cases, you’ll end up paying more when all is said and done than the cumulative debt you started out with.

Federal Action

The Federal Trade Commission is the main U.S. governmental agency fighting for consumer protection and the FTC has responded in a big way to reign in unscrupulous debt-relief services. Federal law gives the agency real power to investigate violations of consumer protection laws, and to enforce them through the agency itself or through the federal courts. According to April 2010 FTC testimony before Congress, stopping abusive debt-relief practices is one of the FTC’s top priorities in these hard times, and investigation and enforcement actions have been vigorous.

FTC Commissioner Julie Brill testified that almost 500,000 consumers have gotten relief from financial exploitation through 20 FTC lawsuits brought in the previous seven years against deceptive debt-relief firms. The FTC also has the power to enact consumer-protection regulations that affect entire industries. Currently the agency is in the final stages of the rulemaking process to enhance its Telemarketing Sales Rule in ways that would help prevent misrepresentation and abuse by more tightly controlling what debt-relief services can say and promise over the phone to potentially vulnerable consumers. Action by the State of FloridaIn the past couple of years, the FTC has actively partnered with several state governments to clean up the practices of abusive debt-relief firms.

As part of this initiative, the Florida Attorney General has filed several significant lawsuits based on violations of state and federal laws by these firms. In one suit, the firm charged its victims exorbitant upfront fees in exchange for promises of undeliverable financial-relief services. In another action, the firm misrepresented that it could settle consumer debts for greatly reduced amounts. Many financially victimized consumers have received financial relief through these lawsuits brought by the Florida Attorney General.

Even when debtors sign up with sometimes more credible, nonprofit credit-counseling services, many individuals are unable to maintain the payment schedules established with creditors that can take years to pay off. Depending on the amount of debt you have along with your ability to pay, experts say it may be wiser to simply contact your creditors directly yourself to work out realistic payment plans.

In the event that you really can’t pay your bills, even after trying to negotiate with your creditors, it’s wise to contact an experienced bankruptcy attorney who is a consumer advocate. Your lawyer can explain your legal options, assist you with stopping creditor harassment, and help you decide whether bankruptcy or dealing with your debt in another way is the best option.…

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