Is one of your New Year’s Resolutions to save money? The beginning of the year is the perfect time to plan your budget, and save money while paying off debt.

Where to Find Money for Savings

Perhaps the biggest obstacle when trying to save money is finding it in your budget. Ideally, you will plan savings into your budget as one of your basic needs (like food and shelter). But there are ways to find additional savings.

Be Frugal

Learning how to do things for yourself such as simple car maintenance (changing spark plugs, oil/air filters), mending clothes, or making your own laundry detergent can eliminate significant money from your monthly budget.

Another area to consider is groceries. Shopping sales can help you save money. Pay attention to the cycle of sales at your local grocery store – many products go on sale consistently every 3 weeks. Buy generic instead of brand name products. Beware of buying in bulk if the food is perishable and will spoil before you use it all.

Found Money

Depending on your income level, you may max out your Employment Insurance and Canada Pension Plan premiums on your weekly paycheque during the year. This gives you a small bonus for several pay periods. Commit to living on your normal take-home pay and funnel the difference into savings and debt-reduction.

Savings Categories

Consider the reasons you need to save money and write them down. Savings targets can be categorized into short-term, mid-term and long-term buckets, the same as you do for your budget. Here are some examples:

Short-Term Goals                Mid-Term Goals             Long-Term Goals

New Phone                                           Home down-payment                 Exotic Vacation

New Laptop                                          New Car                                         Retirement

Gift Giving                                            Education                                      Endowment

Where to Save Money While Paying Off Debt

For short-term goals, you want money to be easily accessible and have a lower risk (which inevitably translates to a lower return). High interest savings accounts are ideal for short-term goals. The interest rate will be less than prime, but there is no risk to the principal invested.

Mid-term goals, because of the longer time frame for saving, can benefit from a more aggressive savings option. A Guaranteed Income Certificate (GIC), savings bond, or mutual fund provide reasonable security to the principal plus a significantly greater return than a savings account. These options may require a higher initial investment, but you can use a savings account until it meets the minimum threshold, then open the more aggressive option. Smaller monthly contributions are also available, depending upon the investment company used.

Long-term goals, with more time before you require the funds, mean more options available to invest in. Here in Canada you have 2 great options — the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings account. These are not products in and of themselves —they are a means of creating tax structures for other investment options. A mutual fund, stock purchase, GIC, or savings account could all be registered as an RRSP or held inside a Tax-Free Savings Account.

Pick your goals, commit to how much you’ll save this year, and choose the savings method that best meets the length of your goal. This will help you save money while paying off debt as well.

If you need help paying off debt, book your free consultation with us now.

The post How to Save Money while Paying Off Debt appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/how-to-save-money-while-paying-off-debt/

Establishing a personal budget is a cornerstone of prudent financial health, yet many Canadians don’t actively budget. You don’t have to be one of them. Here are some simple budgeting 101 suggestions for starting a budget for the first time.

Budgeting Wants and Needs

When creating your budget, take the time to separate your wants from your needs. It’s common to confuse the two — everybody needs food, but you want a chocolate bar. You need transportation, but you want a new car. Being honest with yourself is crucial — differentiate and assess what you need, and where it crosses the line into a want.

Here are some examples you can use to determine which category an expense belongs in:

Needs                                      Wants

Housing                                              Vacation

Food                                                    Dining Out

Transportation                                  Entertainment

Insurance                                           Hobbies

Automobile repairs                          Automobile accessories

Reviewing your expenses (from bank and credit card statements), and labeling each as a need or want is a good starting point. Build your budget from past spending to prioritize your needs, setting the wants aside into a discretionary bucket. Depending on your surplus income (the difference between your net income and required spending), you can slot your wants into your budget, prioritizing them until you run out of your surplus income.

Short-term, Mid-term, and Long-term Thinking in Budgeting

In the corporate world, the controlling department analyzes and tests budgets for variances based on changes — short-term, mid-term and long term. You can do the same. Grocery spending week-to-week is short-term decision making, as is whether to go to the movies. Mid-term decisions include items with annual renewals, such as internet service or insurance terms.

Examples of short-term decision making which can save you money:

• Purchasing generic, bulk, or raw ingredients for groceries
• Maximizing points to purchase gas
• Going to the movies on cheap night
• Taking advantage of takeout specials

Mid-term decision making could include:

• Changing deductible limits on insurance at renewal
• Moving closer to work to save on transportation
• Converting to a variable rate mortgage at renewal
• Moving to a more affordable apartment at end of the lease

What about long-term decisions? In the long-term, all decisions are up for discussion. Nothing is off limits.

The Most Powerful Phrase When Starting a Budget for the First Time

Once you’ve set your budget, you can make rational decisions about your spending on a day-to-day basis. Arm yourself with the most powerful phrase, “It’s not in my budget.” People have a hard time saying “No” because they have a fear of being left out or don’t want people to think less of them. However, taking control of your finances and making sensible decisions about how to spend your money is an essential skill.

Within your discretionary budget — your wants — you can make short-term decisions. If you choose to engage in an activity not in your budget, then you will have to do without something else to make up for it. If there are no discretionary funds left to offset your purchases, the answer should be an absolute, “No, it’s not in my budget.” Don’t dip into your needs budget to satisfy a short-term want.

What about Savings?

Putting money aside for short-term, mid-term and long-term goals is another essential of a budgeting plan. Treat your savings goals as a need as well, and never forgo your savings contribution to satisfy a want. Look for an upcoming article on developing savings targets while paying down debt.

Starting a budget for the first time doesn’t have to be difficult. If you need help starting a budget and paying off debt, book your free consultation now.

The post Budgeting 101 – Starting a Budget for the First Time appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/starting-a-budget-for-the-first-time/

Lose weight … get in shape … get motivated … volunteer more … get out of debt. It is the common refrain heard every January as we make New Year’s resolutions. Sadly, most people’s resolutions fail before the calendar turns to the month of February. How can you avoid this when making financial New Year’s resolutions?

Set SMART Financial New Year’s Resolutions

Setting SMART (Specific, Measurable, Achievable, Relevant, Time Bound) goals may be the answer. You may have already seen SMART goals mentioned in the workplace (and recently there has been legitimate criticism of their effectiveness in the corporate world for being too easily obtained). But considering the failure rate of resolutions, SMART goals might be the best option to begin your New Year’s journey.

If you are struggling with debt, especially coming out of the holidays, here is a breakdown and examples of SMART goals that can help with your financial New Year’s resolutions:

Specific

Everyone wants to get out of debt, but it is that vagueness which can serve to trip up your commitment to the goal. Focus on a specific aspect of your debt. For instance, commit to creating and sticking to your new budget.

Measurable

Use a simple spreadsheet to track your expenses. At first, stick to broad, simple categories, such as Rent, Food, Fuel, Insurance, Entertainment, and Incidentals.

Achievable

By starting in small steps, it is easier to build good habits. Keep the initial phase simple so you can build confidence in your ability to work within a budget.

Relevant

Budgeting is a crucial foundation for maintaining your financial health. Learning to live within your means can be nothing but positive for your life.

Time Bound

Focus on a short-term time frame. You can set a budget for a period from one paycheque to your next at a minimum. A monthly budget would be better, since many expenses (e.g. subscriptions) are on a monthly cycle.

More Potential Goals

If budgeting seems too overwhelming, set a smaller, more obtainable goal. With the new year starting, are you getting a pay increase soon? Is your insurance reducing their premiums? Either will cause a small increase in your take-home pay.

With the discovery of extra income, it is easy to use it as discretionary (fun) spending. However, if you are trying to get in front of your debt problem, then it would be best to use that found money for debt reduction. If you can commit to taking half and putting it into savings, and the other half into an extra payment on a high interest credit card, you’ll reduce your debt and accumulate savings at the same time. But do not forget, you are still living under the same income constraints as the previous year.

Make SMART financial New Year’s resolutions, take them one step at a time, and keep them all year long. Watch for more tips on savings, debt management, and budgeting in our future articles. If you need help with debt relief, book your free consultation now.

The post SMART Financial New Year’s Resolutions appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/financial-new-years-resolutions/

DARTMOUTH, Canada – 4 Pillars Halifax, a specialized debt consolidation company based in Dartmouth, Canada, is urging people who have been financially affected by COVID-19 not to panic and to contact them for assistance. 

COVID-19 has had a devastating effect worldwide, both in terms of health and finances. With many people losing their jobs or being furloughed for long periods, families have been forced into extreme measures, utilizing their credit cards or borrowing to keep their heads above water. 

Although the situation slowly seems to be improving, the future is still uncertain, and 4 Pillars Halifax has received an increased number of inquiries from people who are very worried about their debt levels. This is the exact kind of situation in which 4 Pillars Halifax excels. They understand the situation, never judge, and as they are not emotionally involved, they can devise and implement a workable plan in most cases. 

All of the plans created by 4 Pillars Halifax are 100 percent legal, and 97 percent of the families for whom 4 Pillars create a plan, complete it. In many cases, it is the lack of a workable plan that gets families into more trouble. 

“COVID-19 has caused unprecedented financial hardship for millions of families around the world. As a specialist debt consolidation company, we are committed to doing everything possible to help the residents of Dartmouth,” said David Moffatt “Our friendly team of advisors will sit down with a family and devise a simple-to-follow plan which will ensure, if followed, that people can regain control and hit their financial targets. The most important thing to do, in our experience, is to devise a plan and work that plan through, hiding your head in the sand is never going to be a good solution. Our teams are ready and waiting to deliver the clarity and support that many families are in desperate need of.”

4 Pillars Consulting Group is one of Canada’s largest debt restructuring companies and has assisted in the successful restructuring of over 1 billion dollars of consumer debt throughout Canada. Their clients have been able to eliminate up to 80 percent of their total debt. 4 Pillars Consulting Group aids their clients in obtaining the lowest possible repayment, helping them show restitution to creditors and prevent claims of bankruptcy. 4 Pillars acts on behalf of the debtor, not the creditor, and focuses on financial rehabilitation and education as well as helping find solutions. They are one of the only companies in the industry with this approach to debt elimination and financial restructuring. This results in services that put debtors back on track with rebuilding credit and effectively managing their finances. They are members of the Better Business Bureau and proudly serve their local community, whenever they can. For more information about the company and the services they provide visit their website at https://www.halifaxdebtfreedom.ca/

The post Debt Consolidation Company Urges People Worried About Their Financial Situation Post-COVID Not To Panic appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/debt-consolidation-company-urges-people-worried-about-their-financial-situation-post-covid-not-to-panic/

We are super excited to announce that David Moffatt, our Senior Debt Relief Specialist has published a book. It is called Behaviour Before Math and it is available on Amazon in paperback or kindle versions.

Have you ever felt like you couldn’t get a handle on your finances? That no matter what you try you always seem to stay where you are at? Behaviour Before Math tries to change that by focusing on our limiting behaviours and habits we all have. Based upon David’s experience in assisting thousands of Canadians understand their financial positions, he has built a book outlining the foundational knowledge that everyone should know.

Pick up a copy of the book at www.behaviourbeforemath.com

The post Behaviour Before Math appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/behaviour-before-math/

https://www.buzzsprout.com/1104815/4012025-mortgage-refinacing-guest-episode-8.js?container_id=buzzsprout-player-4012025&player=small

Join David Moffatt and guest speaker, David Clarke as they discuss the merits of using home equity to refinance and pay off debt.

Transcript

David Moffatt: Hello everyone. I hope you’re doing exceptionally well today. Welcome back to the Escaping Debt Podcast. My name is David Moffatt, I’m your host as always. Today, we’ve got a really interesting episode planned. I have a guest in the house actually. Today, we’re completely social distancing. I promise. His name’s Dave Clarke, he’s a mortgage broker. And really what we’re going to be talking about is the benefits of refinancing and how that can help you get out of debt. Now, remember that we believe that no one should have to struggle with the overwhelming burden that debt causes. We simply believe that it is not possible to work for both the consumers and the creditors at the exact same time in an unbiased fashion. That’s why we work for you, not your creditors. So, I have Dave Clark here. Dave, how about you introduce yourself?

 

Dave Clarke: Thanks David for having me. I’m Dave Clarke with the Clarke Mortgage Group. I’ve been a mortgage broker for eight years now and I have offices kind of scattered around Nova Scotia. David, I guess, just to talk about where we met, we met in a networking group probably four years ago, something like that.

 

David Moffatt: Something like that, yes.

 

Dave Clarke: Yes. A lot of my business has been helping people refinance, restructure their mortgages using equity in their home. To try to get their debt wrapped up, to try to get cheaper credit products, just to try overall help their financial situation. And then, I know when David and I met, we just not a – our clients to seem measure really well together.

 

David Moffatt: Yes. Absolutely. It’s a topic that we talk about often. I know kind of just of the podcast and kind of in the real world is, there’s a lot of different ways to solve debt. Most people seem to gravitate towards just traditional going to the bank and trying to get that loan or bankruptcy. They don’t seem to see anything in between. I know that in talking with clients on my end, most people aren’t even aware they can refinance their house. Do you experience that much? Much I’m sure you don’t because if they’re going to you, they know they want a mortgage. (2:00) How does that work in your day-to-day life?

 

Dave Clarke: I agree that not most people don’t know, I guess, the power of what kind of credit products are available to them. Sometimes, especially in the rural communities that I work in, it’s just kind of like the random bank that’s in the area and if they said no, no one can do it type of thing. So, to kind of take it further, I don’t know if it necessarily that they don’t think they can refinance. But in my experience and I talked to a lot of people who have just been kind of discouraged or declined, and they don’t know about what options are available. There are some people that don’t know they can refinance their homes, but there’s a lot of people that have had such a negative experience over their last five, ten years that they wouldn’t even think as possible. And then, that’s when they don’t kind of reach out right away to refinance.

 

David Moffatt: Yes. Absolutely. I’m sure you get a lot on the opposite side of the table to that think they can refinance. They bought their house two, three years ago and then they come to you and say, “Hey, I want to grab some money out of my house to pay off my debt.” We both know that doesn’t necessarily always work unless, there’s been a massive uptick in the economy, which certainly hasn’t happened in Halifax and probably, isn’t going to happen anytime soon with COVID.

 

Dave Clarke: Yes. You’re exactly right. It happened in the opposite side to where people come in. They think they can take the equity out of their home, but they don’t necessarily understand the rules. You can buy a house with 5% down, but you can only refinance up to 80% which means that you need to have a 20% equity stake there. Sometimes that takes 10 years to even make it, so you can just get the money that you have owed. It’s something they called a switch which is a little different. But yes, a lot of people don’t understand how long it takes to pay down your mortgage enough to do it. And then, there’s some obvious exceptions like, you made major renovations to your home and things like that. But yes, it takes a little while.

 

David Moffatt: Yes, for sure. Are you able to run through an example (4:00) of how somebody would use refinancing to help their situation? I know it’s kind of on the spot. We’ve literally talked about doing this five minutes ago. [laughter] As best as you can, maybe just around numbers to kind of go through scenario.

 

Dave Clarke: Okay. If you have someone who’s house is worth 200,000 and they owe a 100,000 on it, you can refinance it up to 80%, that’s a 160. So, in that situation, you actually have $60,000 of usable equity. You got to get Lauren appraisal involved but just for my quick easy math in my head, we’re going to say 60. In that scenario, if you have credit cards at 19.99%, we can look at paying those off if we have some type of loans. Sometimes it’s like a car loan that’s got a year left but still has a big monthly payment, or some consolidation loans, or some high interest stuff like Fairstone or things like that. We can pay those off. Sometimes we could take money ought to do renovations. A perfect example that happened recently is like, I helped somebody build an In-Law Suite which actually made their whole finances cheaper because their parents moved in. Those are examples about how you can refinance and go up to 80% and you can do something with that money. The question is, what do you do with it? If you’re paying off high-interest debt or something with a very high monthly payment, sometimes you can really cut your monthly payments in half or less.

 

David Moffatt: Yes. This is really interesting and one of the things that you touched on there was was paying something off that had a really high payment. Now, I know we’ve had this conversation, I don’t know how many times about how interest rates not always, but are often times completely irrelevant to the conversation. If somebody would just prioritize paying off their 0% interest car loan over their 8% personal loan, for example, they would be in a much better situation. So, I don’t want to steal the thunder. Are you able to kind of comment on that and how mortgage refinancing (6:00) can kind of accelerate somebody’s entire financial plan.

 

Dave Clarke: Yes, you’re exactly right. The biggest thing that I keep talking about is how cash flow is the most important thing. Interest rates are definitely a component that you need to pay attention. But when you look at someone comes in and they’re struggling and they’re trying to think of a better situation, it’s because of the cash flow. That’s how they’re feeling it. We’re looking at a truck loan for instance, you get a truck loan for 70 grand. It could have a monthly payment of what you see 800, 900 bucks a month type of thing.

 

David Moffatt: That’s if they take it over eight years. Yes. [laughter]

 

Dave Clarke: Yes. Sometimes a thousand.

 

David Moffatt: Yes.

 

Dave Clarke : You look of that again, obviously, a thousand for a simple math. When you have only a year left on that, you might only owe $10,000, $12,000, $15,000, but the monthly payment on it is a thousand. So the question is, if you refinance and pay off that $10,000, $15,000 loan, what can you do with that thousand dollar a month payment? If you refinance it and you just spend thousand dollars a month, you’re not going to see that positive change. You eventually are going to need to get another car loan and that might not be the best thing to do. If you use that thousand dollars to then take that towards your next loan or your high-interest credit cards and you use that to really snowball pay off the rest of your debt, that can make a huge impact in that time frame between then and when you might need another car a year or two.

 

Dave Clarke: Your finances can be in much better shape because you spent that time paying off these high interest credit cards. Which if you didn’t do it, you might be still paying off your car loan and doing interest-only payments on your credit card. So, it depends what you do with the cash flow. There’s a right way to do things for paying debt off and when I say right thing, I just want to put a little disclaimer here. There’s a big difference between what we say about paying off debt and what real life is and what (8:00) fun is and all that different stuff. There’s sometimes a balance between that. In that example of a thousand bucks a month, we might be able to do some type of aggressive debt payoff with 600 of it. And if the other 400 meant that you could take a vacation with your family and was your goals. Those are things that I just need to know about, so it can be all part of the plan. But yes, cash flow is important, but what you do with it long-term really is the thing that makes a big deal.

 

David Moffatt: Yes. Absolutely. I think you kind of hit it right on the top of the head of the nails – is that an expression?

 

Dave Clarke: It is now.

 

David Moffatt: Awesome. Love it. Is this whole concept of – there’s the mathematically correct thing to do. If anybody wants to know the mathematically, the most mathematical accurate way to pay off debt as you start with the highest interest rate, you focus on that and you throw everything extra on it. There’s been a whole bunch of studies that have shown that, that’s actually a very ineffective way to pay off debt, and the reason why is because of human behaviour, right? Another method that’s often talked about is the debt snowball which is where you start with the smallest balance first and then work your way up. There’s been a lot of studies on that, that show that it is significantly more effective than what’s called the debt avalanche which is where you start with the highest interest rate first.

 

David Moffatt: But I think, I know we both agree on this. I think those are very good ways to start and look at your finances, but it doesn’t necessarily mean that, that’s the most accurate thing to do. For example, paying off the smallest balance first might only free you up a hundred bucks a month, whereas, if you focus on that truck payment of a thousand dollars. Imagine the choice that you now have, the safety that you now have if something goes wrong. What happens if your income drops a thousand bucks a month like it did for a lot of people during COVID, right? Somebody who would have prioritized the smallest balance or the highest interest rate might not necessarily of focused on that vehicle. So, I think there’s this human element as well, that has to come into things. I think you’re perfectly right.

 

Dave Clarke: The reason why refinancing can be helpful is that (10:00)  in my experience when I look at debt payoff plans, there needs to be some type of element that plays in the freeze up cash flow at all. So, to be able to focus on things, you can do it or you, again, we’re looking at the snowball and you’re picking your smallest credit card and you pay it off. That can take a while, that can be kind of discouraging sometimes. If you do something like a refinance or a proposal or you get a raise or there’s some type of cash flow change, that’s what I find helpful when you put a plan in place. It’s one thing to do budgeting and stuff like that. But I find there needs to be something that kind of triggers some of this extra cash flow that you can use to even pay off debt, especially for those that are kind of going paycheck to paycheck.

 

David Moffatt: Yes. Absolutely. I mean, my biggest recommendation to anybody that struggling with debt, that if you can’t pay your debt off in at least five years, I’m talking unsecured stuff. So obviously, a mortgage for twenty years, I don’t expect you to be able to pay it off with five years over, that would be really cool if you could. If you’re going to take more than five years, you have to consult a professional. Now, who you go and see is going to really depend on your circumstance. If you have a ton of equity, that might be a mortgage broker. If you’ve got a ton of assets out there, although there’s an Astrix on that, you shouldn’t be selling assets to pay off debt. You might want to go see a financial advisor. If you don’t know then, you want to come see debt specialist. But really, what we’re talking about mainly is for people that if they refinance, if they restructure, if they do some sort of change, will actually be able to afford what they’re doing after the fact. Have you ever – I don’t really need to ask question I know for a fact. What happens when somebody’s credit is so impacted, but they have equity in their home? How does that work? (12:00) What opportunities are available to them?

 

Dave Clarke: There’s three different residential to kind of types of lending. There’s A lending, B lending and there’s private lending and then, additionally on that there’s commercial. To start off, if you’re looking for mortgage advice and even if you were declined in the past, you got to ask that simple question. Can you do A, B private or commercial? If they’re missing one of those components then it’s just – keep checking because there’s stuff out there. That’s just kind of a question for the consumers to ask. If you have damaged credit, typically, what that plays into is what you’re able to do with an A lender. That’s what the whole kind of credit profile is really based on when you talk to mortgage professionals is whether or not in A lender like the big banks or the big model lines can do it. If it’s damaged below what we can do with them and if it’s not realistic that waiting and doing a little for tweaking, we’ll fix it. You have a ton of equity if you’re in an urban area like HRM or other urban areas in Canada, you can go to B lenders. They typically do four and a half six and a half percent rates. If you’re in a rural area like I live, you don’t have that B lender at all. You got to go right from A lending to private expensive money. So, if you have damaged credit and lots of equity, what I always say is, it’s not whether not I can get you a mortgage, it’s whether or not it makes sense. Sometimes it does, sometimes a 12% can pay off a 26% product and it makes a ton of sense.

 

David Moffatt: Or that 0% interest truck that’s cost you an absolute fortune on a monthly basis.

 

Dave Clarke: Yes. An example that is, if we think we could fix your credit in a year or two to go to A lender. We could pay off something with a thousand dollar a month payment like an older car loan. Sometimes that gives us the cash flow we need to fix your credit. (14:00) Maybe the timelines work perfectly there that we can get that bought out with a normal lender, but it just plays into the strategy. Does it make sense. If I get you a mortgage and we pay off something to fix anything. Not to keep going back to paying off the car loan, but it’s a perfect example of something that needs to make sense. Paying off a maxed out credit product might not help the issue, if the only reason we use a credit card is because we have no cash flow.

 

David Moffatt: Yes. Sorry to interrupt, but that’s why I have a really hard time with “traditional advice”, right? If you would go to speak to your traditional financial advisor, they’re going to say, “Well, it makes no sense to pay off that 0% interest car loan. You can make so much more money by either paying off this credit card or this debt or investing the money.” The challenge behind this is that just, yes, the math makes sense, but real life doesn’t match up with that math, right? I’m actually writing a book on this whole kind of topic. But at the end of the day, if everybody followed the math the way it’s supposed to be done, there wouldn’t be any financial difficulties at all. But it’s simply not true, 50% of Canadians were living paycheck to paycheck, right? Anyway, just an aside. Sorry continue.

 

Dave Clarke: Yes. Things need to make sense. There needs to be a plan. When you talk to your financial professional, it’s kind of my advice for all financial professional, if we don’t know the story, it’s hard to give advice on it. We need to know kind of what happened to cause the debt. What we could do differently and why it’s not going to happen again. Those are kind of the key elements when there’s damage credit and we’re trying to make a plan or even if there’s not damaged credit. You’re just feeling like you’re going paycheck to paycheck and we need to make a plan, because what David is saying is right. Say, “Hey, let’s pay off your 20% credit card with a mortgage.” (16:00) Saying that out loud sounds like a perfect idea. But if I don’t know that the reason it went up is because your kids going to school or I don’t know that the reason that the credit card went up is that you did renovations and you still need to get your roof done. If I don’t know the key causes, my fix isn’t going to be an actual fix. What we’re doing is we’re using your equity and we’re not putting in a good realistic plan and I’m all about realistic plans.

 

David Moffatt: To kind of add to that, not only might it not kind of solve the problem, you might not even be able to get them a product, right? I know we’ve had conversations about this where you’ve had a client that has a really, well, good story. It makes sense in the lenders have made exceptions based upon those stories where if you don’t know the story from the get-go, how are you supposed to even try to get this exception, right?

 

Dave Clarke: Yes. That’s absolutely right. When David says a good story to what I need, is I need something that makes sense. If it’s something that there was a job loss or someone was sick or those type of things, a business failed and you all bunch of back taxes or something like that, which is a one off. It’s a very good example of me to show those last questions. I answered, what happened? How did it change and why is not going to happen again? That being said, if it’s something where it was just over spending, not budgeting or things like that and it was a slow kind of build up of debt and you kind of lost control of it. You couldn’t get your way out of it. That is still the story I need to hear. What I have a really hard time getting approved is when I don’t know what happened. I can’t explain it to the underwriter. Underwriters are all very much human. So, they start imagining what happened. They start coming up with their own opinions. That’s the worst thing that we can do. We need to make sure that everything is answered before it ever hit someone’s desk. (18:00) The story is very important and I don’t think people necessarily think that. I think some people think things are a need-to-know basis. But I find in my business to make things successful, you always need to overshare with me. [laughter]

 

David Moffatt: Yes. I understand why this happens so, because I look at my own personal life right in. Whenever I go meet with a professional, I don’t want to tell them the whole ins and outs of everything that I want to do and want. I just want what I want, right? But I think you’re very correct that people need to really take a step back and understand kind of what they’re doing, right?

 

Dave Clarke: Yes. It almost seems like I’m digging sometimes for information. What I’m trying to do, is I’m trying to have a complete story. If they’re – I’m just going to do a common example that comes up, is that there’s some bank errors that happen every once in a while. Where you think of payments going to come out a certain day and it doesn’t and that messes up things sometimes. I hear that a lot, but what doesn’t work is that if I only explained one late payment when there is five. If I explain one late payment when there’s five, there is no story. Then, I need to know exactly how the second late payment happened. I need to know how the third one and the fourth and the fifth. What happens if I don’t is there’s not a complete story and again, the underwriters going to start making assumptions and there might be a very good reason in there that I just don’t know about yet. Those are the type of things that I just need to know if you had late payments for three years and I just have kind of one thing that happened. I can’t explain it to anybody. I’m going to keep saying this over and over again. I need to explain, what happened? How we fixed it or going to fix it. Why we know it’s not going to happen again. If we can’t prove those three things, it’s very hard for me to prove doing underwriter is a good decision to approve it. That’s why it’s so important for me to know the story.

 

David Moffatt: Yes. It makes perfect sense, right? It doesn’t –(20:00) the idea is if there was a problem in the past, has the problem stopped? What was the reason for the problem and kind of move forward from there. I think we share a very similar approach in tackling kind of situations in the approach that we go through, right? Really identifying the problem that the individual has. Designing a solution around that and then, implementing that solution at the end of the day. Is there anything else you want to cover on mortgages? What do you think people should need to know as it relates to debt and mortgages?

 

Dave Clarke: What I think people need to know is to rely on professionals and to go through their options. For instance, if somebody has lots of equity in their home, many times I can do something. If they don’t have lots of equity in their home and they need to do something, I’m very likely not the answer, but I know people that are the answer. I know Dave has the same way of working at things. But the first step there was to reach out to somebody. It is very hard to research mortgages online. I’m not saying you shouldn’t, but there’s actually some nuances and some stuff in the mortgage industry that you just learn from experience and not because it’s written on a piece of paper. That makes it kind of difficult to be able to navigate it without a professional. That doesn’t mean that every mortgage person you talk to is going to know it all. Maybe, talk to a bunch of them until they feel comfortable with someone. But it is to reach out because it’s very hard to know it on your own. I’m just going to do a quick example.

 

Dave Clarke: The interest rates that you see online are not the interest rate you’re going to get on a typically on a refinance. There’s something called a high ratio rate and something called a conventional rate. The high ratio rate is a CMHC insured or one of the other insurers mortgage. CMHC insurance comes into place when you have (22:00) less than 20% down when you buy a house or if you already have it because you never got rid of it and you’re looking into switch and do things at your renewals. That’s the interest rate that everyone advertises. If you go online and you do your homework and you try to find the best lender for a refinance, the rates you see online, it’s very likely you’re not going to get it. The lender that you find online with the best rate might not even do refinances. It’s not a bad thing to do the homework. It’s just to explain those, there’s nuances there, which you may want to have some professionals to bounce ideas off of. That’s kind of like the first step that I really recommend when somebody’s looking for some financial advice.

 

David Moffatt: Love it. Kind of a big thing that I caution people on whenever they’re looking to obtain mortgages to really make sure that they’re not turning unsecured restructurable debt into mortgage debt that is then tied against their house. This kind of goes back to our entire conversation about really making sure that the solution actually works for you, rather than just simply jumping into the first solution that’s offered to you. I recommend that you just talked with professionals. Typically speaking, somebody that brings these things up, is consciously thinking about it. People had don’t bring it up or are probably not thinking about it as much as they probably should, right?

 

Dave Clarke: Yes. Just one of the piece of advice is, some high interest loan companies out there that advertise quite well, it’s pretty easy to get funds. Just caution that some of these high interest loan companies that you see where you can get these 26% rates with it. It is quick and easy money, but I am shocked over and over again when clients come to me and they have these high interest loans. How they just didn’t know that some of them were attached to their house. It didn’t know what the interest rates were on some of them. If you’re getting an offer at anything (24:00) at 26%, just reach out to a few people just to see what else is out there because in a lot of cases, I found that there is alternative or there’s other solutions. That’s my only thing that I really caution, so not to be too negative. I find there’s a lot of good professionals, financial professionals in the world, like Four Pillars or financial advisors or mortgage brokers. But yes, just caution some of those 26% loan companies.

 

David Moffatt: Yes. Love it. Where can people find you Dave if they want to reach out and ask the mortgage questions?

 

Dave Clarke: You can find me on Facebook, Clarke Mortgage Group. My website is Theclarkemortgagegroup.com. My phone number is 902-482-8808. We’re a team of four, and we do all over Canada, but our offices are scattered around Nova Scotia. Any questions just feel free to reach out. The very worst case scenario that I can recommend you to someone and give you some information. So, love to talk to you.

 

David Moffatt: Absolutely. Love it. Well, thanks for being on the podcast. I really appreciate it. We’re going to have to make this, maybe a reoccurring segment because I know that mortgages and debt restructuring are always very much tied. Everybody wants to buy a house and I completely understand that. Maybe, we’ll get in and talk about kind of the credit impacts of kind of insolvency is in restructuring and how that impacts abilities to get mortgages.

 

Dave Clarke: Yes, perfect. Thank you for having me.

 

David Moffatt: Awesome. So, everybody thank you very much for listening. You’ve been listening to this Escaping Debt Podcast and remember that we believe it’s simply not possible to represent both the consumer and the creditors at the same time in an unbiased fashion. And that’s why we work for you, not your creditors. We’ll catch you in the next episode.(25:44)

 

 

The post Escaping Debt Podcast – Mortgage Refinancing – Episode 8 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-mortgage-refinancing-episode-8/

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Transcript

David Moffatt (00:00):
Hello, everyone. I hope you’re doing exceptionally well. Welcome back to the Escaping Debt Podcast. My name is David Moffatt. I’m your host today as always.

David Moffatt (00:09):
Today, we’re going to be talking about debt service ratios and how largely they’re meaningless, useless, they don’t really give a good indication of somebody’s financial stability, and how you really shouldn’t be relying on them, or a bank to tell you what you can afford for debt payments.

David Moffatt (00:31):
Remember, that our goal is that no consumer should have to struggle with the overwhelming burden that debt causes, and we believe that it’s simply not possible to work for both the creditors and the consumer at the same time in an unbiased fashion, and that’s why we work for you, not your creditors.

David Moffatt (00:47):
Let’s dive into this a little bit more, and you might hear some clicking in the background just because I’ve actually got a bunch of information pulled up here into what exactly is a debt service ratio, right? Like what are we even talking about? These terms might be largely unfamiliar to a lot of people. Essentially, let’s define what a debt service ratio is first.

David Moffatt (01:08):
A debt service ratio is a calculation that a bank does to determine whether you can afford a payment or not. For example, you go into a bank, and you want to apply for $20,000 loan. They will calculate what’s known as your gross debt service ratio, as well as your total debt service ratio. These are slightly different, but the principle is the exact same. They essentially calculate how much you’re spending on the payment itself in relation to your income, and then your total obligations, okay?

David Moffatt (01:47):
They’ll take into account all of your debt payments, your mortgage payments, the utilities on your house, for example, and they divide that into your income. In most instances, these formulas are used primarily when lending on mortgages. However, as I understand, that they are used when you go in for just a regular loan itself.

David Moffatt (02:07):
I’m going to be talking about these primarily in the concept of going to get a mortgage, however, these still apply largely when you’re looking at a personal unsecured loan. Let’s kind of go through these calculations, okay?

David Moffatt (02:21):
Let’s start out with just your regular gross debt service ratio, which is really the cost of the individual property that you’re going to be purchasing, okay? For example, they take your mortgage payments, the property taxes, your heating costs, any associated condo fees if you’re purchasing a condo, and you’re dividing it into your gross annual income.

David Moffatt (02:46):
The total debt service ratio, which is usually what they’ll calculate if you’re going to get an unsecured loan, is all of your household expenses, any credit card payments that you’re paying, and other loan payments like car payments, mortgages, second mortgages, all this type of stuff, and then you’re dividing it by your gross annual income.

David Moffatt (03:04):
Now, these guidelines depend and change a little bit per bank and for what you’re planning on doing, but the number you get is a percentage. Here’s the problem with this stuff, okay, is that you’ll notice that, although I mentioned taxes, I mentioned the property taxes, and you’re now dividing this formula by the gross income that you end up making, so what ends up happening in a lot of instances is that people are just, just shy of being able to qualify for a mortgage.

David Moffatt (03:39):
I’m looking at the CMHC guidelines in the page, and I’ll put this in the show notes, that says that CMHC normally restricts debt service ratios to 35% for the gross debt service ratio, and 42% for the total debt service ratio. To kind of put this in common language, the gross debt service ratio, as it relates to properties, calculates the cost of that individual property, okay?

David Moffatt (04:08):
It essentially says, “How much does this house cost in relation to your overall income?”, and the total debt service ratio, and to kind of back up a little bit, that gross debt service ratio, it omits other forms of debt, okay? The total debt service ratio takes into account the entire cost of all of your debt situation, okay?

David Moffatt (04:38):
It’ll factor in loan payments and credit card payments and everything like that, that I’ve already mentioned, but here’s the issue with all of this type of stuff, okay, is that when you get paid, there are a ton of deductions. The first one that many people are aware of are just your regular income taxes.

David Moffatt (04:58):
Income taxes in this formula are not taken into account at all, okay, which means that theoretically, somebody that makes a reasonable and sizeable income, I would say, more sizeable than reasonable, they could theoretically eat up a ton of their disposable cash flow just in the taxes that they have to pay. I’ll use my own situation back when I was in the military.

David Moffatt (05:26):
Back when I was in the military, I was making about $65,000 a year. This is all public knowledge. You can look it up, and when I run what I was supposed to make, just through an income tax calculator, you take $65,000, you put it through an income tax calculator, I should have been receiving almost $10,000 more per year after taxes than I actually was.

David Moffatt (05:59):
Now, most people would be like, “Okay. Well, this doesn’t make any sense. If you were supposed to receive it, why weren’t you?” It’ll become clear in a second. Well, it’s because of everything that was coming out of my pay, so there’s obviously the tax that come off. There’s the pensions that we ended up having to pay for.

David Moffatt (06:17):
A little known fact, you actually pay for your pension when you’re in the military. It isn’t something that you get for free. Medical costs can come off of pays, and in the military, you get free medical, at least while you’re in, so this is more talking about a regular pay. Any type of dues, so we had mess dues, for example, and you think of just a regular individual that’s out and about. They might have regular union dues, they might have mandatory fees that they end up having to pay.

David Moffatt (06:48):
I mean, there’s all kinds of costs that don’t get factored into this debt service ratio that an individual might have to pay. When I was looking at my income, I was losing nearly 50% of my pay, okay? If you follow this whole debt service ratio calculation, especially when you look at the total debt service ratio that calculates everything … By the way, this formula worked. I was losing roughly 50% of my income, okay? I could max my service ratios up to 42% in relation to a house, meaning that I would have roughly 8% of my income left to pay for groceries and the gas, and all the other expenses that come with life, right?

David Moffatt (07:39):
I hope that makes sense, and it’d be easier to visualize this if we had a screen share or something like that, but I hope it makes sense. Long story short, this debt service ratio doesn’t take into account the actual true costs of life, and the largest cost of life for many people is taxes, the various deductions that come off of their pay that might not necessarily be related to taxes, so again pensions, medical plans, union dues, long-term disability, this type of stuff.

David Moffatt (08:11):
It doesn’t take into account cable, internet, phones, your family size. Like for example, the gross family income of a household may be 75,000, which for a family of two, would probably be a very, very, very comfortable salary to make, but if you’re now a family of six or seven, that 75,000 starts to become really restricted because your grocery bill goes through the roof. This service ratio doesn’t take any of that into account, which means that is this really a good way to actually lend people money?

David Moffatt (08:44):
Well, according to the bank, it is, and the bank will give you a loan if you fit within this 42%, even though your expenses might far exceed what you actually have available, but you might just fit into this calculation. We see this time and time again, where people are lent money, that they really couldn’t afford from the get-go, but again, because of these calculations, it ends up working just fine, right? I don’t believe that you should be using these calculations when making your decisions to borrow money.

David Moffatt (09:21):
I don’t think you should be listening to your banker as to whether you should borrow money. I think you should be listening to yourself, potentially a financial advisor if you’re working with one, and I think that instead of calculating debt service ratios, I think you should be going through, making a proper budget, and going through an entire money management plan, and actually figuring out what’s affordable.

David Moffatt (09:49):
Now, affordable doesn’t mean that when you write your income at the top, that your remaining money at the bottom says $0, especially if you haven’t saved anything. A proper effective money management plan has you putting aside money, okay, so make sure that you’re prioritizing these types of things, because what this means is if you properly plan and properly calculate how much you can actually afford to pay, then what will end up happening is you’ll live a much, much better life. It’ll be filled with less stress, right?

David Moffatt (10:28):
You imagine if you get into a house and you can barely afford it because, in my example, I was losing 50% taxes, deductions, pensions, you name it, all my pay when I was in the military, and I can max out my debt service ratio to 42% of my annual gross income, leaving me roughly 8% left to live, and let’s just calculate how much 8% actually is. Give me a second here.

David Moffatt (10:59):
8% would be $5,200. According to this calculation, okay, I would have been able to feed myself, buy gas, have a cellphone or a phone, internet cable, I’d been able to just go buy regular household things, and I would’ve only had $433 a month to do that.

David Moffatt (11:23):
Now, interestingly enough, from what we’ve seen, the average person spends about $250 a month on groceries, so let’s subtract that, so now, I have $183 left. Say cellphone plan, let’s say it’s cheap, $50, that’s cool, so now I have $133 left, and that’s for everything. You got to understand this, right? Like obviously, this makes absolutely no sense, and so I don’t actually know why CMHC and these banks use this formula.

David Moffatt (11:56):
If anything, if they were to use this formula, they should make these calculations say closer to, I don’t know, 25 or 30%. Now, here’s the thing, is they’ll never do that. The reason why they’ll never do that is because the basis of the economy is people purchasing things, and a lot of the economy is based on people borrowing money to purchase the goods that they want to purchase, which means that the last thing that you want someone to do is to not be able to borrow as much at least from a governmental level and from a banking perspective, and banks make money lending money, right?

David Moffatt (12:32):
Long story short, this was a short one today, but you shouldn’t be relying on the banks to tell you what you can afford. You shouldn’t be relying on a formula to tell you what you can afford, instead, you should be working out a proper money management plan, you should be going through making sure you have room for savings, and what wind up happening is you don’t have to care about these numbers.

David Moffatt (13:00):
If you properly plan and you ever need to borrow money, you’d walk in and you should be properly prepared, because of the fact that you’ll be well ahead of wherever they’re at. Now, I’m not going to lie, this does take effort. It does take time to establish, but I truly believe that anybody can get there if they put their mind to it. Guys, I know this is a short one today. Thank you very much for listening.

David Moffatt (13:25):
We’ll catch you in the next one, and always remember that our goal is to make sure that no one has to struggle with the overwhelming burden that debt causes, and this is very true when we’re talking about debt service ratios because it is what puts people into a lot of debt. Remember that we believe that it’s simply not possible for someone to represent and work for both the consumers and the creditors at the exact same time in an unbiased fashion, and that’s why we work for you, not your creditors. Catch you in the next one. Have a great one. Bye.

The post Escaping Debt Podcast – Why Debt Service Ratios Mean Nothing – Episode 7 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-why-debt-service-ratios-mean-nothing-episode-7/

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Transcript

David Moffatt (00:00):
Hello, everybody. I hope you’re doing exceptionally well today. Welcome to the Escaping Debt Podcast. I’m your host, David Moffatt. And today what we’re going to be talking about is really managing credit card debt specifically.

David Moffatt (00:12):
Now managing credit card debt isn’t really much different, I guess, than managing other debt. However, it is a lot more dangerous than other debts, which we’ll get into for the duration of the podcast.

David Moffatt (00:25):
Remember that our mission and our goal is to make sure that no one has to suffer with the overwhelming burden that debt causes. And we believe that it is simply not possible for someone to represent both the consumer and the creditors in an unbiased fashion when assisting them with debt. And that’s why we work for you, not your creditors.

David Moffatt (00:43):
So let’s dive into this topic. And I think the first focus area should really be about the dangers of credit card debt specifically. So, by far if you look at it, there’s a few dangers of it. And really the biggest one has to do with the ease of access. Not just of the money on the credit card, of course, because everybody out there accepts credit cards these days.

David Moffatt (01:08):
You go and try to finance, you go to get a dishwasher, right? And they’re like, hey, you can just put this on credit. Right? But also getting new cards. You walk into a bank to open up a bank account and they’re basically ready to just give you a credit card without you even asking for one. When you combine those two things, the ease of getting the new cards and then the ease of accessing funds on those cards, it’s really, really easy to see why people get into trouble.

David Moffatt (01:39):
And then if you look at behaviourally, behaviourally, that’s probably not a word. But if you look at the behavior of most people, when you spend money on a card, the math actually works against you. So let’s look at a couple of examples of that. And I’m probably sure I brought this up, but if I haven’t, we’ll dive into it today.

David Moffatt (01:58):
So let’s imagine, okay, you have a credit card and you’re going to the store and you want to buy something that is $10. Okay? So, you got the credit card, you pick up your item, it’s 9.99. You understand how it works. So you think that you’ve spent $10, right? You go to the cash register, you swipe your card. Most people don’t even look at the price. And then you think that you’ve only spent $10, right?

David Moffatt (02:30):
But this actually isn’t the case, because there’s taxes on that money. And when you talk about this, it sounds so obvious. But the truth is, people don’t really look at the total purchase price. There’s been studies upon studies that have proven that you’ll spend approximately 30% more using a plastic card, whether it’s credit or debit card actually than when you use cash. So now let’s look at the difference of how somebody uses cash, right?

David Moffatt (03:00):
So let’s say, for example, they walk in and they have $20 cash and they go to buy that $10 item. Well, at least here in Nova Scotia HST is 15%, meaning then that $10 item is actually going to cost them 11.50. So they hand over that $20 bill, they get back a five and then $3.50 of change. I don’t know if you guys are like me, but I really don’t count change as part of my money. I count the bills. Right. And so, really you think that you only have $5 left.

David Moffatt (03:31):
So, do you see the difference there? One person thinks they only spent $10. The other person thinks that they spent $15, right? And so that’s the psychology that plays against you when you walk into a store, which is really why I believe that a lot of companies push this access to credit. A, it also removes a barrier of, I don’t have the money for it, of course. Right?

David Moffatt (03:55):
But secondly, people are way more likely to buy the item they think is only a thousand bucks, but then ends up costing 1,150 at the end of the day because they charged a card. And they don’t really realize because they don’t have to pay for 24 months or they can make a 0% interest payments for 24 months, all this type of stuff, right? It’s just a big marketing ploy. And so this is the big, big danger of credit cards, right? And I think we can all agree on that.

David Moffatt (04:24):
Credit cards are known to cause significant distress in people’s lives. I have seen people be more stressed out about a $3,000 balance on a credit card than a $40,000 balance on a line of credit. Arguably the $40,000 is more impactful to their life, but there’s a psychology of owing money on a credit card and rightfully so. If you look at the interest, the interest on most credit cards is 19.99%, roughly 20%. And that’s only if you make your payments on time.

David Moffatt (05:04):
If you fall behind, pay late even once, typically speaking, they’re going to jerk your interest rate up to 30% and sometimes even 35% on that credit card. So when you and I recently did a podcast talking with a couple of colleagues about the rule of 72, which is how long it takes money to double. A credit card doubles approximately every, I think, it was 3.8 years. It could be wrong. It might be four, 3.6. I can’t remember exactly, but the point remains that the interest is extremely impactful, especially if you miss payments. Right?

David Moffatt (05:49):
So, how do you actually go ahead and manage this credit card debt? So we’re going to talk about a few strategies here today, to hopefully try and get you out of credit card debt as quickly as possible with the least impact as possible. All right. So, one thing that I want to do as a disclaimer here is that, everything I’m going to be talking about today is assuming that when you make a money management plan, you actually have free cash leftover. Okay.

David Moffatt (06:14):
And when I say money management plan, I mean an honest money management plan, not the one where you make the numbers work just to feel better, ones where the numbers actually work. Okay. If you can’t make your spending plan work with your current debt payments or anything like that, you need to reach out for professional help. Right?

David Moffatt (06:33):
So that’s my little bit of a disclaimer. The last thing I want is for you to implement these things, which if your situation is worse than you believe it is, it can actually hurt your situation rather than help it. So, the first thing you really need to do is take an inventory of your financial picture, right? So you need to understand where your incomes come from.

David Moffatt (06:52):
You need to understand, with the debt, you need to know how much you owe, what the payment required is and your interest rate percentage that you pay on that. You want to understand what assets you have. So if you have a house, a TFSA and RSP and all these types of things. In this example, I do not want you to go and sell those assets to pay off debt.

David Moffatt (07:14):
I think any time you are going to consider selling an asset to pay off a debt, you should be talking to a debt restructuring professional, unless, okay, you can all ready pay off your debt amount in less than three to five years from today. Okay? And the reason why I say that is because if you can do so, that means you can replenish your assets relatively quickly.

David Moffatt (07:38):
If it would normally take you 10, 15 years to pay off your debt and you can pay it off by selling assets, I don’t recommend you do that. I recommend talking to a financial professional before you do that. Okay. So, you’ve now taken an inventory of your financial picture, what you have to do after that is start with a proper money management plan. Okay.

David Moffatt (07:56):
And so what does this entail? I’m going to cover this briefly because budgeting is boring, right? Is you want to identify your bad habits and really figure out where you’re overspending. Okay. You want to go through the last 12 months of your bank statement to confirm if where you’re overspending is actually where you’re overspending. You’re then going to want to take the last 12 months of your expenses, figure out if you think that they’re good numbers, like for example, if you ate out for $500 a month and you don’t want to do that anymore, obviously you’re going to try to change that. And you’re going to create a spending plan out of it. Okay.

David Moffatt (08:27):
So that’s step two. Step three is then to track your spending on a monthly basis as you move forward. The goal behind all of the steps is to have a significant clarity to your situation.

David Moffatt (08:38):
So to rehash these, what you want to do is, analyze your bad habits, go through the last 12 months of your spending, make a spending plan, and then ultimately track that spending. Okay. So, when you’re looking at prioritizing your debts, typically speaking credit cards are going to be one of the products that you want to tackle first. Okay? And that’s because credit card interest is exceptionally high. Okay? If you imagine it and look at the math behind it, for every $10,000 that you owe the average credit card, will cost $2,000 a year in interest. Okay. That’s just shy of $200 a month that goes directly to a cost that you receive no benefit for. All right. So every dollar that you put on to that credit card saves you a ton of money when you actually look at it at the end of the day.

David Moffatt (09:36):
So when you’re going through your spending plan, any free capital that you have, you should be putting it on your credit card. If nothing more than to limit the amount of interest that you’re paying. Okay. You might actually want to consider going to the bank and ask them for a consolidation loan.

David Moffatt (09:53):
Now, this is a double edged sword sometimes, because sometimes what ends up happening is people go and take out a new consolidation loan at a lower interest. And then they end up re-racking up that credit card rate from the get go. And this is why my disclaimer is, if your budget doesn’t work, you need to talk to a professional to make sure you’re doing things properly.

David Moffatt (10:13):
But consolidating can make a lot of sense. So, if you consider a $10,000 loan at only an 8% interest rate, where instead of paying $2,000 a year in interest, you’re now paying only $800 a year. So that’s an extra $1,200 or a $100 a month freed up. So, the idea would be that you now direct that principal directly to the credit card debt, which would now be on a personal loan or a line of credit or something like that to help you pay it down.

David Moffatt (10:45):
One of the problems that I find with consolidating for a lot of people is that, they don’t maintain the same amount of payments. And this all comes down to not being able to afford things right from the get go. But for example, on the $10,000 credit card, your minimum payment might be $300. Okay. Of which roughly $200 of that is interest, right? So you’re only paying a little over $100 dollars on principle. It’ll take you forever to pay off this account.

David Moffatt (11:14):
If you consolidate it, drop your payment now to only the $800 minimum interest payment, right? Let’s say, if it’s on a line of credit, and go and spend that extra additional money, which give me a second, I’ll calculate it here really quick. So, it’d be $66, right? If you go and take the difference of roughly $234 a month and go and spend it, well, you’re actually going to be worse off than just simply making that minimum interest credit card payment.

David Moffatt (11:45):
I know that sounds weird to say, but it’s true. So what I recommend you do, is if you were paying $300 before, that you continue to at least maintain the $300 payment. Now, what does that do for you? Well, that now means instead of it being a little over a hundred dollars that goes to principal, like on the credit card, you now have over $200 going towards principal, right?

David Moffatt (12:05):
And that makes a massive difference at the end of the day, because you just cut the repayment term on your credit card from probably 20 plus years to now. You’re going to end up having that credit card paid off in five years or less. And the cool part about this is, is that the more that you pay on to the account, the less interest that you end up getting charged, which ultimately means that the faster it gets paid off, right? So, consolidating can make sense, but you just have to make sure that you’re doing it properly.

David Moffatt (12:38):
You do not want to put yourself in a situation where you end up having to basically go backwards and re-racking up a whole bunch of credit card debt after the fact. Make sure things work, don’t get yourself stuck into the trap of interest rate.

David Moffatt (12:53):
I always say that interest rates are nothing but interesting, which means that you could have the lowest interest rate in the world, but if you can’t afford the payment it’s meaningless, right? So, I hope that one helps. That’s probably one of the biggest ones, if you can afford things to immediately save costs and not actually impact your situation at all.

David Moffatt (13:10):
So, I’ve had some people that without changing their payments period, they’ve been able to consolidate and chop down how long it’ll take to pay off their debt by 10 plus years. Right? So, the next ones are going to be deterrence for spending on your card. So, what I have seen time and time again, is people have an effective budget that they can stick to. But the temptation of having a credit card actually makes them spend more money.

David Moffatt (13:40):
So, for example, Amazon is a big problem for this, because you go on Amazon and you’re like, Oh wow, that’s such a great deal. I absolutely need this. So in my mind, I’m thinking of a TV, right? So, let’s say you go into a big box store local to you. Well, that TV might be $400, right? But on Amazon, it might only be $300. And so people think they had got such a phenomenal deal, but here’s the truth, they would’ve never bought the TV locally. To begin with their TVs, fine, excuse me, their TV is fine, but they have been wanting a new TV. Because they have access to a credit card, and they have access to Amazon, they go ahead and they basically buy this TV and then they re-rack up all of the amount of money they put on the credit card, right?

David Moffatt (14:28):
So you see this self defeating, I guess, function that happens. Right. So, how can you get around this? Right. So, if getting out of credit card debt is your number one priority, cut up the card. Okay? Again, when you look at these studies that basically prove that you’ll spend up to 30% more using a card, it’s probably the smartest thing that you can do. Operating on a cash based budget for the items that you can, of course, is going to make a whole ton of sense, right? So, cut up your credit cards in that way. If you really needed credit, you’d have to go and order a new card which would be really, really annoying.

David Moffatt (15:05):
I recommend that you remove all of the saved numbers and everything like that from any online platforms that’ll help you out as well. Next thing is that, and this might sound really cliche, but if you put them in a plastic container, freeze them, and well put it in your freezer so that it’s frozen. It’ll take a lot of effort to get to that card. Now it’s not going to be as much effort. The effort rather will be worth it if you truly need your card for “an emergency.”

David Moffatt (15:38):
Although I think spending money on a credit card for an emergency is still not that great of an idea. You should be having an emergency fund. However, and when I talk emergency funds everybody recommends three to six months. I recommend people start with a $1,000 just because $1,000 is obtainable.

David Moffatt (15:53):
And there’s very little in life that takes more than a $1,000 if you needed it today, right? It’s not perfect by any means, but start with 1,000 then build it up from there. So by freezing the card, if you need it, you can get it. It takes a little bit of thought and effort to go and get the card. So it’s not like you’re going to be making rash impulse decisions if your card’s actually frozen.

David Moffatt (16:16):
The thing that I personally like the best is, if you have a significant other in your life or someone that you truly trust, give them your card to hang on to. And whenever you need the card, set a rule in place that you have to tell them why you want the card. Two heads are better than one, right?

David Moffatt (16:35):
Finances are a very emotional thing. And we have these impulse urges to buy things, right? And so, if that other person does not have that impulse urge to buy something, then they will be a little bit more rational than you would be. So, I think that one is my favorite because now it’s two people putting their heads together to determine whether something’s worth it, rather than just yourself. Right? So I think that really is the key, right? So, some things that you want to know in managing credit card debt, just as general information, right? So, interest rates are extremely high.

David Moffatt (17:17):
We’ve already talked about it, but really you have to understand that when you start understanding the true cost of holding a balance on a credit card, you’ll be less likely to hold a balance on a credit card. Okay? I recommend you pay off the balance as soon as you spend the money.

David Moffatt (17:30):
If you treat your credit card like a debit card, you’re less likely to get yourself into trouble, where you hold balances, where credit card debt becomes a problem. You may already be holding a bounce, but you know what, if you start good habits today it’s less likely that you’ll do the bad habits tomorrow. When spending money with credit cards, actually spending money in general, just period, take a day to think about if you truly need something.

David Moffatt (17:55):
So, what I tell clients is that, if you woke up today and you didn’t need the item that you want to buy, then the chance that you actually need it are very, very slim. So, go to bed and if you wake up the next day and you still think you need the item, I’m not saying go buy it, but at least consider it more strongly. Okay?

David Moffatt (18:16):
I promise that trick alone will save you a ton of money. The second thing is that don’t just go browsing. A lot of people their hobby is to go browse at a… Go to the mall, or just go shopping and pick up a couple things. You got to remember every company out there is trying to sell you stuff. So, to avoid that just don’t go to those places, right? When you go to the mall or you go to a store, know exactly what you’re going to buy, go in, buy it and leave, right?

David Moffatt (18:44):
The reason why shelves are designed a certain way, the reason why they use yellow tags versus red tags, etc, etc, is all because those things are more likely to make you spend money. The more often you put yourself in a position to not spend money, the better your situation will be. Yeah. So I hope that helps.

David Moffatt (19:06):
I know it’s not the, end all be all guide to managing credit card debt. But really what I want people to understand is that credit card debt is simply too costly to continue holding onto. If you’re carrying a balance, you want to tackle that balance as it owes you money, right? So be ferocious and get that thing paid down as quickly as possible.

David Moffatt (19:29):
Once you get your credit card paid down to a zero balance or consolidated, I don’t necessarily at that point recommend that you cut up your cards, but you should strongly consider switching to a cash based budget or at least a primarily cash based budget. So I hope that helps.

David Moffatt (19:47):
So, guys thank you very much for listening to Escaping Debt Podcast.

David Moffatt (19:51):
Remember that our goal is to make sure that no one should struggle with the overwhelming burden that debt causes. We believe that it’s simply not possible to work for both the creditors and the consumer at the same time in an unbiased fashion when dealing with debt.

David Moffatt (20:05):
And that’s why we work for you. Not your creditors. We’ll catch you in the next episode.

David Moffatt (20:10):
Have a great day. Bye.

The post Escaping Debt Podcast – Managing Credit Card Debt – Episode 6 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-managing-credit-card-debt-episode-6/

Will debt collectors settle for less? This is a great question that has many moving parts to it. We will quickly break it down in this article, however, please note that we have written an article series dedicated to this topic. You can find it here: Debt Settlement

The short answer to this question is yes. Debt collectors will settle for less depending on your circumstances.In saying that, if you are struggling to pay your debt and are considering settling with your debt collectors you absolutely should get in touch with a professional. In most instances, debt settlement is not going to be your most effective method of becoming debt-free.

The main factors that debt collectors look for when considering a settlement are as follows:

Late Payments – Typically speaking, if you are at the debt collection phase, you have already missed payments. Usually, the more payments you miss, the more likely a debt collector is going to be willing to settle for. After you speak with a professional, and they agree that debt settlement (sometimes known as informal settlement) is your best option, you will typically want to stop making payments to the collection agencies or continue to not make payments.

Your offer – As we have explained in our article series on Debt Settlement creditors typically want to receive a lump-sum of cash. They don’t really want to settle and take monthly payments on this. For a strong offer, always go with the lump-sum route. It should be noted that it is because of this consideration that many people cannot make debt settlements work.

Your Personal Means – If you let a creditor know that you could pay this off tomorrow or make monthly payments large enough to satisfy them they most likely won’t settle. Typically, the worse your situation is, the better a settlement you can obtain.

Of course, this list isn’t exhaustive and is highly dependant on your individual situation. This is why we always recommend speaking with a debt professional before making any decisions about your debt.

The post Will Debt Collectors Settle For Less? appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/will-debt-collectors-settle-for-less/

https://www.buzzsprout.com/1104815/3841658-how-to-properly-budget-episode-5.js?container_id=buzzsprout-player-3841658&player=small

Transcript

David Moffatt (00:00):
Hello, everyone. Welcome to the escaping debt podcast. I hope you’re doing exceptionally well. Today, we’re going to be talking about how to properly set up a budget that actually works, that you can actually stick to, and that actually improves your finance in a measurable way.

David Moffatt (00:16):
Now, before we get that, remember that our goal is that no consumer should have to struggle with the burden that debt causes. We believe that it’s simply not possible for someone to work for the creditors and the consumer at the same time in an unbiased fashion. We work for you, not your creditors.

David Moffatt (00:33):
Let’s dive into this topic here. Setting up a budget that actually works is actually significantly more complicated than most people think it is. I remember reading this article several years ago that mentioned the idea that the overwhelming majority of budgets don’t actually work for people. They basically cited, saying that they’re restrictive and that they don’t work because it’s just numbers on a piece of paper.

David Moffatt (01:01):
I have to agree with that, but not for the reasons that were basically being said in this article. I think the reason why budgets don’t really work is that, again, most people think of a budget as simply how much money’s coming in and how much money is going out and that’s it.

David Moffatt (01:23):
If you ask anyone who has a working budget, they will define it as that and it will be that simple, but they’ve developed a mindset to be financially, if we’re going to call it, financially fit, it’s a muscle that you work out that you get better at. Being good at finances and something that you’re just simply born with, it’s something that you actively work towards and get better and better and better at.

David Moffatt (01:49):
We’re going to discuss the four things that you have to do in order to establish an effective budget, but remember that developing the budget isn’t actually the goal, okay? Honestly, you can take a piece of paper out right now and I bet you, assuming how much money you make and your expenses, it would take you five minutes to go through and write that out. Even if you didn’t know your expenses or your income, I mean, you could look that up and you could have a budget written out in 15 minutes.

David Moffatt (02:17):
But is that really the exercise? Of course not. The exercise is developing that muscle to be significantly better at managing money. You want to be consciously thinking about money more often, in a positive way, of course. You want to make better decisions, which will ultimately help your budget and help you keep more money in your pockets.

David Moffatt (02:45):
Everything about finances is behavioural. I want you to forget about math, and that’s a topic for another podcast, for sure, but what I want you to focus on, and this is actually step one of developing an effective budget, what I want you to focus on is what you consider to be your bad habits.

David Moffatt (03:05):
Now, I don’t want to know what people think your bad habits are. I want you to analyze what you know are your bad money habits. For example, ‘kay, for some people, it might be eating out for some people, it might be smoking, for some people, it might be they go to the thrift store too often, okay? You have to think about where you overspend money.

David Moffatt (03:28):
The reason why I say this is because if you pick something that is “cliche” or the societal norm to be a bad option, and you try to modify that bad habit, then what will end up happening is it’ll actually be more difficult than is possible to remedy it.

David Moffatt (03:48):
For example, if you smoke and you like smoking, well, quitting smoking is going to be next-to-impossible for you. If you enjoy it and you don’t consider it a bad habit, then how are you going to tackle it, right? I want you to find something that you’ve always wanted to get better at, from a financial perspective, of course, and keep that in your mind, okay?

David Moffatt (04:10):
There’s basically three things that you need to do as part of step one. By the way, this whole step is really analyzing your habits and, and picking a focal point to work on for the next 30 to 60 days, okay? For example, let’s pretend that I eat out a lot, okay, which I probably do more than I should, but I don’t think it’s that big of a bad habit, so it would actually be a bad habit for me to pick, but again, for argument’s sake, we will pick this one. You pick eating out.

David Moffatt (04:42):
What I want you to do next is think about why you do the bad habit. In the example of eating out, well, I do because it’s fast, it’s convenient, it’s easy, there’s no stress involved with, you don’t have to know how to cook, it’s just simple, right?

David Moffatt (05:03):
Now, the curious part about this is that once you understand why you do something, you can really start to think about, “Okay, well, what else is available out there that will help me achieve the exact same why, but from a financial perspective, at least, cost less or cost the same and be significantly healthier?” Now, a lot of people will say, “Okay, well, just go and cook your meals,” but you got to remember that cooking the meals doesn’t answer your why.

David Moffatt (05:34):
Cooking your meals at home isn’t fast, it isn’t convenient, and it isn’t easy because you have to know how to cook. It’s not something that you can do on the drop of a hat, right? You have to actively plan to do this, which is another thing.

David Moffatt (05:48):
Let’s think about some compromises, which is step three. Just to recap the steps here, step one is to identify a habit that you want to cut down on, step two is to figure out why you do the habit, and step three is to make compromises that still meet all of your whys.

David Moffatt (06:05):
For example, with eating out, remember, fast, convenient, easy, it doesn’t require cooking, nothing like that, okay, instead of doing the bad habit, which was going out to eat, say at a fast-food restaurant, maybe instead, you stop at the grocery store and pick up one of their pre-made sandwiches and a drink. Now, it’s still fast, it’s still easy. It’s convenient, probably actually more convenient and quicker, to be honest with you, it’s probably a little bit better for you and if not, it’s probably equally as bad as what you were going to eat, but it probably cost half the price. You can go into a grocery store and pick up a sandwich and a drink for probably $7 to $8. I would challenge you to find at least a mainstream fast-food joint where you’re going to eat for $8 or $9, right?

David Moffatt (06:59):
Imagine if you’re going to one of the big name, fast-food restaurant, it wouldn’t be uncommon to spend, say, $15 for a lunch. Well, if you get that down to eight or nine bucks, you’ve shaved off a significant portion of that eating out budget. Even if you continue to do that to every single day, that savings would amount to hundreds of dollars a month, right?

David Moffatt (07:21):
Think about that. You’ve achieved the exact same results, fast, easy, convenient, right, and potentially better again, depending, unless it’s McDonald’s, which is delicious, but that’s neither here nor there, and you have now replaced it with something that is significantly cheaper that’s saving you money.

David Moffatt (07:43):
Do you get that idea? This is something that you want to work on for a period of 30 to 60 days, depending on the habit and how frequently you do it. The more frequently you do habit, the faster it takes to replace that habit, right? For example, if you’re only eating out once a month and that’s the habit that you want to pick and choose, well, it might take you several months to kick that habit, but for example, if you choose smoking and choose an alternative to smoking, then you might be able to replace that habit significantly quicker because you do it more frequently, right? That make sense? That’s step one, is to identify your bad habit and to figure out why you do that bad habit. Then from there, you want to make compromises for that bad habit.

David Moffatt (08:31):
Now, the reason why I get people to start with this stuff first is that you actually want to try to go for the easy wins. You may go through and figure out, “Oh, man, I spent so much money on X,” but if you didn’t think and no one and want to make a change to that category, it’s going to be very difficult to change it, even if you’re overspending in it. I hope that makes sense. We want to start with the easy wins and then over time we’re going to develop this, okay? Again, step one is your habits, all right?

David Moffatt (09:01):
Step two is determining how much money you’ve spent in the past. Now, this involves pulling out the last 12 months of your bank statements, assuming that your situation and finances haven’t significantly changed, right, and if they have, you just go for as long as you can up to the point of change. 12 months of your bank statements and you basically go through it line by line. I want you to categorize everything, even items that you may consider to be a one-off item. The reason why I say this is because if it showed up on your bank statement, in your finances in the past, the chance of it happening again are actually pretty high, so at least plan for it, okay?

David Moffatt (09:43):
Basically, you pull a pen and paper, literally line by line through your bank statements and credit card statements and wherever else you’re spending money from and you categorize every single purchase, okay? You break it down based upon your financial situation. For example, for some people, they may have a fast food budget. For others, they may not, they may categorize it in simply “restaurants,” where some might have a restaurants, a fast-food budget, maybe a lunch-at-work budget, you just really have to categorize these based upon how you spend your money, ‘kay?

David Moffatt (10:22):
Also, you want to categorize these in such a way that you can analyze the data after the fact because once you go through all 12 months of those bank statements, you’re going to take the totals of the category and divide it by the amount of months you analyzed, which in our example is 12 months, but if you only pulled out six months, which you shouldn’t be, unless your situation has changed, by the way, then you’ll simply divide it by six months, okay?

David Moffatt (10:46):
Now, what you should have is the average monthly amount that you spend. This is the amount of money that you need to plan for on a monthly basis, but you also have to understand that some months are more expensive than others, so you do have to take that reality into account, but what you want to try to do is have a number where some months are going to be probably a little lower than it, some months you’re going to be a little higher than it, and you’ll modify it along the way.

David Moffatt (11:21):
The goal of this process is really to have the amount of money that you actually spent, not the money in your mind that you think you spend. For example, a lot of people are like, “Oh, I go to the grocery store every two weeks, so I only spend $400 a month.” Okay, well, there’s a couple of problems with this, right? If you’re only going to the grocery store every two weeks, then you’re probably lying to yourself. You’re probably going three or four times a month, you just don’t realize that 30, $40 that you spend here and there on the extra things and then secondly, twice a year, there’s going to be that extra week, so you’re actually spending a little bit more. You get that idea, right? Anyway, that’s step number two, is to really analyze your past spending.

David Moffatt (12:04):
Step number two is now to actually go down and write a budget, ‘kay, and to make a spending plan. You’re going to take the categories that you had in your budget, you’re going to look at your budget and you’re going to see what is realistic based upon your past spending, okay? You also want to take into account the habit that you want to tackle and you want to consider how much less that habit is going to cost you. For example, in your budget, you may have spent historically $400 a month on eating out, fast-food lunches, that type of stuff, but with your newfound going to the grocery store, you may be able to trim that by 40%, so you would take 40% of whatever amount of money that you averaged over that last 12 month period, okay?

David Moffatt (12:50):
I also want you to assign a date to when you spend the money in the given category. In a category like lunches, where it might be multiple times a week, I want you to actually plan which days of the week you’re going to do it. Now, why is this? Is it just extra work because I want you to do it? No. The reason why is because I want you to properly understand when you’re going to be spending your money so that when you look back at this, you’re going to have a very, very good understanding of what money still has to be spent, okay? Make sense?

David Moffatt (13:33):
Again, step one: Analyze behaviors, come up with compromises. Step two: Go through the last 12 months of your bank statements. Step three now is to go ahead and essentially make a spending plan based upon your previous spending in the past, but understanding your habits that you’re trying to compromise.

David Moffatt (13:52):
A quick note before we go to a little commercial break here is I don’t want you to cut on multiple different categories, okay, unless you otherwise have to, or unless you think, “Oh, man, this category is absolutely just, cold turkey cutting it right now,” and the reason why is because once you start cutting too many things, well, what I’m trying to prevent is failure, right?

David Moffatt (14:16):
I’m trying to prevent you from failing because once somebody fails, they get really, really distraught and upset about the whole situation and then they really get discouraged. The last thing that you want to do is get discouraged over this, which will make you want to quit, right?

David Moffatt (14:35):
Anyway, let’s go to our sponsor of today’s episode, which yet again is us, 4 Pillars Consultant Group. We’re one of Canada’s largest independent debt restructuring firms that exclusively represents the consumer that’s in debt. If you are struggling with debt in any capacity, please reach out to your local 4 Pillars office. We’re personally located in Halifax in Nova Scotia. We’d be more than happy to help you out with whatever debt situation that you’re experiencing currently. Consultations are completely free. We’ll go through every single option, ranging from budgeting all the way to bankruptcy and everything in between to help you identify what the best option for you is, not your creditors.

David Moffatt (15:16):
Okay, let’s get back to the main talking point here. We’re talking again about establishing a proper budget and the steps involved with that. We’ve already gone through three of the steps. Again, the first one is analyzing your habits, making compromises, the second step is going through the last 12 months of your bank statements, the third step is going to be to actually make a spending plan itself, and the fourth step, and arguably the most important step, is to track your spending based upon your plan.

David Moffatt (15:47):
With the plan, going back to step three, you actually put dates of when you’re going to spend your money, okay? Step four is going to be looking at and tracking your money on as frequently of a basis as you can handle. The most successful people at managing their money analyze their spending at least on a weekly basis, okay? What I really recommend is doing it daily and how I recommend people get into the habit of doing it daily is by a few tricks.

David Moffatt (16:21):
The first trick is to simply look at your bank statements, online banking on your phone, three times a day: when you wake up, at lunch, and then when you go to bed at night. This will just keep your money on the top of your mind.

David Moffatt (16:34):
Change the screen saver on your phone, on your work computer, whatever you’re doing, to an item that you want financially. For some people they might want to save to take that trip to Cuba. Put the background of the trip to Cuba. Some people might want to save for their kids’ education.

David Moffatt (16:56):
Well, I don’t know, take a picture of the university they want to go to, I don’t know. I’m just giving you examples here, okay? The goal is that you always want to be thinking about your money.

David Moffatt (17:06):
When everyone says, “It only takes five minutes to go through and write down what you spend your money on during that day,” yeah, because it’s true, it only takes five minutes, but the problem is there’s so many of these little things that take five minutes that you really need to prioritize which five minutes you want to spend it on. Hopefully, it’s tracking your expenses, okay?

David Moffatt (17:26):
Really, at this point in time, what you’re going to do is if you’re properly tracking everything, you’re just simply going to repeat steps one, you can skip step two, but I do recommend you do it at least on a yearly basis, but you can skip step two, you’re going to want to analyze your expenses for that whole month on a daily basis or no more than a weekly basis.

David Moffatt (17:49):
You’re then going to go back to step one, analyze your bad habits, figure out why you do them, come up with compromises, you’re then going to skip step two. I don’t know why I can’t say “skip step two,” but whatever. You’re then going to go and make a plan, again, based upon that bad habit, tackle a new one, right? Spend 30 to 60 days on each habit that you want to cut and tackle and then rinse and repeat.

David Moffatt (18:21):
The really cool part about all of this is that what we found is that clients that diligently do this for two to three months, I’m not talking about an eternity or a lifetime here, two to three months, they develop almost like a clarity with their money, okay?

David Moffatt (18:35):
They don’t need to look at their bank statements every day, they don’t need to track their spending every day, although they do, I must add, because they just know, they know what money they can spend, they know what money they have, they know what they can’t spend money on, they know if they’ve overspent in the category and if they have to make adjustments for the next month. They just know it.

David Moffatt (18:56):
That’s really the goal that we’re going for, because what we’re trying to avoid is these impulse or forgetful spending. The last thing I want you to do is think you have money for something, go to spend that money and then realize, “Oh, I needed that for,” in a worst-case example, say, “For rent” or car payment or something like that, right? That’s what we’re trying to prevent. Ideally, we want you to have just a clarity with your finances.

David Moffatt (19:27):
That really sums up how to make a budget. Again, quickly for everybody, there’s four steps. The first one is understanding your bad habits, figuring out what you’re going to use as compromise. The second one is to go through the last 12 months of your bank statements to really figure out how much money you’ve actually spent. The third step is to make a spending plan, AKA the budget, and the fourth step is to actually go and review and track your spending as it goes, okay?

David Moffatt (19:55):
This is really, in my opinion, the only way to effectively make a budget. Any other way, in my opinion, is guessing, but you know what? I could be wrong. If you have any questions, comments, concerns, want to ask or provide any input today, or you simply don’t agree with my method, email us at halifax@4pillars.ca. Be more than happy to answer and address it on future podcasts.

David Moffatt (20:20):
Remember, everybody, that our goal is that no consumer should have to struggle with the burden that debt causes and we simply believe it’s not possible to represent the consumer and the creditors at the same time in an unbiased fashion. That’s why we work for you, not your creditors. Have yourself a wonderful day. Bye.

The post Escaping Debt Podcast – How To Properly Budget – Episode 5 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-how-to-properly-budget-episode-5/