The issue of cancelling credit cards that you are not using (or should not be using) is a complicated one.
The advantage of cancelling old cards is that you are not tempted to use them and if you are going to do some type of financing in the near future (mortgage, loan, etc.) the amount of available credit on those cards does not form part of your debt ratio. (Will blog on this one later).
The disadvatage is that your credit score, which is created from several factors, can take a hit. One of those factors is how long you have had credit. The longer, the stronger your score. So, let’s say you have a Sears card that you have had for 20 years (because everyone seems to have had a Sears card starting out with credit), if you cancel that card, you have lost that “length” of credit and your credit score can decrease.
That decrease may or may not affect you depending upon your score to begin with and how long before you apply for new credit, but it is something to be aware of.
A better option – don’t cancel it. Drop the limit an then tuck it away, or, better yet, freeze it in a block of water to avoid impulsively using it. (grin)
The whole credit score system is a bit of a grey area. Watch for future posts as we work through some of the pitfalls, myths and confusion.
As always, if you need specific guidance, ask Dr. Debt at info@drdebt.ca or visit our website for more information.
Do you and your spouse ever talk about… money?
For any couple, richer or poorer, talking about finances can easily create static. The solution? Clear the lines of communication – for love and money.
Sad, but true: statistics show that among couples who separate, money issues are a critical factor up to 90% of the time. And yet, any good psychologist will tell you that most couples would rather talk about anything – even sex problems!– rather than discuss their finances.
The thing is, money tends to highlight the differences between individuals. We each have our own way of planning for the future we envision, and this affects how we spend, save and invest. Are you easy-going about money or do you worry all the time? Do your spouse’s spendthrift (or tightwad) ways drive you crazy? Were you saving for a vacation only to find that your partner decided to buy a new home entertainment system instead? Do the two of you truly share the same financial goals?
These kinds of things come up more often than you might think, and can create tension that eventually leads to financial problems. The solution? Open, ongoing dialogue. Here are a few tips to help make it easier to approach this touchy subject.
• Make time to talk about money – Make “dates” with your spouse to talk about money. Don’t avoid the subject or let yourselves go off on tangents.
• Be prepared – Take it seriously. Beforehand, think about what you want to discuss and assemble the necessary documents: your financial balance sheet (assets, debts), your household budget, a statement of income and expenses, your credit reports, if any. Your financial services professional can recommend some practical tools to help you with this.
• Be honest – Have you secretly always wanted to start a business? Is your number one priority the education of your children – from your previous marriage? Or is it your own retirement? Being specific about your dreams will make it easier to decide how to achieve them. Together. Or at least, at the same time…
• Keep it civil – You might discover differences – and differences of opinion – that you never suspected. Listen to each other and try to be understanding. Have your discussions in an environment where you both feel free to speak frankly and, if necessary, have a neutral third party, such as your financial services professional, on hand to help you look at things objectively.
• Take notes – A written record of what you talked about, along with the associated documents, will help you keep track and measure the progress you make together.
When all is said and done, it isn’t always easy for a couple to talk about money… but with the right attitude, a willingness to compromise and, if necessary, some outside help, it’s not the end of the world, either!
(Guest article provided by Barry Coleman, Financial Advisor with Desjardins Financial Security. barry.coleman@dfsin.ca / www.dfsin.ca)
I’m starting this blog with a little joke that found it’s way to me in my inbox. And it goes like this…
A businessman was in a great deal of trouble. His business was failing, he had put everything he had into the business, he owed everybody – it was so bad he was even contemplating suicide. As a last resort, he went to a pastor and poured our his story of tears and woe.
When he had finished, the pastor said, “Here’s what I want you to do: put a beach chair and your Bible in your car and drive down to the beach. Take the beach chair and the Bible to the water’s edge, sit down in the beach chair and put the Bible in your lap. Open the Bible; the wind will rifle the pages, but finally the open Bible will come to rest on a page. Look down at the page and read the first thing you see. That will be your answer; that will tell you what to do.”
A year later, the businessman went back to the pastor and brought his wife and children with him. The man was in a new custom-tailored suit, his wife a mink coat, the children shining. The businessman pulled an envelope stuffed with money out of his pocket and gave it to the pastor as a donation in thanks for his advice.
The pastor recognized the benefactor and was curious. “You did as I suggested?” he asked. – “Absolutely,” replied the businessman.
“You went to the beach?” – “Absolutely.”
“You sat in a beach chair with the Bible in your lap?” – “Absolutely.”
“You let the pages rifle until they stopped?” – “Absolutely.”
“And what were the first words you saw?” – The business man replied…. “Chapter 11″. 
For those who are not familiar with the US Bankruptcy Code, Chapter 11 is the USA’s version of Canada’s Assignment in Bankruptcy.
Am I advocating Bankruptcy? Absolutely not! Bankruptcy should always be the last resort. But it can be the only option to remain sane and move on with your life, when all other options are outside of your grasp. In my 16 years in the industry I have seem people with unexpected illnesses that has thrown their financial plan out the window, single people living in their cars because of an addiction, families torn apart by divorce or other personal issues that has left a pile of debt and little hope for regaining control. In each of these cases, the individual or the family were able to start again, learn from their mistakes, and rebuild their lives. A chance they may not have had otherwise. There will always be those who abuse the system and give a bad rap to those who truly need the relief.
As always, it is imperitive that you get expert, impartial advise to help you make the best decision possible. It may seem odd, but Bankruptcy Trustee’s are one of the few professionals who not only can provide advice on all options, can refer you to a reputable firm for services outside of those they can provide, provide the advice you need for free and are heavily mandated by law and a professional association that is in place to ensure the integrity of and public trust and confidence in the system.
Gotta love summer! School ends and the Kids are home for 8 weeks. You and your spouse have sacrificed any vacation time all year to cut back on child care costs. So half of the time is covered (assuming you have a spouse and he or she gets vacation). And now you get some much-deserved relaxation. And the reward? Your Kids gleeful cries, “I’m bored!”, “he’s bugging me!”, “shes in my room!”, (insert wine here).
You remind yourself of how much money your saving. I mean how much you love spending time with your kids. [grin]
This summer, we committed ourselves to putting the kids in daycamp for two full weeks. One in July and one in August. We figured they would like the change of scenery and we could have two weeks where we didn’t have to juggle our work schedules to accomodate having one of us home. All was going well until my son announced one morning, while getting ready for camp, that he did not want to go. So here I was, brushing my teeth, thinking that I could either force him to go and deal with the fallout creating a stressful morning routine, or take him to work with me (hardly a desireable choice). So I decided to let him decide. And seeing how I was discovering that he was ‘money motivated’ I thought there might just be a lesson to be learned (hopefully by him, not me). So, I gave him an ultimatum. “You can stay home if you want to pay us the amount we are losing from your missed day at camp”. He thought about it. I wanted to put the cost into perspective, so I said, “you know that $50 bill you have (it was just past his birthday and Grampy was very generous), well, you will have to give that to me. Why don’t you go brush your teeth and let me know what you decide”.
He went to brush his teeth and came back. He obviously thought about it, because he came back and said, “Can I pay for it out of the money in the bank?”. We had just set up a bank account the week before where half of the momey they were given had to go away for ‘Needs” and the other half they got to spend on their ‘Wants’. “No”, I said, “You don’t NEED to stay home”. He got that thinking look again. “Why don’t you go put your sneakers on and think about it and let me know what you decide”, I offered. He came back and I asked, “What did you decide?”. He said, “Well (sad pouty face). I guess I’ll go, but I’m not going to have fun”. Mission accomplished!
He had fun by the way and I got so much more work done without him “helping” me. Oh, and we both learned a valuable lesson that morning.
I ask this question often when giving presentations.
Initially I was suggesting that there was no good reason to have more than one. However, I received some valid arguments against that point.
- some places may not take your visa/master card/(fill in the blank)
- identity theft – you can cancel the card and not be left without
- have one card with a low limit for online purchases to limit loss if your card is compromised
- for points, discounts, and other benefits
- in the event a card is not accepted due to a technical / fraud issue.
These are all good and valid arguments. I add a simple caveat.
Two or three cards? No problem! Providing you do not carry balances on any of them. If you are using an additional card, because your initial card(s) is maxed, problem!
Dr. Debt is provided courtesy of Haley & Associates Inc. www.HaleyTrustee.ca
I received a call today from a Debt Consolidation Company planning to expand into Nova Scotia. They were looking for a Trustee to refer business to. We chatted about what they needed and what they offered to their clients.
He informed me that their objective is to help individuals find the best solution. I thought, “Us too!”. He explained that they have individuals complete an assessment package to assist them in determining the best option. And I thought, “We do that too!”. He further offered that they charge the client a fee for this advice. And I thought “We DON’T do that!”. Our consultations are free. Yet, these credit counselling companies are popping up AND, apparently, expanding.
He indicated that many people call them because they are afraid of the “B” word (that would be “Bankruptcy”); and I totally get that. Bankruptcy should always be your last option and we strive to help individuals find solutions other than the “B” word. In fact, and we pride ourselves on this fact, approximately 40 percent of the people who walk through our doors, walk back out again. Not because we couldn’t help them, but because we helped them to find an alternate solution. And it didn’t cost them anything. Other than, perhaps, the embarrassment of talking to a Trustee in Bankruptcy.
Which leads me back to “the cost of embarrassment”…it seems to me that if you are struggling financially, perhaps you would be better off not paying a fee for a service that you can get for free.
There is a movement in the bankruptcy industry to change the title from Trustee in Bankruptcy to something that better reflects our wide range of advice/services. I would say that’s a movement in the right direction.
If your credit card could talk, what would it say? Oh wait! It can! Haven’t you heard it on the radio?
If you have no idea what I’m talking about, the government recently announced, through its clever ad campaign (I rather like hearing my credit card admit its faults publicly) changes to the fees we pay and the charges we incur on our credit cards. The basic concept is more openness and less surprises.
Check out the details at http://actionplan.gc.ca/eng/feature.asp?pageId=194
Its true! Just because we help people find solutions to their financial woes, doesn’t mean we don’t have our own.
I’m sure fitness instructors sometimes have lazy periods, Investment advisors have lost money and great chefs order pizzas. The point is, we are all human and we all make less-than-perfect choices once in awhile. In fact, it is our very mistakes that help us help you. As other has been heard saying, “do as I say. Not as I do”.
So, here’s my confession. I have been suffering from a low credit rating for, oh my, ten years at least. What can I say, life happened – self-employment + two kids – no maternity leave + husband parental leave = dependency on credit / over-extension / drop in credit rating. And we’ve been struggling ever since to get back on track
And get back on track we will! Why? Because we are determined. We are working together. And I am a financial counsellor after all. Which basically means I have the skills, tools, resources to get out of this mess.
It is those skills and experiences that I, and my fellow Dr. Debts, share with you to help you on your financial path of success.
Update (3 months later)…my credit score increased by 50 points +. How you ask? I followed my own advice. More specifically, I did the following:
- talked to someone who knew more than me about repairing credit ratings. ”Use your resources!”
- committed to stop using any new credit for three months. It took some juggling and commitment. “Prepare/review or revise your spending plan”
- Re-arranged my existing credit. I had to obatain new credit at a higher rate of interest and move some of my additional credit to avoid being maxed out. “Never max out your credit limits”
- Stayed on track for three months. “Commit to your plan”
There is no magic solution. The right steps may vary depending upon the circumstances. The common lesson is, don’t give up. Find a way that works for you and commit to it.
How can we help? Ask Dr. Debt today!! (click the link above to the right)
So often, people come to me, embarrassed and ashamed that they are facing bankruptcy, or a similar compromise of debt. They feel that they have failed. They are hard on themselves in a way that is not productive.
I created this pep talk in an effort to help them through this cross road in their life. Feel free to share this with anyone who you feel would benefit from it.
…
“You’re not here because you messed up. You’re here because you optimistically thought that you would continue on the progressive path you were on. But life happened and things change and you have to learn the rules of a new game. And its tough at first. But you will get through it. And you will learn from your experience. And be stronger because of it.
Life is a series of lessons. This is just one of them.
So hold your head up high. Walk out into the world. Be strong in the knowledge that you made a difficult decision that will benefit you and your family for years to come. Let the guilt go. Be thankful that you have learned this lesson at this stage in your life and not later.
I wish you health, happiness, peace and prosperity. “
I’d love to start this post with the secret formula to use when talking to / negotiating with your creditors.
Unfortunately, the method that works best depends on who is on the other end of the line, their personality/style and maybe on the success or failure of the call before you.
Some agents are understanding and sympathetic. Others, well, not so much. They have an agenda and will not waiver from it.
The following are some “tips” to help you take some of the stress of these conversations.
- Keep a record of your call. Get the name of the person you are talking to, the company they are calling from, and their phone number. (If they refuse to give you this information, politely tell them you are not prepared to talk to them without that info).
- Do not offer to pay an amount that you know you are unable to pay. Ask them what an acceptable payment is and tell them you will review your budget/finances and get back to them. (Get back to them).
- Remain calm. These calls can get heated and the agent may rely on an aggressive approach. Getting upset at the agent won’t help. If you feel the agent is over stepping your boundaries or harassing you, politely tell the agent that you are not prepared to talk to them in that manner and will hang up if they continue.
- You may be told that there will be legal action against you or that your credit will be destroyed. The truth is, they CAN take legal action, it doesn’t mean they WILL and if your account is in collection, your credit is affected. Offer this response, “I understand that (you may take legal action/this may affect my credit/etc.) It does not change my situation”.
- Decide what you can and cannot do and stick to it. If you cannot pay anything, be honest. Tell them what you are doing about it (ie. I am going to talk to a financial counsellor, my bank, looking for a job, waiting for a cheque). Offer to get back to them on a specific date.
- Call back with an update. Even if it is to say nothing changed. They may not like your update, but it is what it is.
Have a tip to add? Please comment!
Need additional advice? Ask Dr. Debt info@drdebt.ca