Bankruptcy Kitchener Blog by Scott Schaefer

As Christmas quickly approaches, we are seeing the mall parking lots get fuller and fuller. If your are feeling the financial crunch right now, you may need to be more prepared for the Christmas shopping. One of our Kitchener office credit counsellors, Amie Carroll, provided the following Christmas shopping tips:

1. Know your spending limits:
The most important thing to remember when the holiday season rolls around is your budget! Know how much you can afford and set an amount for your holiday spending.

2. Make a List and Stick to it
To make holiday shopping less stressful and more affordable, it will be helpful to know what exactly you are shopping for. Making a list will save you time, and help you avoid overspending on unnecessary items. Call stores ahead of time to check if your item is in stock so you will not waste a trip and your gas!

3. Compare Prices Online
Travelling from store to store to compare prices will be time consuming and costly. Before you set out to get your shopping done, go online and compare prices. This will save you the hassle of having to make multiple trips. Most stores will price match, so likely you can purchase multiple gifts from the same store, while getting the savings offered elsewhere. Shopping online may also save time and money as some retailers will offer free shipping for the holiday season.

4. Start Shopping Now, Don’t Wait Any Longer
This is a great idea if you want to get your shopping done early and avoid crowds, and it can be beneficial to your bank account. Instead of putting a giant dent in your account all in one go, check for sales all year long. If an item on your list is on sale prior to the holiday season, why not buy it then? It will be one less gift to purchase when the holiday rush comes.

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With winter holidays fast approaching, it can be very difficult to stick to our budget and not overspend. Gift exchanging, holiday dinners, and winter activities don’t have to break the bank. Given this, I asked Amie Carroll, one of our Kitchener office credit counsellors, to provide some some tips on how to save this holiday season:

1. Local events: Check out your local paper or go online to find free activities in Kitchener Waterloo and area:

You will be surprised at what you can find for free (or next to it). Many communities hold events each year that cost little to nothing that you and your family may attend. I recommend checking out the light displays in Waterloo Park and Kitchener’s Victoria Park or going tobogganing at a local park. Most TV channels play holiday movies in December, so why not have a free family movie night in the comfort of your own home.

2. Be creative, spend less on gifts:

A great idea to save on gifts is through a gift exchange in which each family member draws a name out of a hat and is only required to purchase a gift for that selected person. This is definitely a crowd pleaser with extended families, as it will save you from having to purchase multiple gifts. This idea is very simple, and you may even set a dollar limit in advance.

3. Be proactive by making a monthly budget and sticking to it:

Set a budget. With less than a month to Christmas, you need to set a budget so you do not over spend. Do not be spontaneous, keep a list of who you have bought for and what you still need to buy. Planning is important to keep on the budget. Store have spent thousands on marketing and promotions to try to get you to spend more, resist the urge go off your budget and overspend.

4. Use 2010 as a guide for 2011:

Keep detailed notes from 2010 holiday season. Now is a great time to start thinking about next year. Set aside a certain amount each month that can go towards your holiday festivities for next year. This way, when the holidays arrive you will not have to use credit cards or stress over how you will pay for everything, because you will already have the savings set aside. Go over what you spent last year and how much you want to spend to determine the amount you will set aside each month.

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I have been a strong believer that our education system gets a failing grade when it comes to teaching and preparing our youth for the “real” world when it comes to personal finance. We take courses in history, science, geography, math, languages, but real life courses in budgeting, using credit, and negotiating contracts are not offered.

We all understand the demands and stresses life can throw at us. Most, if not all of these demands and stresses have a financial or money element to them. Our world revolves around money. Everything else matters, but without income, we do not have the ability to pay for life’s necessities like shelter, food, transportation etc. There are many different techniques in budgeting, financial planning, investing but each one takes much practice and experience. Life changing events, such as job lay-offs, costs of raising children, unexpected vehicle maintenance, and medical illness can play major havoc on our personal financial situation. The availability of credit and paired with not receiving the key skill sets to deal with life changes may lead to an overwhelming buildup of debt.

Consumer debts in the form of credit cards, lines of credit, and overdrafts are accessible. These types of debts are available for continuous use with no mandatory repayment other than minimums per month. The banks issue the credit but fail to provide personal budgeting sessions for administering the credit. That is why it is great to experience Canada’s 4th annual Credit Education Week. The more resources we have available can only benefit individuals and families. Money and personal finances are something we should discuss. Information is available through books and internet but the important part is to find the one that works for you. Education in personal finance is important. If you are experiencing money problems please visit either of these websites for more information: moneyproblems.ca and hoyes.com.

In Canada, the government has recognized that individuals and couples are entitled to a fresh financial start if the amount of debt has become too large to manage. There are options available to help deal with the debts which include consolidation loans, credit counseling, debt management plans, consumer proposals and personal bankruptcies. If you are in the Kitchener Waterloo and surrounding area and want discuss your situation so that you can gain financial control again, please call me at 310-PLAN or send me an e-mail.

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The primary principle of a consumer proposal or personal bankruptcy is to give individuals a fresh financial start. The first step is to control the debts, which is exactly what a consumer proposal or personal bankruptcy does. The second step is to plan and work on the future. Therefore, I strongly believe what someone does after they have filed a consumer proposal or personal bankruptcy will determine if their fresh start will be successful. The most important part going forward will be the budget.

My top 5 tips when budgeting are:

#1 Cash flow- Cash is everything.
You need to understand and follow the cash. Paying by cash, debit, or cheques is be the new way of life as all of the credit cards are gone after filing a consumer proposal or personal bankruptcy. A budget needs to be set based on expected cash flow. The cash in will be your sources of income. As for the cash out, this is what you will need to control. Your budget should be set with actual cash amounts for expected income and expenses. That is, if you pay something every other month, do not allocate it over two months, record the expense in the month you are going to pay it. If it is a 3 pay month, put the 3 pays in that month; do not spread it across to other months. The budget should respresent your expected cash flow.

#2 Simplicity – Keep it simple
Do not over complicate a budget. A budget is a list of your expected cash in-take and your estimated cash requirements split into specific expense category. Group the expenses into related categories, such as shelter, vehicle, groceries, etc. Try to limit the number of categories so you do not over complicate the budget. There is a good worksheet for an example at this link.

#3 Budgeting is like a diet – you need to be committed to see the results
For effective cash management, you must stick with the budget you set. If you overspend, you are going to feel it and you will not meet the budget you planned for. Just like calorie counting, if you don’t stick to your plan you won’t see results. To succeed, you must be committed and have discipline.

#4 Tracking – know where your money goes
Track every dollar you spend so that you know where it is going. You can only compare your actual spending to the budget if you truly track every expense. From there, you can assess how realistic your budget was and make adjustments to what you believe is best for you. We are all limited with how much we can make, so we need to know where every dollar is going. If you track all your expenses you will be encouraged to make changes to some areas of your budget – cut out bad spending habits.

#5 Look into the Future – plan for the unexpected
There are some expenses we do not plan for, but we know will happen, such as car repairs. You should now plan to have some money set aside for irregular expenses. This can be done by having a savings account at a bank in which you transfer a set amount each pay day. That is, create it like an expense. This spare bank account will then be used for irregular expenses such as car repairs, birthday and Christmas presents, medical costs, etc.

There is life after debt but you need to control it. To arrange for a free meeting in my Kitchener office to discuss your budget, please send me an e-mail or call me at 310-PLAN.

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I moved to Waterloo in 1993 when I first attended Wilfrid Laurier University. Since then, I have made Kitchener Waterloo my home. I believe that in my profession, it is important to live and work in the same community. I feel a greater connection with my community knowing I am helping fellow residents of Kitchener Waterloo.

I try to support and participate in local activities and events. Just this past weekend, I ran the 10K Oktoberfest race in the Waterloo Running Series. Along with the other participants, I ran from Conestoga Mall down King Street to William Street, then looped around and ran by the University of Waterloo and Wilfrid Laurier University before finishing at the Waterloo Recreation Complex.

I find running can be a lot like budgeting. I started running a few years ago for general health reasons as well as for my personal enjoyment. Much like budgeting it started for financial health reasons. When a run goes successfully, it is very rewarding, much like when the budget you set works out and you end up with left over funds in your pocket. The hard part of both running and budgeting is that it takes a lot of practice to make it work. If you over spend one day, the budget will not balance without negatively affecting another area of the budget. With a run, if you over eat one day, your run will be slower than normal and hurt that much more. Further, it you stop running for a period of time, it takes some time to get back into it. Just like budgeting, by not tracking your expenses for a period of time it will be difficult to make sure you do not over spend and you may even need credit to help you out.

Therefore, to become good a budgeter, it takes a lot of practice. There will be good days and days not so good. Making a budget work, takes time and discipline. The better you can become at budgeting the more money you will have to save for the goals that matter to you. Just like in running, the more you run and train, the faster and better runner you can become.

Over the past year I have improved my 10K race time from 49:23 to 46:28 and helped hundreds of people from the Waterloo Region make their budget work again. If you want meet with me in my Kitchener Waterloo office located at 607 King Street West and review your options so that you can make your budget work, e-mail me or call me at 310-PLAN.

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We need cash for almost everything we do. Without cash, it is impossible to pay for the necessities of everyday living. As times change we find ourselves substituting cash for credit. Future use of credit will result in the increase in interest charges and reduction of purchasing power. With today’s higher cost of living coupled with this increase in interest, the less cash we will have to put into saving for the future. Therefore, substituting cash with credit results in many people in Kitchener Waterloo living pay cheque to pay cheque. When tough times such as a loss of jobs, loss of overtime, prolonged illness, or lay-offs hit, we may incur more debts due to our lack of savings.

I meet with many people who as a result of the above tend to fall into the trap of payday loans. Payday loan stores seem to be everywhere today. If you do not have cash on hand for something, payday loan stores seem to be an instant fix to put some cash in your pocket – but at what cost? There is a significant cost associated with payday loans. Administration fees and interest charges are sizeable, not to mention you are spending tomorrow’s earnings. If you borrow today and have to pay more back next week, then it is just like you have taken a pay cut. This is where the payday loan trap begins; the cycle of using one payday loan to pay off the last. We are all constrained with how much we can make, so wasting your pay cheques on the profit of a loan business is not the best solution.

Each week I meet with several people from Kitchener Waterloo that are struggling with their financial situation and have told me that their problems escalated or came to the tipping point after several pay day loans. Therefore, my advice is to avoid payday loans if you are facing financial woes and look for other solutions. It may be that you need to see a credit counsellor to assess your budget and determine a long term solution to your financial situation. If you would like to arrange a free consultation with me in my Kitchener office, please e-mail or call me at 310-PLAN.

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As I prepare my kids for the first day of school, I think how much simpler life is to be a kid. Our children may feel that they have many stresses today, but we all know life is much tougher as an adult. There are stresses we face as adults that include jobs, family budget, marriages, raising children, health concerns, etc. Just when things are going well, it can all change. We live in a changing economy that can have big impacts on our lives. We are faced with making tough choices and may not be fully prepared to make these choices. The old saying that we learn from our mistakes comes at bigger costs as an adult. Making the wrong choice could have a huge financial impact on our future.

Therefore as the kids return to school, we should ensure we are providing them with our knowledge of real life lesson s that we have learned so they can be more prepared for their future. The two school boards we have in Waterloo region provide a strong curriculum for our children to learn, but I do feel that one area that is not talked about as much as it should be – personal finances. Our children are not taught how to purchase a house, how to negotiate a car deal, how to manage financially if someone loses a job or become ill. These are areas we all enter into during adulthood and often have to learn as we go. Therefore we should work at teaching our children how to cope with these experiences. We should teach our children how to do a budget and encourage them to save. It becomes hard when the family budget is not working and debt levels are rising.

We all need to keep learning when it comes to finances. I believe that our time today is much different than any other time in history as we live in a time with a record amount of debts as consumers and as a nation. Once someone reaches their limits, a consumer proposal or a personal bankruptcy may be necessary to allow for a fresh start financially. Once someone files a consumer proposal or a personal bankruptcy, they need to consider a world without unsecured debt (ie. credit cards etc) and how they are going to learn from past experiences. The key will be to develop a budget/cash monitoring system given the individual’s situation. This includes understanding our wants vs needs. Cash becomes king again. There are many different methods available and we need to educate ourselves to find which one works for us.

If you are searching for plan to allow you a fresh financial start, please send me an e-mail or call me in my Kitchener office at 310-PLAN.

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According to Wikipedia, a staycation “is a neologism for a period of time in which an individual or family stays at home and relaxes at home or takes day trips from their home to area attractions. Staycations have achieved high popularity in the US during the financial crisis of 2007–2010 in which unemployment levels and gas prices were high.”

In the Kitchener-Waterloo Region, I have seen and heard this term being used more and more. Staycations are a great way to take in the vast amount of activities and attractions we have in Kitchener and Waterloo. I think there are many activities that we have never experienced because they are local and often overlooked. So from a budget and local impact point of view, a satycation is an excellent way to save money and still get out. But the reality of it is that many people cannot afford to travel away from home right now. With financial debt levels increasing, the amount people are spending just to make their monthly debt payments is growing into a large number. I understand how the past 2 years have affected many people and families in the area.

I have found that summer can be a time when families in the Waterloo Region look at their situation and ask themselves, is this where they wanted to be financially? If a staycation is in your summer plans due to your debt levels, then maybe this is the sign that it is time to consider a plan for your future financial situation. Maybe a consolidation with a bank will help, or maybe it is time for a debt management plan or a consumer proposal.

At this point, the best thing to do is:
a) Create a list of all your debts with total owing and monthly payments to each;
b) Work on a monthly cash-flow tracking what you have coming into the family unit as income and where you spend your funds. See this link for a budget worksheet;
c) Talk to someone to see if your cashflow is missing or omitting something that you missed and will affect your decision making;
d) After drawing up your cashflow, determine what your overage or shortage is.

If you would like to sit down and review your situation to determine how the various options work for you, please call my Kitchener office at 310-PLAN or send me an e-mail. There is no cost or obligation in meeting with us. We will gain an understanding of your situation and then provide you with details of how the options work and at what monthly amounts you would have to pay.

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Since the last snowfall, the government has been issuing warnings to consumers to reduce debts as interest rates will be rising in the future. This of course is in despite of the government not listening to their own advice as the government debts are rising too, but that is another issue. We just witnessed the Bank of Canada make their first increase, so when are we going to see interest rates increase again and how fast? What do these warnings mean to consumers?

Consumer debts are reaching new levels and as all debts are tied to interest rates, any increase will have a significant affect. I have an economic degree from Wilfrid Laurier University so analyzing trends and effects is quite interesting to me, but one does not need this degree to see the impact interest rates will have on the people from Kitchener Waterloo. Every increase in an interest rate will affect everyone’s amount they have to pay. Let’s consider some of the following areas:

- First through the debts that they pay as interest rates are tied to prime – for example, line of credits, overdrafts, new loans, etc.
- Second, the cost of items we buy will have to rise over time due to businesses carrying debt. If the costs to a business go up, then they will have to pass these on to the consumer in order to maintain their profits.
- Third, higher interest rates could affect government debts as well, which are paid through taxes.

Overall, we have seen very low interest rates for a long time. People are not talking today about how mortgages used to be at 20% back in the early 1980s. That is like paying your mortgage on a visa card today. I am not saying we are going to see these high rates again, but the government is warning us to be ready for rates to increase.

The hard part is, as consumers we need to spend to help us recover from the recession, so if we are paying off our debts verses spending the money on consumer goods our economy could take longer to recover. With rising debts and costs, the question people are asking is how do we reduce our debts and still afford to live. Everyone’s situation is different so the same solution is not always available to everyone.

If you are from the Kitchener Waterloo area and feel that your situation is too tight now, then it may be time to consider a plan to deal with your debts. A debt management plan to pay 100% of your debts without interest may be one solution or a consumer proposal where you make one monthly payment to pay back part of your debts may be another. We can arrange a free consultation in my Kitchener office to review your situation and gain an understanding of how the various options would work in your situation. I can be reached at 310-PLAN or by e-mail.

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There is a very simple budgeting system that has been around for a long time, but today, with the use of credit, this system is used less every day. This is a system of understanding our “needs” and our “wants”. After taxes, we are all constrained by how much money we have available to us to spend. We live in an expensive society. For example, our housing costs are a significant percentage of our income. The issue then is, how do we allocate the rest of our income?

In theory, it is easy to understand the needs verses wants principle, but is much harder to practice.

The first step is to know which items are needs and how much they cost. Once we have totaled the need items, we can calculate how much we have available (or left over) for the want items.

Over spending on wants is where we tend to accumulate too much debt. Most times, if we are using a credit card for want items, we likely do not have the full amount of cash available to pay back the credit card for this item. Therefore, debts accumulate. The problem is compounded by high interest rates on those credit cards.

We consume more “stuff” then prior generations. Instead of fixing, we buy new. Every few years we need to replace the old computers and electronics as they may no longer be in style, etc. There are huge marketing campaigns out there to ensure we keep spending.

The availability of credit in today’s world has made it easy to make spontaneous purchases on “want” items. Before you purchase a “want” item, save up for it and then wait a couple of days or weeks to ensure that is truly how you want to spend your money. You may find that you change your mind during that waiting period.

Once you are on the need and want system, you need to determine the appropriate plan for dealing with your debts. These include bank consolidation loans, liquidating assets, doing a debt management plan, filing a consumer proposal or a personal bankruptcy. If you are in Kitchener Waterloo and want to understand your options to deal with your debts give us a call at 310-PLAN or send me an e-mail.

In order to succeed in any plan, you need to know how to spend your hard earned funds in the future. Use the system that existed well before credit was in play, the needs and wants system. Save up for the want items and do not use credit.

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