On April 28, 2014 I enjoyed my first ever appearance on Gail Vaz-Oxlade's radio show on Newstalk 1010 in Toronto. The underlying thread throughout much of the segment? – “You’re the boss”.
This begins (at abut the 41 minute mark by the way) as Gail says with the need to Watch Where You Take Advice. She cautioned that when reading advice in so called ‘finance blogs’ make sure to do your homework and consider all the facts, not just what you are reading. So if someone suggests you get a co-signer if you can’t qualify for a mortgage – consider the consequences they don’t mention. In doing so, you are putting your co-signer at risk for something you can’t afford. The better choice would be to save more money first or lower your expectations to a mortgage you can qualify for (and afford!).
Lenders also have an inclination to give you bad advice, or at least advice that meets their needs and not necessarily yours. They want you to borrow, so, as Gail put it, "lenders will give you more rope than you need to hang yourself". That's why we started our discussion with some numbers, where I made the comment that on average, over a lifetime, 1 in 6 adults in Canada will eventually go bankrupt or file a consumer proposal.
Gail and I may not agree on everything, but we do agree on this one basic point: you must do your own "number crunching" and decide what you can afford to borrow. Just because the bank pre-approves you for a million dollar mortgage does not mean you should buy a million dollar home. Just because you want that big home and someone will help you get a bigger mortgage than you can afford doesn’t mean you should.
In other word’s you’re the boss of your personal situation. If you can't afford to make the payments, don't take out the loan. You get to decide, you need to make an informed choice.
We had a great discussion on credit scores, where Gail described how the "American" approach to credit approval is hurting Canadians. I too see so many people focused on their ‘credit score’ like it’s some badge of honour that defines who we are. Your credit score shouldn’t define how much you can borrow. Your budget should. A good credit score doesn’t mean you have a strong financial balance sheet. In fact it can mean just the opposite if you get that way because you are borrowing a lot (making your banker happy) but managing your minimum payments.
We then had a great discussion about bankruptcy, and Gail revealed that she has been criticized for sending people to investigate bankruptcy. Above all, Gail wants Canadians to be educated. She wants everyone to understand all of their options. For many people a consumer proposal or bankruptcy will not be the correct option, but the only way to determine which option is correct for you is to investigate all options. In other words, she wants you to be in charge, you to be the boss of your decisions.
Gail's view is that "if you can't get your debt paid off in five years, feed yourself and keep a roof over your head, then you need to go see someone". Just make sure that someone is offering to tell you about all your options and consequences.
That's prudent advice. Do your research, know your options, and make an informed decision. Be your own boss.
If your debt is not excessive, Gail offers a free program, My Money My Choices to help you learn to take control of your money and your life.
If you want to hear more sound advice about keeping your debt under control, you can listen to the clip here https://soundcloud.com/gail-vaz-oxlade/april-28-2014-podcast , or find it on the Gail Vaz-Oxlade page on the CFRB website (where you can also find links to subscribe on iTunes).