Does it ever make sense for retirees to go bankrupt? For many seniors, yes. Almost 30,000 seniors and baby boomers filed a bankruptcy or consumer proposal in Canada in 2018. The numbers for Ontario are just as staggering with almost 9,000 older Ontarians needing to declare insolvency in order to deal with the burden of overwhelming debt they cannot pay on a fixed, and often reduced, income. From our annual study of seniors and bankruptcy we know that just over 7% of insolvent debtors were retired. The amount of seniors (60+) that file a bankruptcy or consumer proposal with our firm is roughly 12% while another 18% are pre-retirees. That statistic clearly indicates that more seniors are experiencing financial difficulty, and are making the decision to file insolvency.
The problem with carrying debt into retirement is that it must be serviced with less income than when seniors were working full-time. Some adapt by making only the minimum monthly payments on credit cards, which leads to a downward debt spiral, a journey that often ends with seeking assistance from a Licensed Insolvency Trustee.
If you already have debt when you retire, and your income drops when you retire, it may become impossible to service your debt and pay your living expenses. It may not even be your fault. Many seniors financially help their adult children who are struggling to get on their own two feet. That can often deplete their retirement nest egg, and even lead to new debt.
What can seniors do if they have debt problems?
Seniors facing financial problems have unique issues compared to younger Canadians:
most are on a fixed or reduced income including social assistance, pension income and sometimes support payments;
they need to protect assets like their home and RRSP’s since they will have little ability to replace these investments before or during retirement.
Here a summary of your debt relief solutions if you have debts, and all of your income is from pensions.
First, you can do nothing, and stop paying your debts.
If you have no assets, and if all of your income is from pensions, in most cases your creditors will be unable to garnishee your pensions. This is because pension income is not considered wages and as such cannot be garnisheed. Practically you could do nothing and the creditors would have no way to enforce any legal actions against you.
Of course doing nothing doesn’t eliminate your debt. Your creditors may still phone you and send you collection letters, and they may take you to court, so you haven’t solved the problem; you have simply ignored them. If you open a new bank account at a bank where you have no debts, and if you are not stressed out by the phone calls, and if you have no other assets, doing nothing may be the correct option for you.
Should you sell or refinance your home?
If you own a home you could sell your house and use the proceeds to pay off your debt. If the costs to carry your home including property taxes are beyond your means it may make financial sense to downsize to a smaller home or apartment. However most seniors do not want to sell their house to eliminate debts.
It may be possible to utilize the equity in your home to pay off existing debts. You may be able to refinance with a traditional second mortgage or reverse mortgage. With a debt consolidation loan you borrow at a bank at reasonable rates to pay off your high interest debts, like credit cards. The lower interest rate may allow you to devote more of your monthly payments to principal instead of interest, so you can repay your debts on your own. Refinancing through a second mortgage will work if your debts are less than the equity value of your home and you can afford the monthly payments.
Refinancing may not be suitable if you have significant debts. Mortgaging the equity in your home is a big risk if you do not eliminate all of your unsecured debts and you cannot keep up with all of your debt payments.
Your third option is to make a proposal to your creditors
If you can’t afford to repay your debts in full, another viable option is a consumer proposal. In a consumer proposal you repay a portion of your debts. The amount you repay is negotiated with your creditors by a consumer proposal administrator like Hoyes Michalos, and depends on your income, your family size, and your assets. For example, if you have $50,000 in unsecured debts, it may be possible to negotiate a settlement where you pay $500 per month for 50 months, or roughly half of the amount owing, or perhaps even less.
If you have some equity in your home but not enough to cover all your debts, you can use this equity to make a proposal to your creditors while keeping your home.
As a last resort, file bankruptcy
If even a consumer proposal is more than you can afford, the final option is personal bankruptcy. Bankruptcy discharges your unsecured debts, but there is a cost of bankruptcy which you will need to be able to afford on any reduced income.
For a retiree, the cost of bankruptcy may simply be too high, and the “do nothing” approach may be the best option. However, the stress of the situation may lead you to decide that a consumer proposal or bankruptcy is the correct option.
Protecting your RRSP
RRSP’s and RRIF’s are excluded from seizure in a bankruptcy or consumer proposal with the exception of contributions made within the last year. Since most seniors are no longer making RRSP contributions this limitation may not apply. Since your retirement funds are already protected by bankruptcy law, it is important that you talk to a bankruptcy trustee before draining your retirement savings to pay off debts. Again, if by doing so you are not dealing with all of your debt problems and you are jeopardizing your retirement, you trustee can talk to you about whether or not bankruptcy or a consumer proposal are a better choice.
As you can see, there are many factors to consider when deciding how to deal with your debts. The answer to the question: “Does it ever make sense for retirees to go bankrupt?” depends on your situation.
Here’s my advice: contact one of our local licensed debt experts near you so we can discuss your options. Our consultations are free, and there is no obligation. We can help you build a plan to deal with your debt, reduce the stress and anxiety and improve your retirement.
As a Licensed Insolvency Trustee, my clients tell me how difficult it is to live on minimum wage. That’s why they often have no choice but to use debt to survive. I know that the average person we help file a consumer proposal or bankruptcy has an income that is almost 40% less than the median income in Ontario; in many cases our clients are working minimum wage jobs.
My clients don’t have a debt problem; they have an income problem.
Minimum Wage vs. Living Wage
If minimum wage isn’t enough to survive, the solution would appear to be quite simple: raise the minimum wage. That’s exactly what the Ontario government is proposing to do, raising the general minimum wage from $11.40 per hour to $15 per hour on January 1, 2019. So won’t that big increase in the minimum wage solve all of our problems? No, because, unfortunately, a minimum wage is not a living wage. According to Living Wage Waterloo Region:
A living wage is the hourly wage a worker needs to earn to cover their family’s basic expenses within their community.
The minimum wage is basically the same across Ontario, whether you work in downtown Toronto or a less expensive small town, and it is not in any way related to what it actually costs you to live. A living wage is calculated for each community, based on actual living expenses, so the living wage in will vary from city to city, based on actual costs. For 2017, the Living Wage in Kitchener is $15.42 per hour, which is higher than what the minimum wage will be in 2019. Clearly, the minimum wage is not a living wage.
So what’s the solution?
Minimum wage just isn’t enough. I recommend that, instead of trusting something as important as wages to the government, each of us should use our purchasing power to support businesses that agree to pay their employees a living wage, and not simply pay them a minimum wage. If even a fraction of a business’s customers were to stop dealing with a business that didn’t pay a living wage, every business would either pay a living wage or go out of business. Full details on how a living wage could work is discussed in today’s podcast.
Today I’m going to address a controversial topic, one where no-one is in agreement and where it’s hard to know who’s right.
Today’s topic here on Debt Free in 30?
The Minimum wage.
Why in the world would I want to take an episode of a show that’s supposed to be about debt and talk about the minimum wage?
Because debt and income are linked.
Here’s how:
People who have more debt than they can handle are often also the people who have lower incomes.
We know this because of a study our firm conducted earlier this year that found people who have so much debt that they have no option but to file a consumer proposal or go bankrupt, also have incomes that are almost 40% less than the median income in Ontario.
That’s a fancy way of saying that my clients don’t have a debt problem; they have an income problem.
If they could earn a bit more, they may not have to rely on high interest rate debt, like payday loans, to survive.
That’s one reason why many experts believe a higher minimum wage could solve a lot of debt problems.
On May 31, 2017, the Ontario government announced that they are proposing the largest increase to the minimum wage in Ontario’s history, raising it to $15 per hour.
As of today the general minimum wage is $11.40 per hour.
Under the new plan the minimum wage is scheduled to go to $14 per hour on January 1, 2018, and to $15 per hour on January 1, 2019.
So that means that in the space of a year an half, exactly 18 months, the minimum wage will go from $11.40 to $15, or just over a 31.5% increase. That’s a huge increase.
What’s it like to live on the current minimum wage of $11.40?
Well, if you are a single person, earning $11.40 per hour over a standard 37.5 hour week, your gross pay per week is $427.50 per week.
But of course from that you have to pay your share of CPP and EI, and taxes are deducted, so your net pay would be $366.23
So in a four week month, a single person working a 37.5 hour job would have take home pay of $1,464.92
I think we can all agree that that’s not a huge amount of money to live on.
The consequences? Many people use credit cards and payday loans to pay for what their minimum wage job won’t cover.
A higher minimum wage could help people stay out of debt.
That’s one reason why many experts believe a higher minimum wage could solve a lot of debt problems.
Let’s run some numbers. If you are making minimum wage, what does your monthly budget look like?
If we use round numbers:
INCOME $1,465
EXPENSES:
Rent $700
Hydro and gas $100 per month
Cell phone; assuming you don’t also have a home phone, you’re probably paying $100 per month
So that’s $1,256 per month in livings expenses, which leaves you a cushion of $209 per month.
So that’s sounds good, right?
Perhaps, but think about it:
$1,465 in monthly income over a 20 day month is just over $73 per day. If you are off sick for 3 days, or if you don’t get called in to work for three days, you have lost all of your cushion. In fact, you are in the hole a few dollars.
Can you find a place to live for $700 per month, where hydro and gas only costs $100 per month? That might not be possible.
Can you cover all of your personal expenses, like food, and clothing, for $300 per month? In some months, sure, but if you have to buy a new pair of work boots or a winter coat, your cushion is gone.
And what about unexpected expenses? Like medical costs? If you need to buy prescription drugs, there’s no room in the budget.
And of course there’s nothing in the budget for entertainment, or anything else.
I’ve given you a simple example of a single person, but what if you are a single parent and have expenses related to your children, like daycare? It would be even harder to live on minimum wage.
I think we can all agree that it’s very difficult to live on minimum wage.
And that’s the point that advocates for a minimum wage are making.
You can’t live on it, so people on minimum wage have no choice but to ignore paying for things like prescriptions they need, so they get sick, and a much greater burden is placed on the health care system.
They have no choice but to turn to high cost debt options to survive.
A low minimum wage hurts the person on minimum wage, but it also hurts society.
But there are other experts who say minimum wage will harm low income earners, and they make three main arguments to support their position:
Argument #1: minimum wage laws hurt the very people they are trying to help, because by increasing the cost of wages you will the supply of jobs.
If you force a business to pay higher wages, they won’t be able to afford to hire as many employees. Workers might even get laid off, and the only thing worse than a low wage is no wage at all.
Argument #2: If everyone’s pay goes up, prices will have to increase and low-income workers will be no better off than before
If a coffee shop must pay its workers 30% more in wages, they will have to increase the price they charge consumers. The same goes for food prices, gas stations, buying goods at Walmart etc.
Argument #3: It’s generally younger workers that earn minimum wage and raising the minimum wage will harm those trying to gain experience:
According to Statistics Canada:
In 2014, 49% of employees aged 15 to 19 years and 15% of those aged 20 to 24 were paid at minimum wage.
Among students, 29% were paid at minimum wage, versus 5% of non-students.
Compare this to older workers, where the rate of minimum wage jobs is in the single digits:
So about half of all workers between 15 and 19 years old earned minimum wage. Is that a problem? Some experts say no, because a teenager has very little work experience, so earning minimum wage is a good deal for both employer and employee. The employer gets a low-cost worker, and the employee gets a job where they earn money and gain valuable job experience that will help them earn more in the future.
The concern is that if you raise the minimum wage, those teenagers won’t be able to find a job, so they won’t get work experience, so they will never be able to earn a higher income.
So who is right?
Well, I see both sides of the argument, but I want to discuss a third alternative on today’s show.
I think we should consider a third possibility, a different solution that is not often discussed by either side of the debate.
This new approach stems from the argument that big corporations are making lots of profit, but they aren’t paying their workers a decent wage.
So it’s not a minimum wage issue, it’s a ‘decent’ wage issue. Employers, especially big employers making big profits, should be paying their employees a decent wage.
You always hear stories about the big banks, that make lots of money.
That’s true.
Canada’s biggest bank, the Royal Bank, earned $10.5 billion in profit in 2016.
Their CEO was paid just over $11.5 million in 2016
Other big bank CEOs also earn millions of dollars per year.
What does a bank employee earn? A customer service advisor can earn between $24,000 and $44,000 per year.
Even if we take the high point of that range, that means the bank’s CEO is earning over 260 times what a regular employee makes.
So, the argument goes, a big corporation can afford to pay their rank and file employees more, and they could do it if they would just pay their CEO and top management a bit less.
I guess that’s true, although the Royal Bank has 80,000 employees, so even if they paid their CEO zero that would only free up $144 per year per employee, but I understand the point:
A minimum wage levels the playing field.
It forces big companies to share some of their profit with the workers whose work allows them to earn those big profits.
But wait. There’s a flaw in this argument. Not all big corporations are paying their employees minimum wage. Some are paying just above minimum wage, so they won’t be impacted by an increase in the minimum wage.
That’s why many critics say that it won’t be big corporations that will be impacted by an increase in the minimum wage; it will be small businesses that will be most affected.
Let me illustrate with an example.
Let’s assume that you are the operator of a not for profit daycare centre in your community.
You realized there was a need for affordable daycare, so you got a local church to agree to let you use their basement during the week, for free. They even agreed to cover all utilities. You found some local companies who agreed to donate food and supplies, so your only significant expense is wages for your staff.
You have ten employees.
They all make minimum wage.
Over the next year and a half, the minimum wage is going up by over 30%, and since your only significant operating cost is wages, your costs will be going up by over 30%.
What do you do?
Obviously you only have two options:
Raise prices, or
Cut staff.
Your customers, the parents, can’t afford a 30% increase in what they are paying. They are all typical workers, with typical jobs. They can afford the existing daycare costs, but there’s no way they could afford a 30% increase.
According to a recent study by the Canadian Centre for Policy Alternatives, written by David Macdonald, who was a guest on this podcast back on show #114 in November, , the average daycare cost for a preshooler in cities like Kitchener, Markham and Ottawa are around $1,000 per month. In Toronto its $1,150 per month, and in Toronto daycare for an infant costs almost $1,650 per month, and for a toddler it’s $1,375 per month.
Let’s use the lower number of $1,000 per month. A 31% increase is $310 per month.
If you had your child in daycare, could you afford an increase in daycare fees of over $300 per month?
Probably not, which is why you realize that the only way to continue to break even in this daycare centre you are operating is to cut your employee costs.
You might be able to raise the fees you charge the parents a bit, but to cover your increased expenses you will need to reduce staff.
The math is simple: If you have 10 employees and need to cut costs by 31.5% to pay for the new higher minimum wage, you need to cut 3 employees, and you will still need to raise prices by a bit to break even.
Which three employees would you cut?
Or do you just tell all of your employees that they can keep their job, but they all have to work 30% less hours? So instead of a 40 hour week, you now only get 28 hours per week?
And what about the children? How can you cut 30% of staff hours and still provide the same level of care?
You can’t.
Instead of three of the staff taking the kids to the park before lunch, they may have to sit around and watch TV, because that’s easier to do with fewer staff.
That’s why critics say that a higher minimum wage does not help anyone.
Some staff members either lose their job, or work less hours. The customers either pay higher prices or get less service, or both.
That’s the problem with an increase in the minimum wage.
Math.
Our Joe Debtor study proves that people with lower incomes are more likely to have debt problems, so raising the minimum wage sounds like a no-brainer, but it’s also true that if a business has to pay too much in wages, they can’t employ as many workers.
So what is the solution?
To start, I think we have to make a distinction between big, profitable corporations, like the big banks, and small businesses, like the daycare centre. While a big corporation can probably afford to pay more, a smaller business probably can’t afford to increase wages significantly.
So does that mean we should have a different minimum wage for different sizes of business?
No, that would be an administrative nightmare. You can’t have the minimum wage changing every time a business hires a new employee. That would just create an extra layer of government bureaucracy, and that can’t be good for employees or taxpayers.
And is it fair that the minimum wage is the same in downtown Toronto as it is in a small town where living costs are a lot lower?
That’s the problem with a government-legislated minimum wage. In order to be fair, it has to be incredibly complex.
Here’s my thought:
Instead of having the government decide how much a business should pay their employees, why not leave it up to the public?
How would that work? With a concept called living wage.
A living wage is exactly what it sounds like:
A living wage is the hourly wage a worker needs to earn to cover their family’s basic expenses within their community. It is calculated based on the needs of a two-parent family with young children, but would also support a family throughout the life cycle so that young adults are not discouraged from having children and older workers have some extra income as they age. In Waterloo Region, the 2017 Living Wage rate is $15.42 an hour.
The living wage is different in each community, and that makes sense, because living costs are different.
Here’s why I prefer the living wage as compared to minimum wage:
First, it’s different in each community, so it can take into account living costs that vary by city.
Second, it’s based on an actual calculation of living costs, not a random round number, like “$15 per hour”, which bears no relation to actual living costs.
Third, the calculation is done by an independent third party, not by the government, so the number is more likely to be based on actual costs, and less likely to be based on politics.
Fourth, it’s not a law. It’s guidance for employers, employees, and the general public.
To me, that’s the most important point.
I’m an employer. My company, Hoyes, Michalos & Associates, employs dozens of people. We have 24 offices operating in 24 different communities. How can I, as an employer, know what a living wage is in each town and city I’m in? That’s why a living wage program is very helpful to me as an employer.
I know that in Waterloo Region, which includes Kitchener, where our head office is, the living wage for 2017 is $15.42 per hour. It’s higher in some communities, lower in others.
So as an employer in Kitchener my goal is to pay my employees at least $15.42 per hour.
Here’s the key point: Even after the Ontario government raises the minimum wage to $15 per hour in 18 months, it will still be below the Living Wage today!
The minimum wage may help, but it still doesn’t get employees to where they need to be.
Even worse, it allows businesses to say: “I’m paying the minimum wage, and that’s good enough! I don’t need to pay any more than that!”
So the unintended consequence of a minimum wage law is that it pays employees less than a living wage, and gives businesses an excuse for not paying more.
That’s why I think all businesses should set a goal for themselves of paying a living wage.
Hoyes Michalos signed a Living Wage Employer Declaration as a Champion level employer with Living Wage Waterloo Region on March 8, 2017.
We have committed to paying a living wage to all of our employees.
So that’s great, you say, but what about the small business, like the not for profit daycare centre, that can’t afford to pay $15 per hour, and they certainly can’t afford to pay $15.42 per hour. Isn’t a living wage even worse for them than a minimum wage?
No.
A living wage is voluntary, so the business, and their employees, and their customers, have a choice.
Here’s the final piece of the puzzle:
As a customer, you can decide whether or not you do business with a company that has made a commitment to their employees to pay a Living Wage, or a business that hasn’t.
If every consumer decided that they would only deal with Living Wage employers, companies that didn’t pay a living wage would go out of business.
So if your big bank doesn’t pay a living wage to their staff, you could decide to take your business to a local credit union.
If the big chain grocery store you shop at doesn’t pay a living wage, you could choose to shop at the smaller, local, owner-operated grocery store that does pay a living wage.
Perhaps paying a living wage is not possible in some businesses.
It may be that a fast food restaurant that employs mostly high school kids can’t pay $15.42 per hour. That’s fine, as a consumer you can decide that you still want to buy a hamburger at that place, because you like hamburgers, and because they are creating jobs for teenagers.
It may be that the daycare centre can’t afford $15.42 per hour. Again, it’s up to you as a consumer to decide if you want to deal with that business. Perhaps the daycare centre agrees to pay 90% of the Living Wage, and the clients agree to pay slightly higher fees.
As a consumer, you get to decide.
Do you want to buy goods that are manufactured in Canada, where the employer paid a Living Wage, or do you want to buy cheaper goods made in China where people work in sweatshops and only make a dollar or two an hour?
As a society, we can’t have it both ways:
If as an employee you want to earn a Living Wage, you have to be willing to deal with companies who also pay a Living Wage. If everything you buy is from China, you aren’t creating any jobs in Canada. It’s as simple as that.
So what am I saying?
Only buy stuff manufactured in your home town?
No.
What I’m saying is that, as a Licensed Insolvency Trustee, I know that we have an income problem in this country.
I don’t believe the government can solve the problem.
They may mean well, but I worry that a high minimum wage mandated by any government will backfire, and hurt the people they are trying to help.
That’s why I think that we, as consumers, should decide where we spend our money.
Check out the businesses you deal with. Search them online. Go talk to the manager. Ask them if they pay a Living Wage.
If they do, great.
If they don’t, ask why not?
Get your friends and family involved. Use social media. You’ve got Facebook friends, use them.
If only 10% of a businesses’ customers stopped dealing with that business, that business could be in serious trouble. You don’t need to get every customer to boycott a business. If just a few of you speak up and move your purchasing power, businesses would be forced to change.
Am I right?
Do consumers have the power to change what businesses do?
I don’t know. We’ve never tried a Living Wage experiment where consumers are actively involved in changing the behaviour of businesses.
I’d love to see charities and other organizations like churches and unions getting involved spreading the word.
I think it would be a great experiment, and I think it could actually help the people who really need the help, and that’s the working person.
So to conclude, I think the solution to our income problem is in all of our hands.
I think we can make a difference.
But it’s up to us.
That’s our special edition of Debt Free in 30 today.
You can leave your comments on Twitter with hashtag #DFI30, or email me at dfi30@hoyes.com, or leave your comments on YouTube or on the show notes page over on hoyes.com.
Full show notes, including links to all of the sources I mentioned on today’s show can be found at hoyes.com, that’s hoyes.com.
Thanks for listening, and thanks for thinking about this important issue.
Until next week, I’m Doug Hoyes, that was Debt Free in 30.
How do real estate prices impact the number of people who file bankruptcy? To answer that question, we are pleased to release the Hoyes Michalos Homeowner’s Bankruptcy Index (“HBI”). The HBI shows the percentage of Hoyes Michalos clients who own a home at the time they file a consumer proposal or bankruptcy.
Real estate prices holding down bankruptcy filings
The HBI peaked at 35% in February, 2011, when over one-third of people declaring insolvency owned a home. The index has consistently dropped since that time as the Ontario economy improved. However, the rate of decline has accelerated sharply since the fall of 2016 as the real estate market has over-heated, reaching a new low for the month of May, 2017 at 7%.
In Ontario, if you have owned a home over the last few years, rising home prices have increased your home equity, greatly reducing the need to file bankruptcy.
Homeowners still carrying excessive debt
This reduction in bankruptcy and consumer proposal filings does not imply that homeowners have less debt. In fact, homeowners are carrying record levels of unsecured debt (debt that is not a mortgage or car loan). In our 2017 Joe Debtor study, the average insolvent homeowner had unsecured debt of $72,510, significantly greater than our average client’s unsecured debt of $52,634. Homeowners have 72% more credit card debt and 79% more personal loan debt than non-homeowners.
Here’s the point: banks and mortgage brokers love homeowners! In a rising real estate market they consider anyone who owns their own home to be a good credit risk. Not only do they want to give you a mortgage, they are also happy to give you a home equity line of credit, more credit cards and unsecured personal loans. They assume that because you own a home, you are a good credit risk.
Guess what: for now, at least, they are correct. That’s why today only 7% of homeowners end up going bankrupt or filing a consumer proposal.
Debt consolidation the ticking time bomb
My team hears a similar story every day: we get a phone call on our 310-PLAN hotline for a person with lots of debt; they are considering a consumer proposal. We ask if they own a house, and they say “yes, but I don’t have enough equity to borrow against the house to pay off mydebts.” We advise them to call a real estate agent or appraiser and find out what their house is worth. They call us back and say “guess what, my house is worth a lot more than I thought, I can get a second mortgage and pay off my credit cards, so thanks, I don’t need to file a consumer proposal!” Instead they are going to move their debt around via a debt consolidation loan.
Rising real estate prices are the reason that a lot of people who would have filed a consumer proposal or bankruptcy in the past don’t need to today. They still have a lot of debt, but they can use their house like a perpetual cash-generating machine, and use the increasing equity to borrow at inexpensive mortgage interest rates to pay off high interest credit cards.
Potential for a big crash
While a drop in consumer insolvencies might seem like good news, I have two big concerns:
First, I’m very worried that homeowners are getting used to using their credit card and unsecured lines of credt as much as they want, knowing that they don’t have to worry about paying them off, because when the bills come due, they can use “free money” from their house. In a normal world, debt has consequences. Today, it doesn’t.
Is this a temporary drop or a permanent decline? We won’t know for a few months, but I know this: if house prices stop increasing, homeowners won’t be able to continue to borrow against their home equity to deal with other debts.
So here’s another prediction: I predict that somewhere in the range of 5% to 7% will be the bottom of the Hoyes Michalos HBI. It won’t go any lower than that, which implies we will start to see more homeowners with excessive unsecured debt choosing to file insolvency.
If you are thinking of selling your house and downsizing, talk to a real estate agent today and consider your options. If we are at the peak of the market, there will be no better time to sell.
If you have more debt than you can handle, get help today. It may be possible to use the remaining equity in your house to fund a consumer proposal, so you can keep your house and deal with your debt.
Stay tuned: I suspect there will be many more developments that we will be discussing in the coming months in this fast-moving real estate market.
There is significant evidence that it is harder to save today than it was for our parents and grandparents. Tax rates are higher, housing costs are out of reach for many first time home buyers, tuition costs more, and post-secondary education is the cost of entry into much of the job market now. Having said all that, good money habits don’t age. There are many great money lessons we can learn from our parents and grandparents on how to save money and put away something for your future.
5 Money Lessons From The Previous Generation
10% of Yours is Yours to Keep. A little tougher today but even setting aside 5%, from a young age is a good goal. Can’t manage 5% yet? Then start with 1%. Starting early, no matter how small, creates the mindset that you should be saving. Having an emergency fund to rely on means you’ll avoid credit, and related interest fees. Put the money in a separate bank account, one that you tell yourself you can’t use unless doing so meets your long-term financial goals.
Don’t Buy What You Can’t Pay For. Even your parents likely took out a mortgage for a home, and today it’s highly likely you will need a car loan. However, this saying still holds up well when it comes to anything except pure necessities. If you can’t pay cash for a new TV, boat, furniture or the like, do without.
Make What You Have Last Longer. Take care of what you do own, and keep everything well maintained. Failing to change the oil in your car regularly or change the furnace filter might save money in the short-term, but you’ll end up having to replace things sooner or end up with a bigger repair bill. In today’s world this saying goes a little further than household fixtures. You don’t have to keep up with the latest trends like having the newest cell phone on the market. There is no crime in keeping your cell phone for six or seven years if it’s still working.
Vacations, and Life, Happens at Home. Previous generations saved a lot of money by spending time at home. They ate in more, dined out less. They vacationed at home or nearby. They watched TV at home or enjoyed the yard, went out less for their entertainment. While it’s great that we have so many more opportunities than our parents did to get out and enjoy life, practice moderation. So set a budget and live within it.
Live Modestly. Those who look like they’re rich probably aren’t (those who don’t, just might be). This is an interesting take on the keeping up with the Jones’ syndrome. Stop worrying about how your financial situation looks to those around you. If you drive an old car but have savings in the bank you are better off than the neighbour who has a 48-month lease an expensive SUV. Your wardrobe or your electronics don’t have to follow the latest trends. Trends benefit the seller, not the buyer.
You are in charge of our money. Every time a modest millionaire chose to buy something, go somewhere or do something, they factored in the cost. Thinking about money shouldn’t consume your life, but it should be part of your decision making process. Your parents and grandparents knew this – you should too.
Debt doesn’t start out as an obvious problem. For many people, lack of personal finance knowledge leads them to make poor decisions with their money. Once you figure out how easy it is to get credit, you start spending more and more because, hey, it’s there. Today’s guest is a former Hoyes Michalos client, and like many of our clients, he struggled with severe debt.
Beau started gambling at a young age through seemingly harmless games like scratch tickets. From there, it evolved to online card games throughout university and he eventually dabbled in “pretty much everything else you can think of”. Beau had a full-time job so for him, gambling wasn’t a means to earn income, it was his source for exhilaration. The main problem that Beau had was that credit was the only way he knew how to have that instant access to cash to gamble.
I’m just kind of at my wit’s end and I’m thinking, you know, I’m never going to be able to afford these credit card payments that I have if I keep going.
After working with a counsellor at the Canadian Association for Mental Health (CAMH), Beau found the source of his addiction: he had gone undiagnosed with ADD his entire life. After starting on his medication, and looking through nearly $40,000 in unsecured debt, Beau knew he needed a change.
How to Get Out of Gambling Debt
Initially Beau tried finding ways to trim his expenses like living in places that cost less. He was still stressed about his debt, and all the move did was affect his quality of life. He then realized that no amount of expense trimming would help if he still gambled what was leftover. So he looked for ways to restrict his access to new credit.
Beau started weighing the pros and cons of a consumer proposal vs. a bankruptcy. This was back in 2008 and there was still a lot of stigma surrounding bankruptcies. After looking into surplus income rules and bankruptcy exemptions, Beau decided that a consumer proposal was the best route for him.
He wouldn’t pay penalties if his income increased, and while his proposal payments may be slightly more than the payments he would have in a bankruptcy, his total proposal payments were still only about a third of his total debt. He $40,000 in debt, and was able to eliminate it with a proposal with total payments of $300 per month for 50 months for a total of $15,000.
Rebuilding While in a Consumer Proposal
Beau wanted to start rebuilding his credit as soon as he could. He saved up enough money to put down a deposit on a secured credit card and applied for one. He ended up getting approved by People’s Trust and was able to use that to start a rebuild.
At this time, Beau also identified any triggers that would lead him to want to gamble. While he didn’t have a drinking problem, he knew that when he drank, he had an urge to gamble. So he cut out alcohol.
I really do tell people that the consumer proposal saved my life because I don’t know – even if I would have figured out the ADD thing I still would have been in this crippling debt situation so I really don’t know if I would have been able to get out in the way that I did.
Beau reflected on his experience with gambling, debt, and the process of getting out of debt, and decided that others can benefit from his experience. That’s why he’s on our show today, and that’s why he started his own personal finance coaching business. Using his background in financial management, Beau now helps simplify information for consumers to help them make wise financial decisions.
Doug Hoyes: Many people needing help with their debt problems find my company, Hoyes Michalos, through our hoyes.com website. They send us a message describing their debt problems. I’ve never done this before but today I want to read you the first message that we received from a person with a debt problem. Here is that message and I quote, “due to a recent gambling incident, my debt load has increased significantly. I do not believe that I can afford to reasonably pay my current debt load. I think a consumer proposal might be the right thing for me,” end quote.
What was his recent gambling incident? How much debt did he incur by gambling? He seems like a smart guy, he’s done his research. He thinks a consumer proposal might be the best solution for him. So, why does a smart guy gamble? What causes someone to gamble to the point where they’re borrowing to do it and now they have a debt load that, as he said, he can’t afford to repay. Lots of questions and today I have that guy here as a guest on the podcast. So, let’s get started. Who are you?
Beau Humphreys: I’m Beau Humphreys. Yeah, I had a gambling incident I guess.
Doug Hoyes: Well, and so that email you sent us, it was eight or nine years ago now. So, why don’t we go through the chronology and talk about it. So, do you remember what was going through your brain at the time that you sent that email to us so many years ago?
Beau Humphreys: I do remember. It’s funny that I said a gambling incident. I think I was trying to be as politically correct as possible because the incident was my whole life up to that point.
Doug Hoyes: So, it was not one event, it was a series of events.
Beau Humphreys: I could have been referring to an event years ago. But at that point, I think I was at a point where I couldn’t even afford to gamble anymore. I was just, I’d resigned to my, you know, I ruined my life and I can’t even do what I tried to do in the past and gamble more to get the money back that I lost.
Doug Hoyes: Well, so walk us through it then. What kind of gambling are we talking about?
Beau Humphreys: So, well, I mean it started really early, you know, when I was 11, but I’ll talk about that in a sec.
Doug Hoyes: When you were 11.
Beau Humphreys: When I was 11.
Doug Hoyes: Okay.
Beau Humphreys: But really it was online gambling that got me. And now you don’t have to leave your house and for me gambling was a very private thing. It wasn’t, it’s not something that I would boast about. It was not something that I would do with friends. It was my coping mechanism.
Doug Hoyes: So it wasn’t a social thing for you. A lot of people, older people, in particular. We see this a lot in our practice that, you know, perhaps they lost a spouse, kind of bored. So, they get on the buses, go on junkets to Brantford or Niagara Falls or the slots or something like that and it becomes a social thing. And then it becomes a gambling thing after that. For you that wasn’t that case.
Beau Humphreys: No, and for them that may or may not be an addiction. If they have the disposable income to do that on a weekly basis and they don’t have anything else going on, you know, I’m not going to judge anybody for doing that. An addiction is when you start to use money that was for something else, say your rent or, you know, I’ve talked to people in the past who gambled away their mortgage and then a second mortgage. And that’s really unfortunate and that’s when it comes down to an addiction. And also when you start doing things and everything is revolving around the gambling, it’s more important than your family and other things in your life.
Doug Hoyes: And I guess that’s a good definition of an addiction. It becomes so important that everything revolves around it. So, you said starting at age 11.
Beau Humphreys: Yeah so there’s an inciting incident that I go back to. I had saved up a lot of money to buy a Super Nintendo. Now in 1991 it had come out in the U.S but not in Canada. So, I had to mail order, I had to get it by mail order. And I’m 11 or even like just about to be 11 at that time because it was 1991, I’m born in September. And I save up all my birthday and Christmas money and I asked my parents because I needed their help to get a mail order. I couldn’t just go and buy it myself. And they saw the price, which was about over $300, perhaps even US dollars and I forget what the exchange rate was at that time. And they said that’s a lot of money, let’s talk about it. Maybe some other time but, you know, let’s not do that. And I had this reaction, this, you know, spoiled kid reaction of I’m not getting what I want and I decided to go ahead and spend that Super Nintendo money in secret buying lottery tickets. Now you might ask –
Doug Hoyes: How is this possible that an 11 year old kid can buy lottery tickets?
Beau Humphreys: That’s right, that’s the question to ask. And in ‘91 I think the OLG laws were in place but very few retailers were enforcing them. And the loophole was I need a couple of tickets for my mom. And then oh, my mom wants me to cash in these tickets too. So, you know, the retailers weren’t too concerned, they were making a sale, they were getting business. There wasn’t a lot of penalties and I think probably even a couple of years after they started to enforce it a lot more and I think retailers are a little more careful now.
Doug Hoyes: So you were there at the right place at the right time.
Beau Humphreys: Or wrong place.
Doug Hoyes: Or the wrong place at the wrong time.
Beau Humphreys: Exactly. So, it was just a fun sort of week at the mall with my friends and it was really, you know, exhilarating. You’re spending money, maybe we won $50 on a $2 scratch ticket. So, what it did was it kind of opened my mind to this idea that I can make money out of what I thought was nothing. But what I didn’t realize is, you know, it’s fleeting and I spent all that money that week. And my parents later on were – asked where they money was because oh maybe we can go buy it now that it’s in Canada. And I had to admit that I had spent it all. And that was kind of the first time that I, you know, spent all of my money gambling.
And it just kind of built from there. I didn’t have a lot of money through high school and, you know, I did lottery tickets here and there but if you don’t have money you can’t spend money. And when you have credit you can’t use your credit card. But I turned 18, I went to university, I had an emergency credit card from my parents and that’s when it just fell apart or got huge if you wish. In residence I was just gambling first year at Western when I was there. I would gamble at night, sometimes I wouldn’t go to classes, I would gambling then.
Doug Hoyes: What kind of gambling are we talking about?
Beau Humphreys: This is online gambling. I would play probably like card games, Black jack or poker or what have you. And I would, you know, there’d be a $2,500 cheque coming to me in the mail and I get it by courier and everybody would be like wow, this is real.
But what they didn’t know is that I had already spend that $2,500 again probably a couple of times over. And the only thing that kind of pushed me over that first lapse if you will was the fact that I used my parents emergency credit card to try to get a lot of the money back and so there was the accountability. If I could have done it all in private I don’t know if anybody would have really known. I would have just started struggling with the debt then. My parents found out and I got counselling and, you know, they took the credit card back. So, at least somebody was aware at that time.
But over the next eight years I had many relapses, gave my credit cards to my family for a little bit. Then I’d be better and it just came down to, you know, how is this ever going to go away, how do we ever make this go away? I spent a lot of time at CAMH. We went through behavioural theory, I saw a counsellor, a great counsellor for years. And I just, you know, I ended up gambling so much. Whenever something stressful would happen it was my coping mechanism. I would go there. And so, coming down to that email, this is 2008 and I’m just kind of at my wit’s end and I’m thinking, you know, I’m never going to be able to afford these credit card payments that I have if I keep going. Like I tried living in cheaper places and it just all that did was affect my quality of life.
And so I moved into a place and I just started looking for alternate solutions to my problem as opposed to cutting down my spending or trying to stop gambling. Because even if, I always thought even if I did, somebody somehow magically paid everything off, would I stop gambling? It doesn’t work that way. I was actually afraid at the time that if I did have any available money that I would use it.
Doug Hoyes: So you were looking to treat the symptom as opposed of the problem by the sounds of it.
Beau Humphreys: Yeah. I mean at that point I started to be a little more introspective with, you know, looking at the consumer proposal, considering bankruptcy for the first time. I never even thought of it as a thing that I could do. And when I started looking into it, it started to make more sense because I knew I would not have more access to credit. And that’s what I was trying to do.
Doug Hoyes: Yeah and I want to talk about those two things but let’s look at both sides of it then. So, there’s the gambling issue, which lead to the debt issue. So how did you deal with the gambling issue and then we’ll talk about the debt issue.
Beau Humphreys: So, well, it’s funny because I would say that one of the first steps to dealing with the gambling issue was dealing with that debt issue because what it did is it gave me – it’s all temporary methods, temporary protection. You get like stopping your credit cards or giving them to somebody to hold or having someone look at your bank account so that if they see any gambling transactions they can stop you. It’s only temporary but this one was more of a permanent temporary in that I couldn’t get credit for a long time and credit was the only way I knew how to gamble. I was never into casinos and I hadn’t bought scratch tickets so I was a teenager and the benefits of those were it takes forever to get some money and there’s no quick wins.
Doug Hoyes: It’s not that quick endorphin hit.
Beau Humphreys: That’s right, not even close. Even though I did dabble in scratch tickets along the way and pretty much everything else you can think of. So, when I decided to do the proposal it just made so much sense and I would say it kind of saved me.
Doug Hoyes: So it was actually the proposal that helped you deal with the gambling.
Beau Humphreys: Because I was able to now say okay, the money thing, that’s taken care of, now I can focus on what is actually – like I don’t feel as much at risk to myself. That’s what it is. And for people who don’t know about addiction, there’s two sides. There’s actually two people. I even remember having conversations with myself, like saying like stop this, why are you doing this? And during the day I was successful and then after hours I was gambling. And people had no idea. Most of the people in my life expect for my parents and my brother and a couple of other close people did not know. And it’s a hard thing to deal with because you just want to get out there.
So I was able to say okay well now you’re – you other part of me, you’re kind of screwed for a little bit, now I can think and figure out what is actually wrong with me. And I turned to like way more introspection and I did mindfulness course with CAMH, which was great.
Doug Hoyes: Can you just explain what CAMH is?
Beau Humphreys: Sorry, CAMH is the Canadian Association of Mental Health. And they have a problem gambling service and it’s really great because they have people who are trained in addiction and specifically gambling because they have smoking, they have alcohol and drugs as well. But it’s not the same, you need to understand what a gambler is going through. But my time there, I explored all these things and I was like none of this stuff is helping, what is actually – there must be something else.
And so, I stumbled across a test online that was a test for attention deficit disorder. And I was trying everything at that point and I took the test and I was like, this is me. You know, can’t read a book, can’t make friends, terrified of everything. Everyone manifested in different ways but this was the, you know, are you afraid to start or finish things, are you afraid to do anything because you don’t know if you’ll be able to handle it, the amount of energy that it will take from you, the focus that a simple interaction or a simple work task requires? Everything was hard for me. And I was this is me so I was lucky enough to have access to a psychiatrist at CAMH, which everything there is free for addicts, which is a fantastic thing and she gave me the real test and yeah, I have attention deficit disorder. And I was medicated and everything changed.
Doug Hoyes: So the ADD is what lead to the gambling.
Beau Humphreys: It is and so when I talk to people about gambling and addictions and what they are, I usually say that the addiction is not the problem it’s the response to the problem, it’s the coping mechanism for what is actually affecting your life. And for a lot of people it is, you know, like the more obvious ones like depression or anxiety but for some people it’s mental health issues like attention deficit or something that’s been diagnosed. And simple medication is often what you need.
Doug Hoyes: So you were able to deal with the ADD and I guess it’s not something you cure, it’s something you deal with.
Beau Humphreys: It isn’t something you cure unfortunately.
Doug Hoyes: But you’ve got that under control I assume. So let’s talk about the second piece of it, which is the debt piece of it then and I realize they’re all kind of interrelated here. It’s not like one is separate from the other. So, you reached out to us and you ended up filing a consumer proposal.
Beau Humphreys: I did.
Doug Hoyes: And what was the thought process? because the email I read at the start, you had obviously done some research already. It’s not uncommon the email you sent us in that you said I think the solution is this. And obviously when we meet with someone we say okay, let’s figure it out. And yeah, in your case you were right. That was the solution and I can touch on I think why that was probably the solution you picked. But why do you think that was the solution as opposed to something like bankruptcy?
Beau Humphreys: Because I mean for a lot of people bankruptcy carries this stigma and for me it did at the time. I realize now sometimes it’s the better option. And I think for me I was able to hold on to kind of my assets or the ability to earn more. I kind of had this feeling that if I went full bankruptcy that I wouldn’t be able to recover or grow out of this or I might feel like I was just under the weight of it.
And with the proposal all of the different options with the proposal in that if you start making more money, that’s fine, you don’t have to pay more money. And the proposal in itself was just the deal with your creditors and it’s final and you make the payments. I really like that. I really liked that I had options because I felt like I was heading towards the light so to speak. And I didn’t know how I was going to get there but I knew this was a first step and I wanted it to be open for me and I didn’t want to feel trapped. And I guess even though this may not be true, bankruptcy felt like it was more trapping to me.
Doug Hoyes: It’s almost as though you are an optimist and you viewed that as more of an optimistic solution.
Beau Humphreys: It, yes I am an optimist. My wife will tell you that. And I did view it as the ability for me to grow and for to make decisions and I knew that I was being introspective much more and that maybe eventually I would find this and so.
Doug Hoyes: Yeah and just so that people listening understand kind of the mechanics of what you’re talking about. In a bankruptcy the government sets a limit. You’re allowed to earn this much and it’s based on a number of factors, the size of your family, you know, if you have medical expenses that sort of thing. If you earn more than that level you’re paying the penalty of half of that amount you’re over. So, if you’re a single guy and we’re recording this in 2017, the number changes and certainly would have been different back when you did it. The limit’s around $2,100 a month. So, if you’re making $3,100 a month you’re $1,000 over the limit, you’ve got to pay a penalty, surplus income penalty of $500 a month. So, in a bankruptcy you don’t know how much you’re going to pay unless you know exactly what your income’s going to be during the period of the bankruptcy. With a consumer proposal, as was done in your case, we go to the creditors and we say here’s what my life looks like right now, here’s what I’m making, here’s what I can afford to pay. It’s more than you get in a bankruptcy probably. Take the deal. And in your case obviously they did. And in your case it was kind of a win/win. You knew exactly what you had to pay and they agreed to the deal obviously. And so, the proposal was completed, you were able to make your payments I assume.
Beau Humphreys: Yeah I had 50 months I think it was, 50 months at $300. My debt was reduced and I know it’s not the same for everybody but mine was reduced from $40,000 to 15. That was huge to me at the time.
Doug Hoyes: Yeah and those are relatively typical numbers I would say. The typical client we deal with has around $55,000 of unsecured debt so we’re ignoring obviously mortgages and car loans and that number. And the typical proposal is probably somewhere around a third of that number, which is roughly the numbers you’re talking about. So that’s a fairly typical. And in your case there was quite a weight lifted off your shoulders as a result of that.
Beau Humphreys: Because it was all credit card debt. This wasn’t, you know, a subprime line of credit or a mortgage for that matter.
Doug Hoyes: So higher interest rate.
Beau Humphreys: They were up in the 20s or at least close to that. And, you know, I became a balance transfer master at that time. Everything would come in the mail. I used them all, everything that I could. I couldn’t transfer the balance anymore and then now I’m faced with this huge interest and minimum payments that were just eroding my life. And I think that kind of, that lead me definitely down the consumer proposal path.
Doug Hoyes: And so how has your life been different since? So, the proposal has been paid off now for a number of years.
Beau Humphreys: Yeah I paid it off and then you have to wait three years after that for –
Doug Hoyes: Well, there’s a note on your credit report that stays for three years that says you filed a consumer proposal after the payments are made. I mean you can still borrow money but you’re faced with potentially higher interest rates things like that. So, the proposal was paid off and then have you taken steps to rebuild your credit, do you not have any credit, how has that changed?
Beau Humphreys: During the proposal I got a secured credit card, People’s Trust is pretty good for that. I tried to get one from TD but they wouldn’t even have it. It’s unfortunate that even – I think that was even after the proposal was paid off. And they have very specific guidelines, banks have every right to do that but I gave them the money but they still wouldn’t give me credit for that amount and, you know, unfortunately I’m not going to bank at TD for that reason.
Doug Hoyes: Yep. Well, banks are funny because I can show you somebody else that applied for it the day after you and they got it, there’s no rhyme or reason at the time.
Beau Humphreys: That’s really upsetting to me. because I went through the whole process, it was a $600 credit card. I wanted it to be something so I had a branch that I could go to say. And they went through the whole process and then denied me without even knowing what their policy was before I applied.
Doug Hoyes: Their computer kicked you out.
Beau Humphreys: Exactly.
Doug Hoyes: If you asked for a million dollar mortgage you probably would have got that no problem.
Beau Humphreys: I might have got that, for a high rate I’m sure.
Doug Hoyes: Exactly, exactly.
Beau Humphreys: But, you know, so I was able to keep my credit rating up to date throughout that, at least some reporting, that I have a credit card and I’m paying it off even though it was secured by a $500 GIC in Vancouver, People’s Trust but after that once it was paid off and then with the three years expired. Everything gets wiped clean. Well, you have to do a bit of work with Equifax and TransUnion people to make sure everything is clean.
Doug Hoyes: We can do a whole show on that, yes they live in their own world sometimes too.
Beau Humphreys: But with the due diligence, you can write to them and say you took this proposal off so you have to take everything else off that goes with it. And they have to abide by that. It may take a little bit of time. And then my credit rating just went through the roof and I started getting offers again. Well you might say well, you didn’t go and get credit cards again, well I did because having a credit card is good for your credit rating, for your credit report. I just don’t leave a balance ever, I probably pay it off on daily basis, if not weekly at the most.
Doug Hoyes: Yeah and so you’re not paying any interest and you’re not getting into any trouble.
Beau Humphreys: Exactly.
Doug Hoyes: And you’re not using it to gamble I assume.
Beau Humphreys: No. You know, gambling, it was about six years ago now that was the last time I ever gambled. And it was just before I took a trip to Peru, I spent 30 days in Peru and that’s exactly what I needed. I was right at the end. I’d been on the medication for ADD for a couple of years just trying to shake the – you know, you do this thing for so long, it doesn’t go away immediately. And medication doesn’t cure all the things that ADD causes and it still hasn’t, it’s still hard for me to read a book, things like that. But this trip was exactly what I needed to just change, change myself.
To get out of an addiction finally even though you have a lot of tools, you have to change your life and I think a lot of people they don’t know that or realize how much they have to change to actually get out of it, 100% out of it. Because if you are a drinker and drinking make you gamble then you need to stop drinking. And I did because I don’t have an alcohol problem but I have a gambling problem that’s fueled by alcohol.
Doug Hoyes: One things leads to another.
Beau Humphreys: And the same thing if you’re trying to keep smoking then you have to stop doing the things associated with smoking and unfortunately for a lot of people that’s getting up in the morning. So that’s why cigarettes are very hard to quit even though they are not as detrimental in the short-term as, you know, say going on an alcohol bender or, you know, overdosing on drugs or spending $25,000 in a night gambling. Cigarettes have a long-term effect and so because they don’t have that immediate “I got to stop this”, people have a lot more trouble with that. But I had this $40,000 in debt and I was making probably 30 something a year and that was just not working for me.
Doug Hoyes: The math doesn’t work there.
Beau Humphreys: It does not.
Doug Hoyes: Yeah you’ve got to interrupt the pattern is really what you’re saying.
Beau Humphreys: You really do. The travel, I would recommend that to anyone. Go away go away from your current situation. And if you’re at the tail end of your recovery that might just be what you need.
Doug Hoyes: Yeah if my problem is I walk by that bar and I want to go in and have a cigarette well if I’m in Peru I can’t be walking by that bar and eventually I’ve interrupted that pattern. And it won’t be an issue. So, your background is what job wise?
Beau Humphreys: Yeah so I’ve been in financial management and accounting for the last 15 years.
Doug Hoyes: And for those of you who are watching on YouTube because we’re going to put a video of this up on YouTube, Beau doesn’t look like me, the traditional accountant. So you can go to the video and look. He’s not wearing an Armani suit today. Neither am I but , you know, hey.
Beau Humphreys: This is my every day –
Doug Hoyes: That’s his everyday thing. But you also have, you know your own business, your own thing that you do. Tell us a bit about that.
Beau Humphreys: Yes. So, my main business now is I am a personal finance coach and what I really want to do is help people. I don’t want anyone to be in the situation I was in. Mine was unique but it was easy to get into the debt I was without the gambling addiction I was in if you just don’t pay attention to what you’re doing. If you don’t start putting stuff away then you have an emergency you don’t have an emergency fund, you don’t have any savings and then you have to go into debt and you might even have to go the payday loan route which is the worst.
Doug Hoyes: Very bad.
Beau Humphreys: We can have –
Doug Hoyes: Oh we’ve done shows on that, yeah.
Beau Humphreys: Exactly so I just want to make sure that people are educated in a very simple way because people find personal finance to be really dull and some people would just rather eat trash than talk about their finances at all and they don’t even have to have a bad situation going on. They might even have a lot of extra income to invest. They just don’t want to think about that stuff. And so what I’m trying to do is make it easier for them.
So personal finance coach, I am here to simplify and organize in very simple way. We meet once a year, twice a year to figure out your stuff and we kind of automate it all. So I’ve been writing for my website investwisely.ca and I have a podcast now which you’re going to be on shortly called The Personal Finance Show. And because of my background in accounting, I’m not a designated accountant but I have lots of years of bookkeeping experience and I did do 95% of my CGA course back in the day. During the time before I was medicated for ADD so you imagine –
Doug Hoyes: That’s quite an achievement then.
Beau Humphreys: I didn’t really feel like doing another exam. This is so hard for me so I wonder if I would have finished otherwise. But I do realize now that that wasn’t the path that I was on. But what I do like is the basics and I want to teach everyone the basics of personal finance but also bookkeeping. I’m a bookkeeping coach, QuickBooks online.
Doug Hoyes: So if I’ve got small business then I call you up and you’re not going to do my books for me you’re going to show me how to set it up so I can do my books,
Beau Humphreys: Exactly. And everybody can learn basic bookkeeping in terms of classifying where an expense goes and how to make a simple statement for you or maybe a partner to look at or whoever you’re doing business with, invoicing that sort of stuff. I can show you how to do it because you don’t want to be paying someone on an hourly basis to do stuff that when you’re starting a business you might have a lot of time or a lot of money and that’s the time to learn this stuff.
Doug Hoyes: I’ve had hundreds of clients over the years who were self-employed because hey I can make more money if I’m self-employed, I can be a roofer or a drywaller guy, I’m going to drive a truck, whatever it is. They’re not accountants though so they don’t realize what you’re supposed to be keeping track of or how you’re supposed to be doing it. They don’t understand all the initials you’ve got to know like HST and WBIB and all that sort of stuff EHT and so on. And that’s what gets them into trouble.
And I always say before you start a business it would be great if you could spend a few thousand dollars with a lawyer and a few thousand dollars with an accountant, well of course no one can, that’s impossible. I’m starting a business because I don’t have any money. So, it sounds like the service you’re providing would be great for someone like that to point them in the right direction. Okay let me show you in the right direction. because okay, we have computers now, that’s a pretty cool thing.
Beau Humphreys: Exactly.
Doug Hoyes: And you don’t have to do the old green ledger paper like I learned on 35 years ago.
Beau Humphreys: No more T accounts.
Doug Hoyes: T accounts. I was using those last week I’ll have you know because I had to figure something out.
Beau Humphreys: Sometimes it’s useful.
Doug Hoyes: I went around the office asking all the accountants, do I have this right? And they’re all looking at me like I’m crazy. I think that’s a great way to start out and it’s a great way to prevent problems in the future. So, anyone who’s in a small business or starting one then that would be a service that you would provide. And again you’re not going to do the work, you’re going to show them how to do the work.
Beau Humphreys: And I’m not even going to come to where you are. This is 2017 so we’re doing this over video and it’s all going to be through screen sharing and you’re using QuickBooks online to make it easy. So everything’s in the Cloud.
Doug Hoyes: Which keeps the cost a lot lower too.
Beau Humphreys: The cost is so much lower. You don’t want to pay for my travel to come and visit you and you don’t want to pay the higher fees I would have to charge if I did come and visit you. So everything I do is in the Cloud and it’s all through video. The apps that they have out there are free and you can share the screen. I can look at what you’re doing and point to where you need to click or the thing you need to fill out. Everything’s a little easier now with technology but sometimes people just need a little bit of coaching.
Doug Hoyes: Excellent. Well, I think that’s a great way to end it. So, we will put in the show notes all of the links that you just mentioned to your website. So the best place for people to find you is at what URL?
Beau Humphreys: It’s investwisely.ca
Doug Hoyes: So all one word investwisely.ca. And then the name of your podcast is?
Beau Humphreys: It’s called The Personal Finance Show.
Doug Hoyes: And you can find that on iTunes, Stitch and all of those.
Beau Humphreys: You can just type Beau Humphreys, The Personal Finance Show in Google and it’ll come up.
Doug Hoyes: There you go because there’s not that many Beau Humphreys out there.
Beau Humphreys: That’s right. And I got all the first page of Google was all me.
Doug Hoyes: You’re it. It’s all you so Beau b-e-a-u and then Humphreys.
Beau Humphreys: That’s right.
Doug Hoyes: So for people listening who are going through what you were going through your advice would be get help.
Beau Humphreys: Yes.
Doug Hoyes: And a place like CAMH would be a great place to start I would imagine.
Beau Humphreys: CAMH is great and they have a problem gambling service. They have it online, you can go in and try to find them but they’re findable so you can Google them.
Doug Hoyes: And they’re obviously big here in the Toronto area and Ontario but there are other places that can help with so I think reaching out for help is a good idea. And then on the debt side you’re happy you that made the decision you did on the consumer proposal.
Beau Humphreys: I am. I really do tell people that the consumer proposal saved my life because I don’t know – even if I would have figured out the ADD thing I still would have been in this crippling debt situation so I really don’t know if I would have been able to get out in the way that I did. It might have taken another 10 years.
Doug Hoyes: Well and you do the math, $40,000 in debt, the minimum payments are a big number. Interest is adding up every month. So even if you could pay the interest every month the $40,000 is still there.
Beau Humphreys: It’s still there and always going to be.
Doug Hoyes: So unless you’re making $200,000 a year the math just doesn’t work. So, at some point again you’ve to interrupt the pattern, and it worked for you. Well, that’s great. Fantastic. Well, I think that’s a great way to end it. So, as I said I’m going to put links to what we talked about in the show notes so they will be over at hoyes.com. You can just do a search for Beau b-e-a-u and it’ll be the only thing that comes up there. Thanks for being on the show.
Beau Humphreys: Thanks for having me Doug.
Doug Hoyes: Thanks for being here Beau. That’s our show for today. As I said full links to everything we talked about a full transcript will be at hoyes.com that’s h-o-y-e-s-dot-com. Until next week, I’m Doug Hoyes. That was Debt Free in 30.
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