Financial Stress Facing Single Parents

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Posted in Success Stories
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

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Struggling financially is difficult for anyone. It can be exceptionally stressful if you’re a single parent trying to juggle your finances, work, and parenting all on your own. Without a partner you’re solely responsible for the fate of your family. My guest today is here to talk about how going through insolvency as a single parent feels, and how she overcame her debt.

Her name and personal information are kept anonymous for confidentiality reasons so we’ll call her Joan. Joan was a working professional with a job on Bay Street. Like many Bay Street positions, Joan was making a very good salary. Shortly after Joan celebrated her 50th birthday, work at her office was slow and she was downsized.

After Job Loss

Immediately after losing her job Joan didn’t panic as she received a severance package and made diligent contributions to her savings.  She knew she still had skills useful to her industry and thought she could readjust. After going on multiple interviews a week with no results, Joan began to lose hope.

Joan has two children that she raises as a single mother. As teenagers Joan didn’t face a daycare issue, but teenagers can be quite expensive. She continued her search while taking a few part-time jobs on contract work. None of which matched her previous salary prior to her being downsized. After reducing everyone’s cell phone plans, landlines and TV packages, Joan knew she needed to cut back a bit more to hold them over until she could find a new position.

Reducing the cost of everything doesn’t necessarily do anything when you don’t have money coming in

After exhausting all options including making her home run more efficiently with LED lights, refinancing her home to help her cash flow situation, and even with contributions from her working teenagers, Joan had to sell her home.

Joan recommends that you assess the length of time you think you can survive financially after a job loss, and cut that in half.

Considering All Options

At this point Joan had done the following:

  1. Reduced her family expenses as much as possible. Including selling her family home to help their cash flow situation.
  2. Tirelessly searched for employment. Accepted a position that included benefits, but was still significantly less than what she previously made and barely covered their rent.
  3. Depleted her savings, severance, and RRSPs.
  4. Turned to credit to service her day-to-day expenses like gas, groceries and utility bills.
  5. Personally tried working with her bank and credit card companies to see if they could reduce the interest rate.

After trying a few free online tools to assess her situation, Joan decided it was time to speak with a professional. The first person Joan spoke with recommended bankruptcy. Joan did not want to file bankruptcy as she didn’t want to lose her car. She went to a Hoyes Michalos office close by and our team recommended that she could also do a consumer proposal instead.

Consumer Proposal Process

Knowing the debt accumulated was her own, Joan was more comfortable with a consumer proposal as it meant that she was still paying her creditors. There were no interest payments, and it was about a third of what she owed, but she still felt the need to repay her debt in some way.

A consumer proposal also offered Joan a fixed payment over a set amount of time. Joan also liked the fact that if she was able to repay her consumer proposal early, she could with no penalties.

Her creditors have accepted her proposal and Joan is well on her way to debt freedom.

Resources mentioned on today’s show:

FULL TRANSCRIPT show #138 with a Hoyes Michalos clientfinancial-stress-single-parent-transcript

Doug Hoyes: Let’s start the show with some facts. Single parents are twice as likely to file insolvency as are two parent households. Why? In a lot of cases it’s because they struggle to keep up with the rising costs of raising a family so they turn to debt make ends meet. For our clients, and we released all this information in our recent Joe Debtor study, two parent families have an average income of $4,127 per month take home pay. Single parent families have a family’s income of just under $3,000 per month.

That’s 28% lower than two parent families. In a two parent family it’s often possible to juggle childcare responsibilities but in a single parent family daycare is often more necessary. So, a single parent gets hit with a double whammy, lower income but higher costs for things like daycare and everything else.

It’s no wonder then that lone parents end up resorting to debt to make ends meet and that’s often why they have no choice but to resort to filing a bankruptcy or a consumer proposal. Our average single parent client has unsecured debt of $47,612 at the time they file. And since a third of them have payday loans at the time they file, it’s no wonder they have financial problems. They can’t service the debt on their incomes.

So, what’s it like to be a single parent? What are the challenges? What are the practical strategies that you can use to manage your money as a single parent? And how can you deal with job loss, which of course affects everybody, single parents, lone parent families and all age groups? To find out I’m joined by a woman who is a single parent, who has gone through job loss and who is also currently in a consumer proposal.

So, let’s get started. Why don’t you give me some of your background? And we’re not going to use your name here because I don’t think that’s really relevant to the discussion, but in ballpark terms, tell us kind of, you know, what happened. Give us a bit of your life story.

Client: Well, I, as you said, I was a single parent but I had a very good job. I was working on Bay Street and doing quite well. And shortly after my 50th birthday, I got downsized.

Doug Hoyes: And this was something that just happened, it had nothing to do with you in particular I assume.

Client: Exactly. My colleagues and I had thought for a couple of months that something was going to happen because there just wasn’t the work. And we discussed it and I sort of figured it would be me because I was the last man in so to speak. And because of what we dealt with I said finically it makes more sense for the company to let me go because it will be cheaper for them. And that’s exactly what happened. And then you take it, you think you take it in stride but it’s a blow, it’s a blow to your ego.

Doug Hoyes: And I’m interested in talking about that then. So, you could sort of kind of see it coming.

Client: Yes.

Doug Hoyes: And from a business point of view it made perfect sense. Okay, business is down and I’m one of the least senior employees there, like you said last man in kind of thing.

Client: But with the same sort of level of experience, there was several of us at the same level.

Doug Hoyes: You’d done other things before. But for the company well, if I’ve got to pay severance or termination it’s based on how long you’ve been there, you haven’t been there as long so we can save money by downsizing you and so that’s what happened. So, it was not a total and complete shock to you but it was still a blow I assume.

Client: Yes.

Doug Hoyes: What did it feel like when you got that phone call or got called into the meeting or however it happened?

Client: It’s momentarily absolutely terrifying. And then you sort of go that’s okay, I’ve got skills I can adjust. And because I sort of thought it was coming, I had been looking. And unfortunately the industry I was in was looking at a downsized change, redirection altogether. So, a lot of the jobs that I had been interviewing for suddenly weren’t going to happen anymore.

Doug Hoyes: Because everyone else was downsizing too.

Client: Exactly. And there was also a major player in the industry had collapsed right around the same time so it flooded the market with highly skilled people and it was just, you know, circumstances all came together that I did not readily find another job.

Doug Hoyes: And so, when you got downsized you figured okay, and I’m putting words in your mouth here so you can tell me if I’m wrong. Okay, I’m going to find another job.

Client: Exactly. And that was a hope that I held onto for a very long time, looking for employment. I had a small severance package and I knew what my timeline was and I think in that time I probably went on 10 to 15 interviews a week.

Doug Hoyes: Wow, but there just was nothing there.

Client: Well, if you look at I’m also disabled. I look great on paper. I know that when I walked in some interviews the first words out of the interviewer’s mouth was like oh, you’re disabled. And the interview would last 10 minutes. And you can’t go and say they didn’t hire me because I was disabled, they can give a thousand reasons why they didn’t hire you. So, that became a barrier as well I believe.

Doug Hoyes: Yeah and your disability had nothing to do with your job I assume.

Client: No.

Doug Hoyes: I mean you managed to come to this interview today so obviously you’re able to get around and all that kind of stuff.

Client: Yep.

Doug Hoyes: But it was yet another barrier. So, at what point did you say you know what? I’m not going to be able to find another job in my field?

Client: Probably after a year.

Doug Hoyes: After a year of looking.

Client: Yes. I had taken some temporary part-time jobs, I taught for a while and of course nothing was at the salary I was at, I made very good money in my job. And everything I found was considerably less. But I kept at it, I kept looking. Even when doing the temporary jobs I was still out there looking. And it just – I’d applied for one job I was really hoping I would get. It was a very long process, in involved writing exams, multiple interviews, doing written questionnaires, it was a very long as I said process. And at the end of it they decided not to continue with the position and that took a year.

Doug Hoyes: So you might have gotten the job if the job existed but they job didn’t exist.

Client: The job no longer existed.

Doug Hoyes: And so, throughout this process, and obviously prior to that, you were also a single parent.

Client: Yes.

Doug Hoyes: So, how did that impact the whole job situation? I mean I would assume if you’re single and 20 years old and living in your parent’s basement then oh well, no big deal. But in your case you were the primary caregiver and the primary income support for your family.

Client: Yes, I was paying all the bills. It meant reducing expenses; it meant that my kids who were working had to start contributing, which was hard for them. No eating out.

Doug Hoyes: Because your kids were like teenagers at the time or that kind of age.

Client: Yeah.

Doug Hoyes: So you didn’t have the daycare issue but teenagers can be more expensive.

Client: Everybody’s got cell phones, there’s a landline, there’s multiple TV variations and that was all reduced. We did things around the house to reduce our energy costs and water consumption and that sort of thing. You go through all those steps to, you know, make your finances as tight as possible. But reducing the cost of everything doesn’t necessarily do anything when you don’t have money coming in.

Doug Hoyes: And that is a key point and this is really the thrust of our whole Joe Debtor study that my clients, of which you are one, do not have a debt problem so much as they have an income problem.

Client: Yes, cash flow as I like to call it.

Doug Hoyes: Cash flow. And so, you’re right if you reduce your expenses to a dollar a month but you’ve only got 50 cents coming in then you’re not going to be able to do it. So, you did the logical thing, which was cut back as much as you possibly could. But it just wasn’t enough.

Client: No.

Doug Hoyes: It’s as simple as that, it’s a simple math question.

Client: Yes. So, I looked at refinancing, I refinanced my mortgage.

Doug Hoyes: So at the time you owned a house.

Client: Yes.

Doug Hoyes: Okay. So, you looked at refinancing.

Client: Yes and increased my mortgage to give me some cash flow and continued to look for work.

Doug Hoyes: Did you have any savings leading into this process?

Client: I had savings and I had RSPs.

Doug Hoyes: So you had done everything right up to this point.

Client: Yes.

Doug Hoyes: You, you know, were living responsibly. You weren’t living in a 10 million dollar mansion I’m guessing.

Client: No.

Doug Hoyes: You can tell me if I’m wrong here.

Client: No.

Doug Hoyes: You had, you know, essentially minimal or no debt. Obviously you had a mortgage but if you had savings then presumably you were on the plus side.

Client: I had a small balance on my credit card of maybe $500.

Doug Hoyes: So, essentially nothing.

Client: I always limited my credit cards most of my life, I didn’t near the end, to a one pay a month. So, I wouldn’t have a balance over one pay a month.

Doug Hoyes: So in effect one paycheque could clear it up, it was your procedure.

Client: Exactly. That changed.

Doug Hoyes: And this is over extended period of time obviously.

Client: Two and a half years.

Doug Hoyes: Two and a half years. From the time you were working and even though you’re a single parent and the income support for your kids, everything was going pretty good. You had money in savings, you owned a house and –

Client: Yes and I had RSPs.

Doug Hoyes: You had RSPs. And then you lost your job and gradually had to deplete those resources.

Client: All of those assets, yes.

Doug Hoyes: All of those assets. And at what point – so, you refinance the house and then at some point did you sell the house?

Client: Yes.

Doug Hoyes: Again, it was mostly a cash flow decision at that point was it?

Client: I couldn’t make the payments. I got to the point where I had borrowed from friends and family. I was lucky enough to have friends and family who would help me. But that was going to be a stop gap until the house could get sold. And even at that point I had missed, by the time the house was sold I had missed three mortgage payments.

Doug Hoyes: Got you. So, the house would have been taken from you at some point anyway if you didn’t sell it.

Client: Exactly.

Doug Hoyes: So you didn’t end up getting a million dollars when you sold the house because you had already refinanced it so on and so forth. So, in effect selling the house allowed you to in a sense breakeven but it then meant you didn’t have to be paying the mortgage costs and whatnot.

Client: Exactly.

Doug Hoyes: So you ended up finding a place to rent that was obviously less costly than carrying the mortgage, the property taxes, the repairs and maintenance and all that kind of stuff so it made sense.

Client: It was probably 40% less than.

Doug Hoyes: 40% less.

Client: Yeah but still no cash coming in.

Doug Hoyes: Right, still not cheap.

Client: Very little proceeds left from the house so, I began living on my credit card.

Doug Hoyes: And at what point did you get to the point where you said okay, I can’t do this anymore?

Client: I found employment, however it was 40% of what I had been making when I lost my job.

Doug Hoyes: 40% so less than half of what you were making before.

Client: Yes.

Doug Hoyes: Wow.

Client: And it was barely covering rent, heat, hydro, groceries. And I was not being able to service the debt that I had lived on. Essentially I had used my credit card to live on. It paid rent, it put gas in the car, groceries on the table, even paid the utility bills.

Doug Hoyes: So for a two and a half year period, from when you lost your job, you – first you depleted your savings.

Client: My RSPs.

Doug Hoyes: Then your RSPs, then sold the house, which really didn’t free up any equity but it reduced your cash flow. And then you had to resort to credit in order to keep going. You did find a job as you said making less than the previous job. And so, that was the point when you realized okay I can cover my rent with my job, I can buy groceries but there’s no way I can ever service the debt.

Client: Exactly.

Doug Hoyes: And was there some light bulb moment when you realized that? Because you had been renting for a period of time at that point? Was it when you found the job?

Client: I hadn’t been renting that long, I had only been renting about five months, five, six months.

Doug Hoyes: So was it when you found the new job that you realized you had the math issue?

Client: It was probably before that but I’d hoped that once I got in that job – it’s one of those things that you finally find your job and three more come along. And I thought well, let’s see, you know, I’ll get everything covered and we’ll move forward. And then I would say probably two months into it this isn’t going to work, this isn’t going to happen.

And I started working with credit card company and my bank said what can we do to reduce the interest rate, the whole bit. And I had some smaller little credit cards too that I had been paying because their payments were lower. And it just – it – I realized probably in the fall that it just wasn’t going to happen. And I knew Alison and I’d also done – there’s some free things online, consumer debt things that are free, and they will help you assess things. And I had gone to one of them and said okay, just confirm my numbers for me. And they had recommended bankruptcy.

And I didn’t really want to go bankrupt because I didn’t want to lose everything. I still needed a vehicle to get to work, you know, that sort of thing. So, I started talking with Alison and we moved forward from there. And she was the one that said you don’t have to go bankrupt, you can do the consumer proposal.

Doug Hoyes: Right and that’s what you ended up doing.

Client: Yes because you know what? For me too, maybe it’s a generational thing but I still feel responsible for my debt. And a consumer proposal I’m still paying it but in a way I can afford and they were all happy with.

Doug Hoyes: And that’s very interesting. So, why did you pick a consumer proposal over a bankruptcy? It seems obvious to me that you had to do something.

Client: Yes.

Doug Hoyes: There was this debt out there and you had done everything in your power to deal with it.

Client: Yes.

Doug Hoyes: You sold your assets, found the best job you could find, you were working with the credit card company, the bank. Can you give me a break, can you cut the interest, can you cut it? And of course the bank isn’t going to cut your credit card in half.

Client: Actually the credit card company was much more willing to work with me than the bank was. And this is a bank that I had been with for 30 years.

Doug Hoyes: So that shows you how much that’s worth for a bank.

Client: Oh I was furious at times with the treatment. Like suddenly I didn’t have these bank accounts and I was a nobody. And they weren’t going to do anything for me.

Doug Hoyes: So back in the day when you had an RSP and savings and owned a house and had a mortgage.

Client: They were giving me and offering me 50 and $75,000 lines of credit at prime.

Doug Hoyes: And then as soon as that disappears okay, now all of a sudden we’re not even willing to give you a break on the interest and everything else.

Client: Nothing.

Doug Hoyes: And so if they’re not willing to work with you, then what can you do?

Client: Exactly.

Doug Hoyes: Like there is no mathematical choice.

Client: Like even the credit card company was shocked that they weren’t willing to work.

Doug Hoyes: Well, what was the credit card company willing to do for you?

Client: They were willing to work out a payment but the payment they wanted was greater than I could afford. And they realized that. And I had an honest conversation with the representative and I said this is probably going to force me into some sort of credit protection. And they’re like yeah, okay we understand; let us know what you do.

So, once I had met with Alison and the proposal was in place, I called them, gave them Alison’s phone number and, for Hoyes and that. And they signed on within hours of that conversation.

Doug Hoyes: Yeah and we won’t go into the specific numbers here because everyone’s case is different. I took a quick look and in your case yeah, you had a bunch of debt. And the proposal you ended up offering was about a third of the total debt.

Client: Yes.

Doug Hoyes: In terms of the math. And the monthly payment is I think quite reasonable.

Client: Yes.

Doug Hoyes: You’re not paying a massive amount.

Client: No.

Doug Hoyes: You’re paying a lot less than what they were asking for before.

Client: Absolutely.

Doug Hoyes: I’m guessing probably a third or less than all the minimum payments.

Client: Less.

Doug Hoyes: Less than a third of what the minimum payments were before. So, obviously from a cash flow point of view, that makes a huge difference.

Client: It does. Things are still tight but I also have benefits now. Medical costs were also one of the things that were, you know, I have $500 in medical costs a month. That was contributing. Now that I have benefits I don’t have that expense. So, that freed up some money. It’s 70% coverage that I have.

Doug Hoyes: Right so that’s like getting a job that pays $500 more in effect and after tax dollars.

Client: Yes.

Doug Hoyes: So, thinking through that decision, do I do the bankruptcy or do I do the proposal, I mean Alison would have explained to you with a bankruptcy, the more you make, the more you’ve got to pay and, you know, given that your kids are older they might not, well most of them don’t qualify as dependents, we have to factor in their incomes and whatnot. So, there could be a slight surplus income penalty in a bankruptcy, meaning you got to pay a bit more and the bankruptcy can get extended.

So, with a consumer proposal you know exactly what you got to pay, the number never changes. Did that also contribute to the decision to file a consumer proposal?

Client: Absolutely. And there can still be some stigma with a bankruptcy. It would have affected, I sit on a couple of charitable boards, it would have affected my standing on some of those boards. And that was a big consideration for me.

Doug Hoyes: Got you. And we find that today the stigma is a lot less. I mean last year in Canada, 120,000 people did either a bankruptcy or a consumer proposal so it’s not an unknown quantity anymore. So, in most cases most regulatory authorities if you give them advance notice, they’re okay with it. But you’re right, in some cases it is an issue.

So, for you the consumer proposal became a – obviously there was a math component to it. Okay, I know exactly what I’m going to have to pay, it’s a payment that I can afford, it’s way less than a third of what I was paying before. And I’m only going to end up in effect paying back a third of the debt. The banks are going to wipe out all the rest and there will be no further interest.

Client: Exactly.

Doug Hoyes: But it was also a psychological thing too.

Client: Yes.

Doug Hoyes: And that – I’m getting the sense that that was even more important to you.

Client: It was, it was – it was my debt. And I felt a responsibility to pay it back. And just the, you know, sort of a restructuring of your debt if you will. It just felt like the best decision for me.

Doug Hoyes: Got you. Well and the banks and the credit card companies have to agree to it.

Client: Yes.

Doug Hoyes: So they were also in agreement with it.

Client: Yes.

Doug Hoyes: You thought this was the best thing for you. Well, they also agreed, they could have said no.

Client: They could have.

Doug Hoyes: They could have forced you into bankruptcy or they could have, you know, if the proposal wasn’t approved they could have attempted to garnish your wages or something. But in this case and in most cases they realize hey, you know what? If we don’t take this deal she’s going bankrupt because she’ll have no other choice at that point. We’re getting something, more probably than we would get in a bankruptcy. So, it ends up being a good deal for everybody.

Client: Yes.

Doug Hoyes: That’s kind of a point. So, yeah and I know our approach is to always make sure everyone fully understands the options because even if the proposal, I don’t know, makes you feel better if the bankruptcy is considerably cheaper then, you know, we don’t want you doing something that’s going to be a lot more costly.

In your case when I look at the numbers okay, the proposal who know what your income’s going to be over the life of the bankruptcy so it’s impossible to accurately gage it. But in your case yeah you know what? The proposal makes sense.

Client: It’s also a fixed time.

Doug Hoyes: Yep. Well, it’s a fixed amount money. So, you’re right if you pay the same amount every month it’s a fixed amount of time. But if things get better –

Client: I can pay it off quicker.

Doug Hoyes: Exactly. So, if over time your kids start making lots of money and want to help mom out with a few bucks out every month.

Client: Wouldn’t that be nice?

Doug Hoyes: Wouldn’t that be awesome? Or if you get a raise at work, if you end up generating tax refunds or anything like that, then yeah you can throw an extra $50 a month on it and you can pay it off quicker. You can make a lump sum payment quicker. So, there’s a whole bunch of factors then is what you’re saying that came into it.

Client: There’s still some flexibility with it.

Doug Hoyes: Yeah absolutely. I mean I always advise people, even though the proposal is setup as a monthly number, because that’s how it’s done, if you get paid weekly or bi-weekly, well you can make your payment weekly or bi-weekly.

Client: I pay my payments bi-weekly.

Doug Hoyes: There you go.

Client: Or bi-monthly because I get paid twice per month.

Doug Hoyes: Twice per month. So, well, yeah and if you were paid bi-weekly, I mean twice per month obviously you take the monthly payment, divide it by two. If you’re paid by bi-weekly we do the same thing, take the monthly payment divide it by two. So, if you’re monthly payment’s $200 well, pay $100 every two weeks but then when you get your three pay months you’re actually making an extra payment, you don’t even notice it. So, that’s another way to pay it off quicker.

So, okay well that’s a very good background on your situation and the thought process. I think that’s very interesting. I don’t know if I’ve had anyone on the show before who walked us through with that level of detail what was going through your mind which I find quite fascinating.

So, on this show I like to talk practical advice. So, is there anything you would have done different let’s say the month after you lost your job? So, at that point, because you’ve already told us the story, you were thinking okay, there’s other jobs out there, I’m going to be going on tons of interviews, which you were, like you said you were doing 10 or 15 a week. There were lots of other potential out there. Of course your industry was going through a bit of a seismic shift at the time.

Client: Exactly.

Doug Hoyes: And things were changing and of course it’s not obvious till later what was happening. Looking back on that now, a few months after you had lost the job or right after you had lost the job would you have done anything differently?

Client: Well, just a point of irony I had put an offer in on a house. I was looking to move to a bungalow because of my disability. And they counter offered the day I lost my job.

Doug Hoyes: Wow, which was actually a good thing then I guess.

Client: Yes.

Doug Hoyes: Gee if I had gotten that house then –

Client: Yeah, that would have been a bit of a nightmare. I don’t know that I would have done anything different in the first six months. But I think a year out I would have sold – had I, you know, hindsight’s 20/20, I would have sold the house earlier.

Doug Hoyes: Because at that point you had already used your savings and your RSPs?

Client: I used my savings. But also I knew the industry was looking like, you know, recovery wasn’t going to be quick. And had I sold the house earlier, I don’t think I would have ended up in the debt crisis that I did.

Doug Hoyes: Because you would have been able to cut your expenses a bit quicker. Okay so in terms of practical advice then, you know, dealing with it as quick as you can within reason and what you’re describing all seems perfectly reasonable to me. The day I lose my job I’m probably not going to sell everything, tomorrow I might find a new job, but in your case after a year of very hard work, tons and tons of interviews –

Client: And some part-time temporary positions.

Doug Hoyes: Doing everything you could and in your case the industry had changed.

Client: Yeah.

Doug Hoyes: So, obviously you had some disadvantages too but so did everybody else because the industry was changing. The jobs just didn’t exist like they used to.

Client: No and they had fewer people doing more work.

Doug Hoyes: Yeah, which is pretty common in a lot of industries these days.

Client: A lot of surplus people out there.

Doug Hoyes: Yeah, absolutely. And so realizing that as soon as possible okay, I’m going to switch gears. The – is there any way to be prepared for the financial impact of potentially losing your job? Because nobody ever expects they’re going to lose their job. Is there anything else you can do?

Client: I don’t know of anything. I look at the position I’m in now, when I lost my job then I had my house, I had RSPs, savings. Now I don’t. So, a job loss now is going to be even harder to deal with.

Doug Hoyes: Right, much more critical.

Client: Yes because I don’t have that cushion behind me. I think it’s just, you know, you have to have hope for your job loss but you need to assess the length of time. You assume, okay I can do this long, I’ll be okay. Cut that in half.

Doug Hoyes: Cut it in half.

Client: Cut it in half.

Doug Hoyes: So if you think I’ve got enough to survive for six months, it’s really three.

Client: Three. Or I’ve got enough for a year, it’s really six months. So, do that thoughtful tough be really critical, do that math, make that decision and okay, if I can only survive for this long what’s going to happen after? What do I have to do to make it? And look at your assets, even where you live, everything that you’re doing. It’s a hard examination but you need to do it. And yes, family and friends can be very generous but at some point you have to pay them back too.

Doug Hoyes: Yeah you don’t want to leave them in a precarious financial situation.

Client: Exactly. You don’t want to become a burden on somebody else.

Doug Hoyes: Yep. So, in your case right now, I mean you’ve described it, so you have a job which is enough to pay the rent and the groceries and the living expenses. And it’s good, you’ve got benefits so your medical expenses are partially covered, so, what – but you’re right, you don’t have the savings, the RSPs, all that kind of stuff. So, what is the strategy then other than I guess exactly what you’re doing which is living as frugally as you can. That’s pretty much what it comes down to.

Client: It does. You make every penny count. You know, you have to shop all the deals; you have to monitor your utility usage.

Doug Hoyes: You mentioned utility usage earlier when you had the house, we did some things to get our cost down. What are you talking about? We didn’t leave the lights on all day long?

Client: Changed all the lights to LEDs, making sure that like your furnace and your air conditioner are working at their most efficient rate, making sure that they’re cleaned and serviced regularly. Low flow things on your water, Durham Region water you pay as much for the water going out as you do for the water coming in. So, it’s – it can be quite expensive.

Doug Hoyes: And did that make a difference those things?

Client: It did, it helped reduce everything. My gas bill, including my hot water heater, were below $80 a month. My hydro bill, which then you got every two months, was under $150 for every two months. And that’s the sort of thing you have to try to do.

Doug Hoyes: So you literally looked at every single expense you had.

Client: Absolutely.

Doug Hoyes: And said okay, how can I chop it, how can I chop it?

Client: Exactly.

Doug Hoyes: And obviously making an investment in something like LED lights costs money upfront.

Client: But there are rebates, there are all sorts of things you can do. Like even today there’s a website called saveenergy.ca which can open your door to all sorts of free things with respect to your hydro and your water usage and even your heat, so looking at those things can really help.

Doug Hoyes: Excellent.

Client: I mean I also was planning on buying a new car the year I got let go, didn’t do that. I now drive a 12 year old vehicle. And it’s not having the newest and the biggest and the brightest all the time.

Doug Hoyes: And I guess that’s a good way to end it. So, in terms of final advice for people who are listening who are either in a debt situation or want to avoid it, isn’t that what it all comes down to then, the mindset?

Client: Absolutely.

Doug Hoyes: And that’s – so, that’s what you would say to people you don’t have to worry about having the best and the brightest all the time?

Client: Yeah, absolutely. It’s taking a good hard look at how you spend your money what you spend it on. I mean I wasn’t a big spendthrift but I would buy clothes twice a year set times. I don’t do that anymore. And what I’ve – that might have been something that maybe five years out, five years ago maybe I could have cut down. But it’s looking at how you live, how you spend your money and not having to always have the very best or the newest trend.

Doug Hoyes: Excellent. Well, thank you very much, I appreciate you sharing all that and I appreciate those practical pieces of advice. I think that’s very helpful for everyone listening.

So, to close the show here, I will reiterate that my guest had a well paying job making good money, she was downsized and had to use her savings and then cash in her RSPs, sell her house, did everything she could to survive but ended up finally having to resort to credit cards to survive.

She’s working now but her new job pays a lot less than her old job so it was not mathematically possible for her to pay her living expenses and support her family and to pay off her debt. So, she ended up coming in, talking to us, deciding between a bankruptcy and a consumer proposal. She ended up deciding on the consumer proposal both because it was cheaper than, a lot cheaper than what she was doing. But also because she knew she owed them money and she wanted to work out a settlement directly with the people she owed money to, all parties agreed and she can breathe easy again.

So, obviously being a single parent isn’t easy, losing your job, being downsized isn’t easy, but she’s obviously quite happy for the relief that she got from the consumer proposal. And I love her advice about looking ahead and figuring out what it would cost you to live for a few months if you were to lose your job and then cut that estimate in half. So, if you think you’ve got six months worth of runway, no it’s probably only three months. So, being as frugal as you can now is the way to go.

That’s our show for today. Full show notes including a transcript to how a consumer proposal works can be found on our website at hoyes.com that’s h-o-y-e-s-dot-com. Thanks for listening. Until next week, I’m Doug Hoyes. That was Debt Free in 30.