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First Debt Free in 30 Show – Ted Rants About Payday Loans

First Debt Free in 30 Show – Ted Rants About Payday Loans

There isn’t much that get’s under Ted Michalos’ skin than the payday loan industry. In our first Debt Free in 30 Show, Doug Hoyes and Ted Michalos, co-founders of Hoyes, Michalos & Associated talked about what they wanted to achieve from the show. We explain the goal of the show which is to bring in a variety of guest speakers who can provide an interesting perspective on debt, money and personal finance. We hope to bring you not only interesting conversations, but practical advice on what you can do to become debt free.

Why is this important? Today around 125,000 Canadians file bankruptcy or a consumer proposal each and every year.

That is a phenomenal number when you think about it but this is not something anybody ever talks about. – Ted Michalos

These are hard-working Canadians who found themselves struggling with too much debt. How did they get there? Why are we so accepting of debt as a fact of managing our finances? How can we reverse the trend? We want to answer these and many other questions.

Next Doug let Ted loose to rant about one of his biggest pet peeves: Payday Loans.  Did you know payday loans started on the shop floor, where you borrowed from friends, family or someone at work. Starting in the mid-90’s payday loans grew rapidly as ‘big business’ and not necessarily to the complete benefit of those taking out loans. Ted discusses the cycle of debt that occurs when you start to use payday loans as a solution to cash flow problems.

The problem with payday loans is it’s a treadmill you can’t get off…The problem isn’t the first loan. Its most people that we see have got multiple payday loans. So you’ve got one, two, three and it’s not 100 bucks.

We discuss alternatives to payday loans including some simple budgeting tips to help you deal with the underlying issue, which is a cash flow problem.

Resources Mentioned in the Show

FULL TRANSCRIPT inaugural show with Ted Michalos

Introduction to the Show

Doug Hoyes: Welcome to Debt Free in 30 where every week we take 30 minutes and talk to industry experts about debt, money and personal finance. I’m Doug Hoyes, welcome to show number one.

I’m joined today by my Hoyes, Michalos cofounder and business partner, Ted Michalos, but before I bring Ted into the conversation, I would like to start off by giving a quick overview of what the Debt Free and 30 show is all about.

First, let me tell you what it’s not. This show is not the Hoyes, Michalos Show; it’s not a Hoyes, Michalos infomercial and it’s not a Hoyes, Michalos advertisement. Obviously, Ted and I are businessmen, we run Hoyes, Michalos and in a minute we will set the stage by telling you what we’re all about but that’s not the point of the show.

We aren’t going to spend every show talking about bankruptcy. What we want to do every week is take 30 minutes and talk about being debt free. On every show we will have a guest and we’re going to pick guests that can give solid, practical advice. We’ll have practical advice throughout the show because we want to give you information you can use in real life. Why is it even important to be debt free? Isn’t debt good? Isn’t a mortgage or a car loan a good thing? We’ll explore those questions in future shows. How do you become debt free? We’ll talk about that too.

What you won’t hear is Doug and Ted talking to each other on every show. Our goal is to have as many different guests as possible on the show to give a wide variety of opinions on living debt free. I want to bring on the show people who disagree with me. Let’s explore all points of view. That is our plan.

First, let’s set the stage for how we got to this point, so with that, let me welcome in Ted Michalos. Ted, how are you doing?

Ted Michalos: Not bad Doug, how are you today?

Doug Hoyes: I’m good. So, give us a bit of a background on how you got into this business. Obviously, we’ve been working together for many years. I know where you came from but why don’t you explain how you got into this business?

Ted Michalos: This is going to be a little bit of ancient history, but for the people that don’t know me; when I finished high school, I went straight into university. I only lasted a year. About eight months in I had to sell my car to be able to pay the rent and, well I just couldn’t live without my car. That’s, I guess, useful exuberance for you. So, I went to work in the fast food industry and was managing a McDonald’s franchise as well. From there I switched to truck driving of all things. I drove trucks for four or five years and put my wife through university. Then when I got out, the choice was: do I buy a truck myself or do I pursue something different. I think I probably made the right decision in pursuing something different; that was my accounting education.

I started in a national firm and then at some point it just became apparent that the national firms really couldn’t deal with people the way you and I wanted to deal with people. They were good at dealing with banks and businesses but they weren’t very good with Joe Debtor.

Doug Hoyes: So you went to university many years after high school then?

Ted Michalos: Well, when I finally went back to university? Yes, it was many years after high school. Thank you for pointing that out.

Doug Hoyes: There you go. So you were a mature student I guess but on future shows we’re going to talk about students, student loans, student debts and all the rest of it and it’s an interesting perspective that when you first started at university it sounds like you weren’t really either ready for it or financially ready for it.

Ted Michalos: I certainly wasn’t ready financially and I wasn’t focused on what I was doing.

Doug Hoyes: But once you had been out in the real world working in the fast food business and driving a truck, you realized, okay, there is something a bit more that I want to accomplish.

Ted Michalos: Hard work is a great motivator for a higher education.

Doug Hoyes: Oh, absolutely and there is, you know, driving a truck is not easy work. My situation is much less interesting than yours. I went to high school, I realized I wanted to become an accountant, went to university, became an accountant and started working for the big firms. I started out like all chartered accountants do; working in audit, which I found horribly boring because the purpose of audit is to make sure that the numbers reflect what happened last year. It drove me crazy. After a while I realized that the insolvency business was much more interesting because what you’re trying to do is help people that have problems today fix them so they can live again tomorrow. That’s where we ended up meeting. We both ended up at a firm that then merged with another firm and then I think we sort of got to the point where working for big guys wasn’t really what we wanted to do.

Ted Michalos: That first firm, now, is out of the business, right?

Doug Hoyes: Well I think the second firm is too. You can give us a call and we’ll tell you all the names of these companies that still exist but don’t do any kind of insolvency work.

So we then started Hoyes, Michalos which opened its doors in, I guess it was January 2nd, 1999 when we officially opened our doors.

Ted Michalos: That’s right.

Doug Hoyes: And let’s talk a little bit about what our philosophy is. There’s lots of other firms that do what we do. What makes us any different than anybody else?

Ted Michalos: What I’ve been told by people that have come to see us over the years, and we’re talking about thousands of people now, is that we’ve simply got a more humane approach to this whole experience that people are going through. Insolvency, financial distress, is not something pleasant. It’s not something you’d wish on your worst enemy but the reality is about 11 percent of all Canadians are going to experience this kind of trouble in their life and what we realized early on was that they weren’t being treated very well.

Doug Hoyes: So when you say 11 percent of Canadians are going to experience this in their life, put that in numbers then. So I’m in a room and there’s a hundred people in there, more than 10 of them at some point are going to be in such financial difficulty that they’re going to have file a bankruptcy or consumer proposal.

Ted Michalos: That’s correct. I mean, this year, we’re projecting about 125,000 Canadians are going to file either bankruptcy or proposal. It’s about an even split across the country. That is a phenomenal number when you think about it but this is not something anybody ever talks about. You’re not going to be sitting down at your barbecue or family party or a Christmas saying yeah, I filed bankruptcy this week. It’s just not a conversation you’re going to have but it’s a lot more common than anybody realizes.

Doug Hoyes: That 125,000 number you state is less than what it was a few years ago during the height of the credit crisis and the great recession and the rest of it when it was over 150,000.

Ted Michalos: That’s true, 2009, 2010 it was 140-150,000. So it’s gone in the right direction but we’re not really comparing apples to apples here. 2009, 2010 the world was in a financial crisis and it accelerated bankruptcy filings for people that were experiencing any kind of difficulty. Money just got really tight. We’re back now to what I think are, unfortunately, normal levels; 125,000 Canadians this year. I bet next year it’s 128,000 and that’s just a function of the way our economy drives.

Doug Hoyes: Now you said people don’t like to talk about this. Why not? I mean, it’s just money. What’s the big deal? Why don’t we talk about it?

Ted Michalos: Yeah, I’ve always found this strange. You can sit down with a stranger, say in a doctor’s meeting room or an emergency room and they’ll tell you everything that’s wrong with them. They’ll tell you what fungus is growing on what part of their body but if you ask them at all about their finances, they just clam right up. We don’t talk to people about how much we save, how much we spend; they can see some of it because of the things that we buy. They can tell what kind of car you’re driving. They can see how big your house is but they don’t know how you paid for it. That’s all that whole keeping up with the Jones’ thing people have talked about for years and years.

No one wants to tell you what their financial position really is. I don’t know why.

Doug Hoyes: Maybe that’s one of the problems we’ve got. You look at the Jones’ next door and you see that they’ve got the fancy house, the fancy car, they’ve got the swimming pool and you think wow, they’re much more successful than I am. I want to be like them, when in fact, no, they’ve perhaps done it all with debt.

Ted Michalos: Statistically, they probably have done it all with debt. I mean, if you look around at some of the houses and cars people are driving, I mean I still have a mortgage. That is normal. People have mortgages. That’s how you pay for stuff. The trick is how big a mortgage and can you afford it on your income?

Once there was an expression. I don’t remember the fellow in the US that created this; to “live your wage”. Make sure you’re living within your income. It all falls back to the wealthy barber and set aside some of your income instead of spending all of it.

Doug Hoyes: That’s the kind of things we want to talk about as the show goes on. Let’s talk about the title of a show then. We’ve called it Debt Free in 30 because if you’re listening to this on the radio, well it’s a 30 minute show by the time you add in all the commercials. If you’re listening to it on the podcast, again we’re going to add some bonus content at the end it will be around a 30 minute show but we also use Debt Free in 30 as the tagline for our company, Hoyes, Michalos and Associates. What does it mean in that context?

Ted Michalos: Well we threw around a lot of ideas over time but what we finally settled on was we need to convince people that it’s worth having the conversation and the way you do that is you say something that catches their ear. So, Debt Free in 30; does it sound like a sales pitch or a slogan? I guess it is to some extent but we follow that with “If you can give us 30 minutes, we can help you to become debt free”.

The majority of the people that contact us actually don’t end up relying on our services. We point them in the right direction and they can move on which is really the purpose of this show. Once we finish talking about us and our history, its how can we get people to live debt free? How can we get them to live within in their means and therefore have richer, fuller lives?

Doug Hoyes: That’s an excellent approach. That’s the way we’ve always done it and you’re right. You give us 30 minutes and we can show you how to be debt free.

We’re going to take a quick break and then when we come back from the break, let’s talk about some of your pet peeves. What are the kind of things that drive you crazy?

Ted Michalos: I knew you were going to do this.

Doug Hoyes: I know where to push the hot button so I think we’re going to have fun with that. You are listening to Debt Free in 30. We’ll be right back.

Ted Rants About Payday Loans

Welcome back to Debt Free in 30 where every week we take 30 minutes and talk to industry experts about debt, money, and personal finance. This is our first show so my guest today to kick things off is my business partner and Hoyes, Michalos co-founder Ted Michalos. I’m Doug Hoyes, so Ted let’s have some fun and talk about your pet peeves. I’ve worked with you for I think close to 20 years now. I know what buttons to push to get you going and I know one of those buttons is the word payday loans. So, why do you hate them so much?

Ted Michalos: There goes my blood pressure, let me tell you. Well, the problem with payday loans is it’s a treadmill you can’t get off. I understand the need. You run out of cash, don’t have any savings, I’ve got to have 100 bucks to get me through to Friday because I can’t buy any groceries and I’ve got no gas in my car. So, you reach out and you go to one of these payday loan guys. Friday comes around and you owe them 125 bucks. Alright, so you pay it off but now there isn’t enough money left from your paycheck. So you have to borrow 125 bucks, which you’ll pay them off at your next paycheck. What happens at your next paycheck? Well now you owe them 150 bucks and guess what? You haven’t got enough cash to get you to your next paycheck. I think you can see where I’m going with this. It just drives me crazy.

Doug Hoyes: And is it the interest rate, is it the short term of the loan? What’s the real problem with the payday loans then?

Ted Michalos: Well, I guess it’s the imputed interest rate because it’s costing you so much money to borrow that small loan from them. It’s not like calling dad and saying, “Dad I need 100 bucks until Friday” because Dad will take 100 bucks back. These guys won’t. They’ve got to make money and they’ve got to make it fast.

Doug Hoyes: Well, let’s do the math here. So I was driving here today and there was a billboard that said it only costs, I don’t know, 20 bucks on 100. It doesn’t sound like that big of deal; I mean if I borrow 100 bucks today, next paycheck I pay back 120 bucks, 20 bucks isn’t that big of a number. What’s the problem?

Ted Michalos: But again, its cash flow so the reason you got into trouble in the first place is you didn’t have the first 100 bucks. So when you pay these guys back, paying them 20 bucks extra for the loan doesn’t seem like a lot but they’ve also got to get their 100 bucks back and so now you’re out that same 100 dollars you were originally, plus another 20 bucks. I mean, there can’t be a way out of this unless you suddenly know you’ve got some more money coming in. The problem isn’t the first loan. Its most people that we see have got multiple payday loans. So you’ve got one, two, three and it’s not 100 bucks.

Well, when we first started doing surveys of our average clients back in, what, 2005 we did the first Joe Debtor; the average payday loan balance was about 650 bucks. I think when we did it last year the average payday loan balance was 2500 bucks?

Doug Hoyes: Yeah because like you say, there is more than one of them. If you’re listening in and you’re wondering what we’re talking about, you can go to so that’s all one word. and you can see our latest study where we went and looked at the numbers of the people who filed a bankruptcy or consumer proposal with us what their average debt levels were and so on.

So 20 bucks on 100, that’s 20 percent and that’s kind of what I pay on a credit card. What’s the big deal here?

Ted Michalos: But 20 percent of one or two weeks versus 20 percent over the course of a year. So if I do the math, I pay 20 percent interest over two weeks, well there are 26 two week periods in a year so I’m actually paying 520 percent. I think the law says anything over 60 percent is usury.

Doug Hoyes: Yeah but obviously they can get away with it because it’s a short term loan and they just keep rolling it over and over and over.

Ted Michalos: If you really want to wind me up though, the law was changed in 2008. They’re not legally allowed to roll them over anymore. When you go to payday company A and take out a loan, they’re not supposed to give you a new one for at least two weeks after you paid off the last one.

Doug Hoyes: Which is why so many people have multiple loans because I have to go from company A to borrow from company B and when I can’t fully pay back company B then I’ve got to go to company C but I still owe A and B and it just keeps going and going from there.

Ted Michalos: That’s why people now owe twice what they used to owe when this whole thing started. Now for some history, payday loans used to be run by guys in the plant. It was called a payday loan because Louie had lots of cash. You’d go see him on the shop floor and he’d give you the 100 bucks and on Friday you’d give him 120. You’d become Louie’s best friend and he knows that you’d be into him three to four times a year whenever it was tight and that he’d get the account cleaned off when you got to that three pay month where you’d get that little bit of extra money and then you’d be back into seeing him again.

The whole industry was legitimized…

Doug Hoyes: Made legitimate.

Ted Michalos: Because they were trying to bring it off the shop floor and into the light of day. I don’t think it brought it to the light of day, I think it made things worse because now they’ve made it somewhat respectable. More people have access to it. Certainly more people are aware of this service. So maybe Louie’s not doing it who is going to strong arm you or break your arms if you don’t pay but you’re much worse off now because you can borrow more money from more places. It’s a problem you can’t fix.

Doug Hoyes: Well I guess Louie at least knew who you were. He knew where you worked. He could decide whether you were a good risk or not. There was a little bit more personal involvement there.

At the top of the show I said we’re going to talk about practical advice here so you sketched it out how it is with a payday loan. Rent is due; I don’t have the money, so I go to a payday loan to borrow it. That seems perfectly reasonable. If you don’t want me going to a payday loan place, what can I do? How do I get the rent paid?

Ted Michalos: Okay so the first thing would be to go to the landlord and say look, I’m short. I’ll make up the difference in a week and then there’s no interest on it unless the landlord is going to charge you a fee and most landlords won’t do that, or there’s the bank of mom and dad, or there is; I hate to say this but I suppose you could take an advance on your credit card, which is not much of a solution either but at least the interest rate isn’t 520 percent per year.

The trick here is to recognize there’s a fundamental cash flow problem. You haven’t got enough cash. You need to solve that short term solution without creating a longer term problem. You have to think of some of these things. The payday loan is an easy solution. You see their ads, you see their billboards, you see their store fronts and you just go in and they will give you money. Well the reason they’ll give you money is because they’ll make a lot of money off of you.

Doug Hoyes: Yeah, I agree. You’re borrowing the money because you’ve got an underlying problem. It’s not a shortage of the money. It’s a cash flow issue. You’ve been off of work; you’re spending too much, whatever it is. You’ve got to deal with that issue first and then you can then deal with the other.

I agree. If you’re behind on your rent, the person to talk to is your landlord because most landlords aren’t going to evict you if you’re three days late with the rent and they will, in most cases allow you to get caught up so you don’t get into this mess again. That’s a lot better than paying almost 600 percent in interest, which is what you talked about.

Thanks very much for that Ted. We’re going to take a quick break and then close out the show. You’re listening to Debt Free in 30.

30 Second Recap – Payday Loans

Welcome back to Debt Free in 30. I’m Doug Hoyes and it’s time for the 30 second recap of what we discussed today.

This was our first show so in the first segment my business partner, Ted Michalos and I laid out our plans for the show and we certainly hope you tune in every week.

In the second segment I turned Ted loose and let him talk about one of his pet peeves and not surprisingly he talked about payday loans. Payday loans are probably the most expensive legal form of borrowing in Canada so it’s not a surprise that Ted is not a big fan of them. That’s what we talked about today. That’s your 30 second recap.

Now, what’s my take on all of this? I agree with Ted. I think payday loans are a very expensive form of borrowing. Ted hit the nail on the head when he said that you have to recognize that you have a fundamental short term cash flow problem and the trick is to make sure that you don’t create a long term problem by borrowing from payday loan companies. The example we used is the classic one; my rent is due on the first but I don’t get paid until the third. What do I do?

Well I guess the answer is I go to a payday loan company so I can pay my landlord on time and then on the third when I get paid, great. I pay off the payday loan. Well, okay and that’s certainly a strategy but when you crunch the numbers, you find out the cost of that payday loan, which you’re only using for three days can be a huge amount and you certainly don’t want to be doing that over and over again and unfortunately what we see at our firm at Hoyes, Michalos and Associates is that a lot of people don’t just have one payday loan. They have multiple loans. I have to get one loan to pay off another one and then I have to go to a third company and get a third one to pay off the first one and it becomes an endless cycle. That is not the situation you want to get into.

You’d be much better off going and talking to your landlord and saying hey, I’m really sorry but I can’t give you the money until a couple of days later. In most cases your landlord is probably going to be reasonable. Going to family and friends would probably be better than going to a payday loan company but as Ted says, you have a short term cash flow problem but you may also have a more long term cash flow problem. You’ve got to address it so that you don’t get into the same problem month after month after month.

So, what would I be doing? Well, I’d be saying okay. I want to start setting aside my rent money earlier so that I’m not waiting for my last paycheck to pay my rent. So if I get paid every week, okay great. Take a quarter of my paycheck; tuck it away so that by the end of the month I’ve got my rent money for next month. I’m not waiting for my last paycheck. I’m not cutting it right to the wire. I’ve got a plan and I’m executing it. Yes, it takes a bit of forethought; yes you’ve got to think in advance. You can’t just wing it but it’s a lot less stressful knowing that each paycheck I’m tucking some money away so that my rent, my car insurance, my grocery bill, everything else is going to be taken care of. That’s the way you want to do it. If you can do that, you will find that your life is a lot less stressful.

That’s our show for today. I want to thank Ted Michalos for joining me today as we laid out the road map for future shows. As I said in the opening, our goal is to have many different guests with many different points of views and I think we’ve accomplished that with a lot of the great guests that we’ve got lined up over the next few weeks. We also want to provide practical advice during the show. We’re going to certainly concentrate on that as well and that’s what I’m going to be asking our guests for; give us some practical advice.

If you’re listening to this on the radio, thanks for listening. Please make a note of the station and time this show is on so you can tune in again next week. If you’re listening to this in podcast format, fantastic. Please subscribe on iTunes or whatever other podcast service you use so that you can get the show every week. For more information on today’s show or any of our shows, you can go to; that’s and read our show notes, get links to everything we discussed, listen to the show again on your computer and even download an audio copy of the show so you can listen to it on your iPod or MP3 player. That’s, for full show notes.

Until next week, I’m Doug Hoyes. Thanks for listening to Debt Free in 30.

Dealing With Cash Flow Problems and Personal Budgeting

It’s time for the bonus segment of Debt Free in 30. This show airs on the radio and we’re subject to some pretty tight time constraints. It’s a 30 minute show on the radio but when you put in commercials and newscasts and other radio station content the actual running time is only about 22 minutes.

So for our podcast listeners, on many of our shows we’ll have bonus content that you can only hear on the podcast. Nothing we say here will ever be on the air, which hopefully allows us to be more free and open with our opinions since we aren’t constrained by the radio format.

So, Ted, we talked about a practical tip already on the payday loans, which is if you’re behind on your rent, call your landlord. It’s much better making a deal with him to get it paid off rather than borrowing heavily. What other practical tips have you got for managing your money, staying out of trouble, keeping the cash flow going so you don’t need to resort to places like payday loans?

Ted Michalos: Well let’s expand on the whole cash flow idea then. Most people either get paid bi-weekly or semi-monthly or once a week. So you know when you’re going to get paid and for the majority of us, we’re pretty sure of what the amount is going to be or it’s close enough. There’s not a lot of overtime anymore in the economy so you know that this Friday you’re going to get $543.27.

What you were probably taught if you were taught anything in high school or by your parents was that you’ve got to pay your bills at the end of the month. That’s not a practical solution for people where money is really tight. We like to suggest that you consider paying your bills when you get paid so you know that every other week you get a paycheck. Alright, on this paycheck I pay my utility bill, I pay my car insurance, I make my car payment. My next paycheck is used for the rent, groceries, and things along those lines.

It means going through and looking at your spending patterns. Where does the money have to go every month and then figuring out what’s the balanced approach per paycheck. I mean, it’s a little bit of work out front but you’ll find that you have more cash in your pocket by the end of the day and you’re not worrying about making sure you can get to the end of the month and still have money left.

Doug Hoyes: So let’s take a simple example then. So every month I have to pay my cellphone bill and let’s say it is 100 bucks.

And because I’m with one of the big cellphone companies, the bill is due on the 21st of every month. That’s the day they’ve picked and of course you’re right. I either get paid weekly or bi-weekly. I never get paid on the 21st. So the money is never there the day I need it. So what do I do then practically? How do I make that work so that I can pay the bills as I’m getting paid then?

Ted Michalos: So let’s assume just so that we can have this conversation that you are getting paid every two weeks. Twice a year you get three pays, we’re going to ignore them. Those are going to be your bonuses to yourself where you’ve got some extra money that wasn’t put in your plan. Otherwise then we get this list of things that we have to pay every month, like our hundred dollar cellphone bill that’s due on the 21st but we’re going to try and pay it on the payday that’s the closest to the middle of the month. Just because it has to be paid on the 21st or sorry, by the 21st doesn’t mean you have to pay it on the 21st.

The biggest expense for most people is the rent. We’ve got to make sure that we’ve got a paycheck available for that. The rest of your expenses are going to go on your next paycheck.

Doug Hoyes: Yeah, and obviously if you’re paid weekly, bi-weekly, that will have an impact on it. I had a person we worked with who had something like 20 different bank accountants. 20, now I thought she was crazy but she said to me, look. I’ve got them at this bank that doesn’t charge any service fees. I’m not going to say which one it is but I think you all know which banks have no service charges and so she said, it’s easy to open up 20 different accounts. When my paycheck comes in, I just electronically put it in each one of the accounts. It’s kind of like the old envelope method or the jar method.

So I know my rent is 1,000 dollars a month. I get paid every two weeks. So every two weeks when I get paid I put 500 dollars in my rent bank account and then I pay my rent from that bank account either with post-dated checks or preauthorized payment or however it works with my landlord. I don’t have to worry about what day rent is due, every pay day, 500 bucks goes into my bank account so by the end of the month, the first of next month when my rent is due, my rent check is there.

Now you said to ignore the third paycheck every month.

Ted Michalos: Twice a year.

Doug Hoyes: Sorry, twice a year because you’re right. If I get paid every two weeks, I get paid 26 times in a year. So why ignore that one? If I do have this system where I keep putting that money into a bank account every two weeks, I’m going to end up with extra money in my bank account then I guess. Is that right at the end of the year?

Ted Michalos: One would hope. The real reason for avoiding those two extra or ignoring those two extra months is that they don’t easily fit into this kind of plan where every two weeks you’re dealing with something. You certainly can include them and what you’ll find is that things back up on you. So if you get paid every two weeks every other Thursday, the beginning of the year you’re getting paid middle of month and end of the month. By the summer, you’re getting well; it’s more like the twentieth and the fifth. It keeps backing up on you so you’ll find that this gets a little confusing.

When you get to that three pay month, you skip one of them and it resets everything back to the middle of the month, the end of the month, so it makes your life a little easier to follow.

Plus it’s a nice bonus twice a year. You’ve got that paycheck that isn’t assigned to anything. It’s almost like automatic savings. You know you’ve got this extra money coming in. It’s the way people do their tax refunds. You know you’ve got this extra money coming in. You can plan to do something else with it.

Doug Hoyes: I guess if you do use the envelope method, the jar method, the separate bank account method or whatever, you end up having extra money then in each one of those accounts. So, it’s my third paycheck month but only two of those paychecks went to rent. I’ve now got extra money sitting there and that’s a great cushion because stuff happens in life. You get laid off, you’re off sick for a week; with extra money building up then you never have to worry about being behind.

Ted Michalos: Frankly, whatever system you want to use will be better than not using any system at all. My first reaction to the person who had the 20 bank accounts was, that’s a little extreme, but it worked for them. That’s really what we’re talking about. We want you to learn how to become debt free. The first step in becoming debt free is taking control of your cash flow, knowing where the money goes every month and making sure you’re in control and how that money gets spent.

Doug Hoyes: Well I think that’s a good way to close the show. You have to come up with a system that works for you. We’re both chartered accountants or CPA’s or whatever they call us now so we love the spreadsheets and the fancy accounting and all the rest of it but if you’re the kind of person who works better with a piece of paper and a pencil then do it that way. If you’re the kind of person who doesn’t really like to budget, would rather just take your paycheck and pay all your bills every two weeks instead of once a month, great. Do that too. Find something that works for you but I agree. Some system is better than no system. If you don’t have a system then you’re probably going to be getting into trouble and that’s what you want to avoid.

Ted Michalos: Yeah, the old failure to plan as opposed to plan to fail.

Doug Hoyes: Yeah, you come up with a plan and you should be good. Well, thanks for joining me today Ted for this first show and thanks for being here for the bonus content. For those of you who are listening, we have show notes available at That is our main website, We’ll have links to the things we talked about; some videos where we talk about budgeting and some of the other things we talked about today. So by all means, go there and subscribe via iTunes or whatever other podcasting system you like to listen to for the show.

Thanks for listening. This is Debt Free in 30.

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