Putting the fun back into budgeting

If you run your own business, you’re familiar with Entertainment Expenses. That’s the category to which you can assign money you spend entertaining clients or potential new clients, with the final resolution that you drum up some business.

The idea is that you spend a little to make your clients feel appreciated, and they give you back more than the cost of a dinner, sports tickets or a break at a café. Canada Revenue Agency generally allows you to claim 50% of a reasonable dinner/entertainment bill. The idea is that you consume half of what your total bill is, and they’re not going to pay for your meal. There are exceptions for occupations such as long-haul truck driver or bike courier, because they are required to eat in order to continue doing their jobs. For the average entrepreneur, the CRA doesn’t usually bat an eye if you spend $650 per year on entertaining.

But what about in terms of your household budget? Should you factor in some “entertainment” expenses if for nothing else than to feel as if you’re not spending everything you make on the drudgery of staying afloat financially?

Most experts agree that you should. But how much of your monthly budget should you assign to it?

If you work with the CRA figure, a person may think about spending $55 a month on entertainment (movies, fast foods, afternoon lattes, etc.). That’s for one person. If you want to budget for your wife or children, you may want to expand on that. Most experts agree that you shouldn’t be budgeting more than 5% of your paycheque, though, since there are other things that should take priority in your spending (utilities, debt repayment, rent, etc., and yes, even savings).

So, if you’re bringing home $1,000 every two weeks, for example, and you’re effectively covering off your house payments and debts, you may consider putting $50 into the “fun” jar.

You may think that doesn’t allow you much fun outside of your everyday routine, and so vacations are out of the question, but vacations are probably best included in your long-term planning, a separate budget category that is taken care of by your savings.

Your savings is money for your future, so in effect you’re stocking money away today for future fun — short-term financial pain for longer-term financial fun, if you will. Some people put savings away for their retirement and forget about having fun until then. There are examples of couples investing heavily in their retirement, with hopes of traveling the continent in a motor home, only to have one of the spouses pass away suddenly and the surviving one wishing they had spend more money on living with each other now, rather than waiting for a tomorrow that now will never come.

Say you put away 10% of your paycheque into a high-yield savings account (which these days is about 3%). At the end of the year, you’ll have over $2,600. That’s a pretty good vacation for two every couple years, even at today’s prices, and you’re still contributing toward your retirement (albeit, not much).

As with any budgeting, the idea is to make your paycheque cover the essentials and plan for the things you want to do, rather than build up more debt living unsustainably.

So, figure out what you can afford to put away for “fun” and be regimented in making sure you put that money away. And be patient about spending it. The money will eventually be there to take off for Cuba, or buy a big screen TV, or just have a meal at a fancy restaurant and perhaps spend the night away at a downtown hotel. You just have to wait for it to arrive.

Bankruptcy and the continuing collection phone calls

So you’ve had enough of the continuous phone calls and repeated emails from collection agencies and decided to file a consumer proposal or for bankruptcy in order to settle your debts. And yet the calls keep coming. What’s that all about?

Well, it all comes down to communication, or lack thereof. And communication is not always easy or fast.

Once you file a consumer proposal or for bankruptcy, your trustee sends out notices to all your creditors advising them of the filing and the consequent actions. That should make the calls stop. But the action isn’t always immediate — it may take a while. In this day of electronic correspondence, things can be a lot quicker, but it’s still not immediate.

First of all, your trustee has five business days to notify your creditors in the event of a bankruptcy filing. The period in the event of consumer proposal is 10 business days — there’s two weeks right there.

If your trustee doesn’t correspond with your creditors electronically, you have to take mail times into account, and Canada Post offers delivery within four business days. There’s another week gone.

The creditor then has to enter the information into its system, which could take another couple days. So when all is said and done, there could be a period of three weeks from the time you sign off on your file until all your creditors are up to speed on the action. Then the calls should stop.

But they might not if your creditor has turned your file over to a collection agency. Collection agencies are agents (either in-house or third-party) of the company to which money is owed. They collect money for a fee or a percentage of the debt owed. Debt buyers are a type of agency that basically buys your debt from the company you owe it to and then takes on collecting the full amount owed (sometimes tacking on interest). Collection agencies in Ontario have to be registered and have to follow certain guidelines, including how many times they can contact you (no more than three times in a seven-day period) and when (never on holidays, for example).

So, once the company you owe money to has entered the filing information into its system, it could take another couple days to pass on the information to the collection agency. Or the company you owe money too could have sold your debt to an agency after you filed, and neglected to tell the agency.

Usually, an explanation of what has transpired and a transfer of information between the agency and your trustee should immediately put a stop to the agency’s contacting you.

However, some debt collectors may not be satisfied with the action taken and may continue to call you or a guarantor in an attempt to collect the total amount outstanding. If that happens despite repeated requests that it stop in light of your consumer proposal or bankruptcy, you can file a complaint with Consumer Protection Ontario.

Most of the time, the contacts are a result of missed communication and most agencies will stop once they have all the satisfactory information that the debt has been settled.