by admin | Credit Counseling, Credit Repair, Debt Management, Uncategorized
Clothing is one of those items that many people don’t include in their monthly budgets but should consider including it in their yearly budgets, and that involves saving during the year for a once (or twice) yearly event.
Winter clothing is a particularly important item for which to budget because we seem to wear out our winter-wear so much more quickly. Maybe it’s the harsh environment or maybe it’s because we feel so uncomfortable one year with an item or article of clothing that we resolve to replace it before the onset of the following winter.
Summer clothing doesn’t seem to be replaced as often, and when it does, it’s usually for style reasons, rather than functionality. Besides, we don’t wear as much clothing in the summer as we do in the winter, so there’s less to spend on.
By the time you get boots to replace the salt-ravaged ones from last winter, a set of replacement gloves for the ones you stored away somewhere and now can’t find, and maybe a heavier coat than the one the wind blew through last year, you’re easily several hundred bucks down.
When it comes to winter clothing, most style-conscious advisors will tell you to spend your money on being stylish underneath your utilitarian exterior shell. Besides, it’s better to dress in layers because layers trap air between them, and air is one of the best insulators.
So, you may thing you need to spend a couple hundred dollars on a winter coat, when spending a hundred on a wind-proof shell with a bit of insulation may do you just as well for braving the cold between the door and the car, and then is set aside when you’re in the climate controlled indoors (at the restaurant, at the mall, at the office, etc.) and people can see your fabulous taste in the clothes you wear beneath the utility of your outerwear.
Sweaters provide an added layer of insulation underneath the winter-proof outer shell, and a slightly heavier shirt or long-sleeved T-shirt will add the layer beneath that, next to the skin.
As an added benefit, lighter winter outerwear will allow you to prolong the use of your fall fashions through the cold weather months, and then switch over to your spring clothes as winter nears its end. It also allows you to deal with the fluctuation in temperature on those inconsistent days where you leave the house in below-zero temperatures and then go out for lunch after temperatures have climbed into the fives — you can leave the sweater behind and just go with the winter shell over your Tee, or you can leave the wind-protection behind and just go with your fall sweater.
In short, spend the bulk of your fashion budget on the clothes in which people are going to see you most often, and when you really think about it, they usually only see you in your winter coat for several minutes a day.
And as with any large expenditure, it makes it easier to pay for it when you’ve worked it into a budget. The best way to budget for necessities —clothing, shelter, food, etc. — is based on past experience. Thus, keeping track of past expenditures will allow you to set a budget for future purchases (whether you choose to pay less for it or work in an allowance for inflation).
Set a yearly budget point, divide it by 12 or 26 or 52 (depending on whether you want to put money away on a monthly basis, bi-weekly or weekly) and put that money away to spend when the chill starts blowing in from the north.
by admin | Credit Repair, Debt Management, Uncategorized
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.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Debt Management, Uncategorized
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.
by admin | Bankruptcy, Consumer Proposal, Debt Management, Uncategorized
The break-up of a marriage or common-law relationship has certain financial ramifications for both parties, including the splitting of assets and the creation of equalization payments (support).
However, both can be financially draining on one partner (and sometimes both) and could lead to bankruptcy.
So, what happens if one of the “exes” does file for bankruptcy as a result of financial hardship following the breakdown of the relationship?
Bankruptcy basically results in the liquidation of property (houses, cars, RRSPs, etc.) in order to pay off a portion of the outstanding debt (mortgages, loans, credit cards, taxes owing, etc.).
In the event of a bankruptcy following a divorce, the equalization payment also becomes an outstanding debt and the spouse being “supported” will have to settle for a reduced payment according to the bankruptcy payment agreement. However, spousal support does get preferred status in the bankruptcy’s payment distribution schedule, meaning it takes priority over other creditors such as credit cards and the amount outstanding is still payable after the claimant is discharged from bankruptcy.
So, in a nutshell, say John is supposed to pay Jane $1,000 a month for support and owes her $15,000 in back support. The trustee rules that over the course of his bankruptcy, John will pay back the $12,000 owed in the year prior to bankruptcy in addition to a percentage on the outstanding $3,000, and when he is discharged from bankruptcy, John still has to pay Jane the outstanding balance on the $15,000. Say John pays Jane $13,500 over the course of his bankruptcy; he still owes her $1,500 after he is discharged from bankruptcy. These are just examples for easy calculations and not indicative of actual payment schedules.
Now, the family home throws a wrench into the bankruptcy works. Under Canada’s Bankruptcy and Insolvency Act (“BIA”), the trustee liquidates the claimant’s assets to settle debts, but he can’t very well do that if the spouse with custody over the children is still living in the family home.
There are two solutions: force the sale of the family home in order for the bankruptcy claimant to realize his/her share of the asset’s value, or facilitate the sale of the claimant’s share in the home to the spouse receiving equalization payments. There are difficulties with either solution.
In the case of the former, provincial law may prevent the sale of the home due to the resultant financial hardship created for the child(ren)’s guardian, disruption of the child’s life, the availability of suitable alternative housing in the area of residence, the employability of the supported spouse (especially if he/she is required to stay at home to care for dependents), and even because of the history of the spouse and children in the family home.
Although preferable and perhaps an easier avenue toward asset liquidation, attempting to facilitate a sale between ex-spouses is dependent on the spouse taking possession of the house being able to secure suitable financing to purchase it. Again, that depends on the employability and financial stability of the spouse.
Either way, bankruptcy does make a difficult time more difficult for both parties in the separation but in the end, the bankrupt individual has a fresh start financially, and the supported spouse receives regular support payments (as opposed to the deadbeat’s “not at all”).
