Debt-Free Forever (12 page)

The banks don’t mind one bit when you go into overdraft, since overdraft interest rates are often well above regular lending rates—one bank I checked charges 21% interest on your outstanding overdraft—and going into overdraft automatically triggers a monthly fee. If, in fact, overdraft is just for the odd slip, as the marketing material says, then why do some banks offer the option of going $5,000 or more into overdraft? That’s not a little slip.

The answer to running into overdraft is not overdraft protection; it is to better manage the cash in your account so you don’t try to spend money you don’t have, bounce cheques, and rack up exorbitant fees.

1.
Get yourself a notebook.

2.
When you put money in your account, add it to your balance.

3.
When you spend money from your account (be it a cheque, bill payment, a debit card transaction, or a cash withdrawal),
debit that amount from the balance in your notebook.

4.
Keep your eye on your balance.

If you think that sounds like too much work, you’re a dope. You’d work at least this hard to find where gas is selling for a penny less, or where tuna is two for $1.39, or where wings are all-you-can-eat for $3.99. Staying out of overdraft is one of the best deals going.

If you went to university or college and borrowed money to get you through, you may still be walking around with student debt as part of your debt portfolio. Often people graduate from school with more debt than they can manage to repay on the incomes they earn from their first jobs. It can get pretty depressing to be five years into your working career and still be paying off your student loans.

Well, you could declare bankruptcy! No, that won’t work. Even if you owe more money than you can afford to repay, you’ll have to suck it up because you’re not allowed to discharge student loan debt through bankruptcy until you’ve been out of school for at least seven years.

Many people don’t realize that the student loan system actually charges more than banks and other lenders for the use of their money for two reasons:

1. No interest accumulates on your student loan debt while you remain in school … so it’s interest-free borrowing until you leave school (to a maximum of seven years).

2.
They give you a six-month window during which you do not have to make payments after you’ve left school, so you have some time to find a job. You are, however, charged interest. Believe it or not, more than half of all student loan borrowers don’t know this. Hello! Didn’t you read the fine print?

So why don’t people just consolidate their student debt with a regular lender after school? First, they may not qualify. That’s right, having taken out whopping loans to get a ho-hum degree, which has left you earning $10 an hour, no other lender may consider you a good-enough risk, And while the student loan system is happy if you take forever to repay your debt—the interest clock just keeps ticking—most lenders won’t be happy with you taking 10 years to repay your student loan. If you go to another lender, you had better be dead serious about repaying your loan.

Second, as long as you’re part of the student loan program, you may pay through the nose, but you have options. Canada Student Loans or Integrated Student Loans (offered by Saskatchewan, Ontario, New Brunswick, and Newfoundland and Labrador) will let you

• temporarily take a pass on payments. Unemployed or not earning much money? If you are unable to make payments, you could be eligible for interest relief through which the government will pay the interest on your loans for you.

• decrease your monthly repayment amount by extending the amount of time it will take overall for you to pay off your loan up to 15 years.

• reduce the amount of your student loan up to three times to a maximum of $26,000, if you face exceptional long-term financial difficulties and have been out of school for at least five years.

• eliminate your loan completely if you have a permanent disability—physical or mental—that restricts your ability to perform the daily activities necessary to go to school or work.

There are also several tax relief measures that have been brought in to try to help students deal with the growing debts with which they’re graduating:

• A 17% tax credit on the interest you pay on your student loan each year

• An education claim of $400 per month on your tax form for full-time studies

• A non-refundable textbook tax credit of $65 for each month you’re enrolled in a course that entitles you to a full-time education tax credit

• A full tax exemption for all post-secondary scholarships and bursaries. You’ll still receive a T4A slip, but the amount doesn’t need to be reported on your income tax return.

If you do not make your student loan repayments on time, the government will send your account to collections, you will be badgered, and you’ll end up with a really crappy credit history. You could end up paying more in interest. They will hold your tax refunds. And you could face legal action.

The only way to deal with this is to get yourself on a debt repayment program, find the money, and pay off the loan(s). Your life may suck for a while as you pour all your extra money into getting to debt-free, but it beats the pants off watching your credit history go down the crapper.

You don’t have to live in debt. You can change your life. But you have to really want to. It will be hard. But if you have the gumption, you can do it. I know you can.

The first thing you have to do is take all your credit cards but one (or at most two) and cut them up. Include your department store cards. And unless you’re getting a discount on gas, include your gas cards too.

Remember, cutting up your cards does not cancel your account. It simply removes the ability to use the card—and the temptation to spend money you don’t have.

Next, take the credit card you’ve kept and put it somewhere hard to reach—freeze it, bury it in the fish tank, throw it behind the refrigerator. Now you’re on your way.

GAIL’S TIPS

You’ll have to make a budget, create a debt repayment plan, and rebuild your credit history (if you’ve made it messy). And you should negotiate with your creditors to either consolidate your debt at a lower cost or reduce the amount of interest you’re paying on your various forms of credit.

Most important, you have to stop shopping. Make a promise to yourself that you won’t buy another unessential thing until you’re out of debt. If you must shop, it’s got to be a bargain. I don’t want to hear the yada yada on quality versus price. Bargain shopping doesn’t mean buying crap. It means buying quality at the best price going. And it means only buying what you need.

As much as you might think you could never survive without that coffee in the morning or that glass of wine in the evening, I’m here to tell you that you can. If you’ve got so much as a dollar of debt, you’ve got to put the brakes on the “nice to haves” until you’re out of the hole. Debt-freedom brings its own intoxication. There’s nothing like the feeling of being free and clear of all financial obligations. Take a sip. It’s a taste to which you’ll enjoy becoming addicted.
Cin cin!

Y
ou’ve done up a budget. You’ve created a debt repayment plan. You’ve set some goals for what you want to achieve. All you need now is money. It doesn’t matter how much you trim, how much you plan, how much you tweak, there’s just not enough moolah to go around. Maybe you just don’t make enough money.

If you are struggling to make ends meet and are working a 37.5-hour workweek, perhaps you’re just not working hard enough. And if you’re digging a helluva hole using credit to fill the gaps in your budget, maybe it’s time to look at what you can do to make more money!

Some people don’t equate how hard they work with how much money they have. And so when I tell people they have to find a way to make more money, they balk. They are outraged that they’ll need to spend more time with their noses to the grindstone.

Now, I’m not one for exchanging all of one’s life energy for money or stuff. Quite the contrary. But if you aren’t making it to the end of the month before you get to the end of the money, and you’ve already trimmed your expenses to the bare bone, the only solution left is to make more money.

What’s so wrong with hard work anyway? When did it become unnecessary to make enough money—no matter how hard you had to work—to keep the home fires burning? When we got our grubby little hands on credit and decided we could spend money we hadn’t yet earned instead of simply earning the money we needed now, that’s when.

There are lots of people who work hard and still have it tough: people who are dealing with unemployment or a significant change in the economy; people who have struggled through a divorce or widowhood and are finding it difficult to make ends meet; people who have become disabled or are living on a limited fixed income. I’m not talking about those people.

I’m talking to all the lazy doofuses out there who think that just because they put in their 7.5 hours today, they’ve done as much as should be expected. Really? You don’t have enough money to make sure your kids are safe, but you worked hard enough today? Sorry, I’m not buying it.

I live in a rural area where there’s no such thing as 9 to 5. Most of the people who live around me—regular working Joes and Janes—routinely put in a 12-hour day. That leaves six for family and six for sleep. Why do they do it? Because farmers don’t get to clock out. Because even those who have viable farming operations have at least one member of the family with a full-time job on top of the farming to make it all hang
together. Because independence and self-sufficiency are still valued, and people do whatever they must to make the money they need to have the lives they want.

The same is true for people who rise to the top of the executive ladder or are successfully self-employed. Successful executives and entrepreneurs don’t get to work a half-week; their workweek is often 70 hours. If they’re going to make their businesses fly, they’ve got to bust their asses. Not everyone is cut out for the 70-hour workweek, but that means not everyone gets to play with the same toys.

There are ways to find balance. Everyone has to find their own path. Everyone has to do what works for them. But if you aren’t working hard enough to keep bread on the table without going into debt, you need to make more money. Get a second job. Get a third job. Get a better job. Find a way.

A very successful bank executive—the head of lending, as it happens—once told me that when she and her husband started out, they’d both do their day jobs and then they’d go clean bathrooms in a commercial building at night. Hey, man, whatever it takes.

When budgets don’t balance, it’s for one of two reasons:

1.
Your expenses are totally out of whack.

2.
You don’t make enough money.

It’s simple (but not necessarily easy) to solve the first problem: you cut back. However, if no matter how much you cut
back, there still isn’t enough money, you’re suffering from Not Enough Money. This is sometimes tougher to deal with, although it’s been my experience that it just takes a little more effort.

When I work with families and uncover the fact that they just don’t make enough money, I make it a challenge for them to find a way to bring in a specific amount of dollars, net of taxes, which can be sustained consistently. People buck and rail at the idea of having to work harder. They think I’m totally insane. How could they possibly make more money? How could they make that much more money? How will they work harder and have a life too? You know what? They do it. Screaming and ripping their hair out, they find a way. And sometimes they surprise me by making way more money than I asked for.

While people like to wax poetic about all the reasons they work, when it comes down to the short strokes, most people work for money. Unless you are independently wealthy and working for the joy of it—in which case, I can’t imagine why you’re reading this book—money is more than a small factor in the decision to work. And when you don’t have enough money to keep body and soul together, you can either work smarter or work harder.

Of course, people’s desire for more money and the stuff it can bring sometimes comes into conflict with their belief system, their values, or their attitudes toward work. Take Michelle as an example.

Michelle wants to run her own business. She’s determined to be the master of her fate. She’s creative, focused, and determined.
But she’s not making enough right now to keep body and soul together, and yet she has no problem booking a vacation with her girlfriends or eating out a couple of nights a week. She’s borrowing money from her parents, taking cash advances on her credit cards, and digging herself a helluva hole.

When I told Michelle that I loved her determination and focus, she glowed. When I told her she was doomed to failure, the light dimmed, and she looked at me askance. When I told her to find a way to consistently make $1,200 a month more net, you could practically see the steam coming out of her ears.

She yelled at me that if she took some McJob, she wouldn’t have the time to pursue her dream, her business wouldn’t work, and she’d be stuck in that McJob forever. She called me a witch who wanted her to fail. I was the demon who, like all the other people who have been telling her that her way wasn’t working, didn’t believe in her. Michelle was practically purple with rage.

And yet, when you look at the black and white of it, Michelle didn’t have an option. Her parents had said, “No more!” Her cards were maxed out. And she didn’t have the money to make rent. So what did she think I would say?

Michelle is no different than the couple who can’t make rent but have a big truck payment, the guy who won’t spend money on fresh veggies for his kids but gambles online, or the woman who wants to buy a very fancy car but hasn’t got a nickel set aside for her kids’ future education.

One of my mantras is:
You can have it all; you just can’t have it all at the same time.
You have to choose what you want right now. Once you accomplish that goal, you get to choose another.

Another of my mantras:
It’s your life. Make of it what you will.
So you can bitch and complain about what’s not working for you or you can figure out what’s not working, fix it, and have a great life. It’s all about what you want.

Of course, nobody said it would be easy.

Whether you get a better job, a second job, or a third job, you’ve got to do whatever it takes. It’ll seem like a life of hell for a while, but you’ll get used to it. And it won’t be forever. Just until you find a way to lose the debt so you no longer have that drain on your cash flow. Or just until your partner is back to work. Or just until … whatever has put you behind the eight ball is gone. Of course, if you’ve been a chronic under-earner, then you’re going to have to do some thinking about what you want from your life so you can reposition yourself in a better place. Or you can just be miserable forever. You have choices. You choose.

Years ago when my family emigrated from Jamaica, the woman who helped to raise me wanted her own opportunity. So she went to the United States on a visitor’s visa and she stayed. With no education, no financial nest egg, no job, Daphne got busy creating a life.

Daphne worked a full-time day job in a factory and a full-time night job looking after an elderly woman who needed attendant care. Daphne learned to drive, bought herself a car, bought herself a house, paid for her legalization in the United States, brought her children to live with her, put her daughter through college. My lord, the woman had fortitude!

Our circumstances do not define us. We can achieve anything we put our minds to. We have the power to make life whatever we want. Some of us want more.

Daphne wanted more. And she busted her ass to make it so. She achieved a lot, moving from poor to not so poor to secure. She made a life. And you can too if you have the drive and the tenacity. So, what stuff are you made of?

A quiet, hard-working employee who waits for salary increases is easy to overlook. If you haven’t had a raise in two years, this may be your problem. If you want to earn more money, you have to ask for a raise. If you assume your boss is eager to reward competence, you are going to be sorely disappointed. If you want something, you make a case to get what you want. And if it’s more money you want, you’ll not only have to ask, you’ll have to put on quite the performance to get it.

Do you deserve a raise? While hard work and long hours are the fuel that drives raises, at least from most employees’ perspectives, if you’re the boss, these factors aren’t the be-all and end-all. Think about how willing you’ve been to accept new tasks and learn new things. Are you known as an employee who gets things done? Are you a self-starter and highly motivated? Have you increased your worth to the company by increasing your skills or knowledge? Show your boss the value you’ve added to the company’s bottom line. Track your achievements. Measure the before and after on projects you’ve completed.

Review your job description. It’s not unusual for people to take on new assignments without considering that their
increased responsibilities might justify more money. If you’ve assumed new tasks, you may be performing at a more advanced level than your job description dictates, and you might have a ready-made case for an increase.

Track your accomplishments. Keep a folder with examples that demonstrate your worth to the company. Since you’re going to be talking about money, you’ll do well to put an actual dollar value on each of your achievements. If you found your company a lower cost supplier, landed new business with the proposal you prepared, or created a flexible work schedule that resulted in lower absenteeism, calculate your contribution in dollars and include it in your documentation. Highlight how you’ve made your boss shine.

Find out how much others make in comparable jobs. If your company follows a set pay scale, this can help you to see how much of a raise you can reasonably expect. Check with professional associations for surveys of members’ salaries. Look at recruitment ads to monitor pay ranges. Find out the salary ranges of co-workers, colleagues, and friends in similar positions, and create a chart to show where you currently sit in the pay range. If your manager has a salary band outside of which he or she cannot negotiate, you may have to change the department you’re working in or change employers to get what you’re worth.

Decide on a realistic amount. Don’t go marching in asking for the moon because you’re sick of being unappreciated. Remember, you’re trying to make a business case for your raise, so your request must have some boundaries. The upper limit should be aggressive, while the lower limit should be
your breaking point, below which you would consider finding a new job. If you’re working in a hot job market where demand outstrips supply, you may be in a position to ask for a bigger raise, secure in the knowledge that other companies out there are ready to snap you up. If times are tough, you may have to wait until things improve economically.

Timing is important. Choose a time when your boss is relaxed, and try to strike when profits are up or just after you’ve finished a major project that made the department look good. It won’t be of much benefit to demand a raise if the company’s revenues are in the tank and your boss is in cost-cutting mode. And just because your employer reviews salaries annually at a specific time doesn’t mean you can’t toot your own horn when you’ve just completed a stellar job. Ask, don’t pester.

Have a good fallback position. If you asked and your boss said, “No,” you’ll have to figure out whether it is truly a case of no money available. If it is, suggest other forms of compensation such as extra vacation or free parking that will keep you happy until more money becomes available. Or suggest a tiered implementation of your increase—2% now, 4% in six months. You could also counter with, “Can we meet in three months to talk about this again?” Get an agreement and follow up with, “What can I do to maximize my chances then?” If your boss says, “I can’t think of anything,” suggest something. If that doesn’t work, dust off your resumé.

Throughout your discussion, focus on your creativity and commitment, and describe how those qualities have added value to the company. Be confident and convincing in your request. And don’t forget to listen for the objections your boss
may have to increasing your salary so you can work on them right then and there. Ultimately, if you’re not happy with the reasons given for why your request for an increase was denied, it may be that you’ll have to move companies to get the financial recognition you’re seeking.

If you don’t know what you want from your career, it’ll be pretty tough to make things happen. Sit down and think about what it is you want. Talk to your manager about your career aspirations. Get him to agree to help with your career growth. Set some goals. Companies love employees who have a plan for how they will increase their contribution to the bottom line. If you don’t have a manager who knows how, or wants to help, find yourself a mentor.