Don't Buy Things You Can't Afford

	Don't Buy Things You Can't Afford - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on February 24, 2007.

Show Topic:

On today's show we talk about the issue of crazy consumerism. It's a problem for many people and it can lead to serious debt issues. We talk about the causes and consequences of poor spending habits and bad financial discipline and offer some options to assist you in making a plan to take charge of your debts incurred by bad spending habits.

Guests:

Ted Michalos joined us from the firm of Hoyes Michalos & Associates, Ontario based Trustee in Bankruptcy firm. Ted and his partner Doug Hoyes started their firm in 1999 and have helped thousands of clients throughout Ontario take charge of their financial life and get that badly needed "fresh start". Ted is a chartered accountant and is an expert in personal bankruptcy and consumer proposals

Show Summary:

Ted started the discussion by saying that no one educates people on how to effectively deal with debt. Advertising and marketing drive consumer appetite and that leads to irresponsible spending behaviour. No one is marketing effective credit responsibility. People, Ted suggests, have a real desire to have things today even if they can't afford them. Ted offered some advice on credit card management including following:

• Have no more than 1 or 2 cards maximum
• Credit cards are an alternative to cash - not an alternative to borrowing
• Pay off your high interest cards with high balances first
• If you have cards with monstrous interest rates: Cut them up and don't use them

We talked about the issue of consumer entitlement, that is, the feeling that because you are employed and earning you are due many material things that maybe you can't afford. Ted's suggestion: Yes, you have worked hard but take a year and discipline yourself to not buy things on credit, wait until you have the cash and at the end of that period you'll be surprised at how improved your credit and financial picture could be.

Question of the Week:

Q. I am in my last year of University. When I arrived four years ago I applied for and got approved for two new credit cards. I have been using these cards and now am in pretty heavy debt. I have not been able to find a job in my field yet and I am wondering whether bankruptcy is my only option to get out from underneath this credit card debt. What would you suggest?

A. There are several options that may work to solve your problem. A consolidation loan that allows you to restructure your debts may be the best route to take. If that is not a viable solution, credit counselling can be considered. This is a voluntary process where debts are pooled and repaid to creditors but interest payments stop. A consumer proposal is one of the best-kept secrets in debt management and restructuring. It is a deal between you and your creditors where an agreed upon portion of your debt is paid back. It is a legal process and requires the involvement of a licensed trustee in bankruptcy. As a final possibility, you may consider filing bankruptcy, but this is normally the final solution if the other options fail to solve the problems. It too is a legal process and you will require the services of a licensed trustee in bankruptcy. It's important to speak with a professional and investigate all your alternatives; they can help direct you to the best solution for your debt concerns.

Don't let your money problems overwhelm you; contact a bankruptcy expert today for the answers to your questions and for more information on dealing with your money problems.