I was out shopping the other day and when I got to the cash register the sales clerk took my purchases and then asked me the following three questions.
- Would you like to purchase these lovely gloves they are on sale?
- Would that be on your store credit card?
- Would you like to purchase a shopping bag?
To all three questions my answer was NO, after saying NO I felt someone tugging at my coat. I looked back into the smiling face of a lady who said,
“Good for you, I can never say no”. I smiled back and said, “I have trained myself to only purchase what I plan to purchase that day”. She replied, “I wish I could be like you”.
I was just about to say bye to her when she said, “You are just the person I want to talk too”. She decided to forego her shopping and walked out of the department store with me. She said, “I hope I’m not taking up too much of your time”. I replied, “No” and thought to myself you are using NO an awful lot today.
She introduced herself as Constance and told me she needs the help of someone who can advise her where to get an installment loan. I explained that her best choices would be her local bank, trust company or a credit union.
Constance then said, “I have such bad credit, I can’t get a loan from any one of these places, you see I have a payday loan and it is just killing me inside out”. I paused looked at her with all the empathy I could muster and said, “NO” to that she said, “Yes my dear what can I do?” I replied, “In order to help you, I would like to know more about your finances is that okay with you?” “Let’s find somewhere to sit” I said, and then she began her story.
Constance’s’ story went this way:
“I am 70 years old and live on a fixed income of $1,133.00 monthly, my source of income is from Canada Pension, Old Age Pension and a Guaranty Income supplement. For the past thirty years I have never held a job past probation, therefore, I do not have a company pension”. So I said to Constance, “Can you tell me what your expenses are?”
Here are the numbers Constance gave me:
- Rent $ 413.00
- Telephone and cable ABOUT 160.00
- Bay Card 50.00
- Bus Fare ABOUT 100.00
- Grocery ABOUT 200.00
I realized quickly that is was $923.00 in monthly expenses. Although whenever someone tells me an amount of an expenditure or income prefaced with words such as, “PRETTY CLOSE, NEARLY, ABOUT, LET ME SEE and I BELIEVE”, I know right there and then that person is not managing their money properly; which means they are usually in debt, and don’t know how much they owe and how they spend their money.
I asked Constance if that was all her expenses, and if it was she still had $210.00 left. I wanted to know what she spent the remaining on.
Constance replies, “Oh I forgot, I’m paying a Credit Proposal of $150.00 for the next five years”.
“Well that still leaves you with $60.00 I said, where does that go?”
“You know” she replied, some of those prefaces again I thought.
“You mentioned a payday loan, how and when are you supposed to pay this?” I asked.
She replied, “That’s the problem” as she held on to her head. “You see, I borrowed $500 and I have to pay back $600. When I pay back the $600, I do not have sufficient money left to pay my expenses and so the cycle continues, I take another payday loan for the next month and so on and so on. If I had an installment loan, I would be able to pay a small amount every month until it is paid off”.
I asked her “When you received the credit proposal, were you advised not to incur anymore debt?”
To that she said “Yes but I did not have any money and started using my credit cards again”.
Do you have any family or friends that could lend you the $600 to pay the payday loan off and then pay that family member $55 a month over one year that would give them a small amount of interest?”
She replied “No I can’t. I’ve received help from both my son and my sister and right now they are unable to help me.” Constance continued with sadness, it was my carelessness and lack of knowledge over the past thirty years which paved this road I am on. I never thought it was necessary to save for old age; no one told me that I shouldn’t retire with credit card debt. I believed that my Canada Pension and Old Age Pension would be enough to pay all of my expenses and I would have some left. Do you know until I became eligible to receive my pensions I thought the amount was in the thousands? I moved from the Maritimes to Ontario at the age of forty for a better life, now I’m not able to purchase a train ticket home to visit my family.
The situation that Constance is in is not uncommon, I am meeting more and more people who are finding themselves in this position. We are planning to meet again to see if together we could come up with a solution to solve her problem.
It always comes back to those five simple words: proper preparation prevents poor performance.
It is never too early to begin to plan for your retirement, better to start sooner than later. Everyone should pay off all debt in full before retirement; retirement income is MUCH, MUCH lower than employment income.
Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com