Much Ado about Debt
Posted by Gail | Filed under Debt Traps, Retirement Planning
Much ado is being made about the fact that we are retiring with higher levels of debt than ever before. Y’know why? Because we’ve been racking up debt like never before. Comparing the Baby Boomer retiree with his or her predecessor is just dumb: our parents didn’t have the access to credit that we’ve had; credit wasn’t thrown at them as it has been thrown at us; and the idea that not paying your balance off in full so you’d have a better credit score would have been scoffed at by our parents. We bought into the whole “do whatever it takes to have a good credit score” crap. And now, as we watch people head into retirement with record levels of debt, we’re scratching our heads and wondering how this could have happened.
Virtually everyone knows that the basic percentage used to calculate what you’ll need to live on in retirement follows The 70% Rule: you’ll need about 70% of the income you were earning just before you retired. In fact, most defined benefit plans – the Cadillac of pensions — only replace 60-70% of your working income.
The big supposition was that you’d have all your debt paid off by the time you retired. No consumer debt, no car loans, no mortgage. No way. That’s just not happening. Now, people are buying fancy houses and renovating as they retire. They’re still driving luxury cars, repurchasing every couple of years. And they’re racking up consumer debt either on credit cards or on their lines of credit so they can do all those things they promised themselves they would do when they retired: travel, play, party.
One of the reasons why “retirees” are spending so much money is because people are retiring earlier than ever before. Freedom 55 was sold to us as nirvana. Hey, it’s expensive to retire that early. It means your savings have to last between 23 and 28 years if you kick the bucket when you’re supposed to at 78 for guys and 83 for dolls. Have a longer life expectancy because you come from good genes and you’re really going to feel the pinch. Added to the “more time retired” is the fact that you lose that extra ten years of earnings you would have had if you’d stuck it out to the normal retirement age of 65. Retiring earlier also means you have more time to get bored and wanna go shopping. Whether your pleasure is a renovated kitchen, a sail-boat or an annual cruise, living the dream seems to have become a right that can be financed rather than a privilege that comes with having enough money saved.
Overextension of credit is the number one reason given across the country for the reported cause of bankruptcy. From BC to the Prairies, Ontario to Quebec and all the way to the Maritimes, consistently “overextension of credit” is reported as the culprit. So how did so many people find themselves with more credit than they could manage?
Here’s where we return to the problem of the credit score. Since lenders have virtually given up practicing sound lending adjudication, relying solely on the credit score as a means of qualifying customers for credit and more credit, overextensions have become a huge problem.
Having a great credit score does not mean you are able to repay your debt. You can use a cash advance on one source of credit to repay another source of credit to keep your credit score gleaming, since all that’s required is that you make the minimum payment. And lotsnlotsa people people, shuffling their credit around to make it look as if they can handle their debt. Ultimately, when the money flow slows (as in retirement) or when the soft and stinky pile of debt gets too deep, people have no option but to declare bankruptcy.
If solvency is really important to folks, perhaps we’ll stop encouraging people to chase the credit score and learn, instead, to live within their means. And since their means are going to be significantly reduced during retirements, perhaps practicing to live on less before you retire, and using the extra money to pay down debt and save up for the future wouldn’t be a half-bad idea.
July 15, 2010 at 6:08 am
What do people suggest for keeping on track with Gail’s style of living and saving when you have a sibling who constantly blows all her money and is counting on this being OK because we’ll get a substantial inheritance from my parents, who are retired in their late 60’s? It’s really hard to be working to pay down my mortgage and live sensibly when I see that she does whatever she wants. I’ve spoken to my parents, who just say that the money will be there, so what’s the problem? It really bothers me because it’s their money to use, not to have to save for us. And besides, who knows what health issues they could have where they would need it? They have no medical plan outside of OHIP. Any suggestions?
July 15, 2010 at 7:00 am
Nadine, unfortunately there isn’t much you can do to change your siblings behaviour. They will probably rack up debt and use the inheritance to pay it off so they can rack it up again. The best thing you can do is live like you won’t get this get out of jail free money and then when you do get it you can make a plan and use the funds in a more meaningful way.
Something you could mention to your parents is that they can start paying out the funds in smaller increments now if you think it is the big wad of cash that is causing problems, or if there are grandchildren arrange it so they get the bulk of the money.
July 15, 2010 at 7:17 am
Nadine, keep doing what you are doing…it’s ridiculous to live on the edge of financial ruin just because “one day” you’ll get an inheritance (those words are for your sibling…you are the smart one)…your parents could easily live another 20 yrs and who knows what financial needs they may have over those years…IF your inheritance is still substantial when you receive it…then you’ll have the luxury of deciding how you WANT to use it…
July 15, 2010 at 7:30 am
There’s truth in them there words, Nadine. I’m the power of attorney for my mother, age 89. A recent decline in health = more output for care. I am writing out checks from her savings that make me gag. It’s incredible how fast it goes. I put money in US certificates of deposit in late spring after having taken out a percentage that I thought was enough to keep her for three months. After two hospitalizations in 30 days, guess who’s heading back to the bank to break a CD.
If you want to find out for yourself, call a health care agency, senior transportation agency and get their rates! If your parents have millions, that’s one thing, but there’s no guarantees when you hit a certain age. One good health calamity is all it takes.
July 15, 2010 at 7:41 am
Great post Gail, my father is one that retire while still holding a mortgage, and I think the debt is really hurting him. I’m hoping that I rub off on him a bit.
Nadine, you can only control what you do in your life. by living the advice Gail gives, when and if you do get an inheritance, it will just acclerate you even further along the path. basically you’d be leaving your sister in the dust. Got to remember that most people don’t understand the tax implications at death. The inheritance promised might be smaller then expected.
regards,
Jason
July 15, 2010 at 8:24 am
Nadine, another financial advisor who’s popular in the States is Dave Ramsey. His tagline is something like, “Live like no one else [don't blow all your money on junk and indulgences now], so you can live like no one else [when everyone else who did blow all their money is scrabbling to keep a roof over their heads, you'll have no debt and the cash to spend however you like].” It might be hard to watch your sister have all the things she wants right now, but you have peace of mind, and eventually you’ll have all the things you want – plus you’ll still have your peace of mind!
July 15, 2010 at 8:42 am
Maryl, that’s so true. A health crisis with an elderly parent is very difficult to fully recover from. My mother-in-law went from a blocked intestine surgery, to getting a c-difficile infection while in hospital recovering from the surgery which took a year for her to recover from due to hep c complications which she had contracted in the 1970s from a blood transfusion. Then a series of falls which landed her in hospital several times, and finally long term care. Add to that a serious addiction to pills and alcohol before she ended up in long term care and we had power of attorney over her affairs, there wasn’t a lot left in her accounts to pay for the long term care. It was difficult to manage and to see her in such pain.
The worst part of it unfortunately is to see my partner’s sibling squabble with him over the estate. Despite the fact that he did not have POA until her hospitalization in the long term care facility and the record keeping is precise and backed up with receipts and bank statements, his sister seems to think he pillaged the accounts for himself before their mother passed away. She doesn’t believe how much the long term care cost and says her inheritance has been squandered. I shudder to think of the care his mother would have received with his sister in the driver’s seat. But her attitude is certainly due to a serious problem with debt and spending – in the months her mother was in long term care she went on a shopping spree, spending as if there would be hundreds of thousands of dollars coming her way. She was counting on that inheritance to give her a clean slate.
Do not depend on an inheritance to get you out of debt. My brother and I both know that with my mother’s serious chronic health issues, there will likely be very little inheritance and the more likely scenario (even though my mother was very good with her money, never was in debt except for mortgage which was paid well before she retired) is that we will have to pay something towards her long term care. So we’re both trying to put money aside for the possibility.
Depending on an inheritance to get you out of debt problems is like depending on winning the lottery.
July 15, 2010 at 8:55 am
I also have been dealing with this issue with my family. My mother takes care of everyone. She decided to retire and does a part time job on the side which she says “keeps her afloat”. My husband has asked me not to interfere since she has expressed this desire and just wants a good relationship with us. It just frustrates me to no end that 3 people can take financial advantage of a loved one with no regard for the person’s financial future.
In the end I will probably be the one driving her to appointments, living with us, and being her rock. She knows that…so I take advantage of the free sporatic babysitting:)
July 15, 2010 at 9:00 am
Gail, great post as usual. My dad and step-mum have no debt and are spending our inheritance like wildfire, while maintaining enough for the prospect of long term care later on. I think it’s fantastic, they have worked hard all their lives (my father since he was 16) both lost their first spouses very young, so they’re having a great time travelling and doing what they enjoy together. I am very lucky to have such an excellent example to live by.
Nadine, I can’t add to what others have told you, they’ve given some great advice. Unfortunately, there’s not much you can do, except live by example. Good luck.
July 15, 2010 at 9:04 am
I don’t like credit cards and still have my student Visa with its $500 credit limit (although I’ve been out of school for over 18 years!), but recently applied for an HBC credit card as we were purchasing a mattress, and with a credit card they were offering “do not pay for 6 months” with no fees (I will pay it off, no worries there), plus get an extra 10% off, so I thought why not. The sales guy was truly surprised when my application got accepted and they gave me one of the highest limits that he’d seen. Same thing when we got a Leons’s card; making a purchase of under $2000, and got approved for $12000. Then they try to talk us into more purchases. I’m like, are you crazy, you charge a minimum of 28% interest, no thank you, I’ll just take the incentives that they’re offering, and make sure they do not benefit from it. And really, how much furniture does one need to buy? Why would someone even need that much available credit?
July 15, 2010 at 9:30 am
I plan (or rather will) retire when my mortgage is paid off, I have no more debt, and if I have kids, are comfortably settled in their adult life (meaning not in school). Both my fiance and I are teachers and will hopefully have pensions in 25 years time, but still I have no plans of paying a mortgage with my pension.
My parents are getting ready to do a ‘life adjustment’ more than actually retire. They will have their mortgage paid off in the next couple of years. Their plan is to sell the house in Mississauga and small town in Eastern Ontario where my mom can transfer her retail mgt. job, and my Dad (who works 12 hr days in the food biz) can go work at Home Depot or drive a school bus. He doesn’t want to retire, but just wants to work a different job with less hours and different responsibilities.
July 15, 2010 at 9:34 am
The idea of waiting for my parents to die so that I can get a windfall is disgusting. Does this mean that when the creditors start calling I can choose to downgrade my parents quality of living so that I can get at more of their money? As someone who has volunteered in nursing homes and lodges I have seen the difference in what money can provide. I want my parents to have the best and the lessons they taught me through life to be my inheritance.
July 15, 2010 at 9:39 am
You know it is really sad to see that at some point people seem to forget that your parents are people who gave you life and raised you and they start seeing mom and dad as dollar sign.
To all the greedy siblings, get a life and enjoy having your folks around. When they die you will miss the times you had and having all the inheritance money in the world won’t make you feel better! When my grandma passed away 24 years ago my aunt and uncle took everything leaving my mom with a few of grandma’s clothes. When I asked my mom if it bothered her she just said that sshe got the best part of grandma. She got to spend time with her in the years before she passed and got all the memories. By the wa,y 24 years later my aunt and unlce are still at it over silverware! Really, some people need to get a grip.
To all of you who are going through this now with siblings I really feel for you and I hope that it will work out in the end.
July 15, 2010 at 9:40 am
@Nadine I’m going to suggest something radical — this isn’t about living Gail’s way while watching a sibling not, this is about the family relationships that you have, and your parents condoning her behaviour. That’s what is driving you insane. Recognize the real problem. Jealousy. If it was anyone else, it wouldn’t affect your daily life. It’s the old, why does she get this and I don’t?
I say this having 3 siblings. Being jealous is second nature with siblings, it’s moving beyond that to a place of peace with yourself and your beliefs.
re: blog — I dream of retiring early. I live simply. Few books, a restaurant meal every now and then… these are my treats. I am 40 now, and this is my motivation. But I have good examples of why retiring early is dangerous (parents living in siblings basements) — so I’ll do it right. And I’ll be conservative in my estimates.
July 15, 2010 at 10:05 am
Well, I can honestly say that my concern with my parents or in-laws dying is just that, them dying. I have absolutely no idea if there’s any inheritances involved for my siblings/grandkids, etc. But I am happy that my Dad is mortgage and debt free and my Mom will be mortgage free once she fully retires. If I’m trying to raise myself and my own kids, throwing another person’s mortgage payments into my debt-load isn’t something I can imagine, just like I can’t imagine rubbing my greedy little hands together while waiting for someone to fall down the stairs or in the shower so I get my inheritance.
Ugh, Nadine, your sibling’s thought process is pretty disgusting. I’ve got a friend who spoke of getting rich when her parents “kick the bucket”, and I told her I thought that was an outrageous way to think…followed quickly with “so who the heck would provide you with free babysitting anymore then since they do it all the time?”. Funny, we haven’t talked much in awhile.
July 15, 2010 at 10:11 am
Parents don’t owe their children an inheritance and non should be counted upon by the offspring. After years of hard work it’s time for retirees to spend on themselves, safe guard their later years, and not worry about funding their children’s spending sprees.
When my mother was dying two years ago, at age 94, we hired a private duty nurse to assist at the nursing home so she would never be left on her own. It was very expensive and used up most of her remaining funds. We didn’t think twice about it. It was her money and we didn’t care that it was used up.
My parents didn’t carry debt and I don’t, but I can understand how people get sucked in. Credit card offers come regularly in the mail from banks that I have never dealt with. My credit limits go up without notice. I called the TD bank to reduce the amount I could withdraw from the ATM as it had increased way beyond what was reasonable. Large stores used to make their money selling merchandise. Now they make a lot of it on credit interest. People need to wake up.
July 15, 2010 at 10:20 am
This certainly wasn’t a “fun” blog day was it? But definitely needed for many people.
I am on track to pay off my mortgage before I retire. Once I get the home improvements done hopefully I can ramp up the mortgage payments. But for now all the improvements are paid for in cash before starting. As for having a car payment, I don’t plan on ever financing a vehicle again.
I also hope that my parents keep living a good life, and hopefully blow through all of their hard earned and saved money in their retirements. Perhaps it’s a pride thing for me too, I want to be able to do it on my own (I’m 43, when do I have to stop proving it?). I had one time in my 20’s where my parents bailed me out, and I never want to have that happen again. My retirement and my life will be financed by me, not some windfall.
July 15, 2010 at 11:19 am
This is an interesting blog today. My husband’s family is in a similar situation, if not worse. My BIL and SIL racked up huge debt by lack of communication (he was making little money with the poor economy and did not tell her) and him not wanting to say NO to her with her personal indulgances in the name of vanity and having a good time. Soon, however, they were close to losing everything. Next thing you know, he had convinced my mother-in-law to sell her townhouse and move in with them, and as my FIL has health issues, she willingly did so without asking my husband what he thought. She gave them hundreds of thousands of dollars from the sale of her house to pay off their bills. Guess what? Nothing was in writing and they have returned to their old lifestyle. To make matters worse, they are not enjoying having my inlaws live there and the whole situation is a mess. Today, we are all off to the lawyer to have paperwork signed admitting to the debt, the reason for it and the fact that when my inlaws do pass away, my BIL has to pay my husband half of what was given to him which he will likely have to finance his house to do so. Looks like taking the “inheritance” early will come back to haunt them. So glad we are finally getting the i’s dotted and t’s crossed.
Nadine, sadly we cannot control our siblings behaviour, only our own. Keep your chin up, dear! You are doing the right thing!
July 15, 2010 at 11:20 am
Nicely said, Gail!
I’m reading the book “Your Money or Your Life” by Joe Dominguez and Vicki Robin, and learning to find “enough” is a big part of it. Reducing expenses, increasing income, and staying out of (or paying off) debt!
Michael W
July 15, 2010 at 12:23 pm
My BF thinks like that.
Even if he is the only child he want’s them to have a really good ending of life.
They are people that really like there home. They do not travel.
And if tey need a private nurse we would like them to have one if they have the money.
So he is thinking like there will be no more money for him.
It is a good way to think because if there is money left it will be ok but if there is no more left we does not count on that.
Christine
July 15, 2010 at 12:24 pm
And I think the same thing with my parents of course!
July 15, 2010 at 12:45 pm
An elderly gentleman that my mom looked after had a lot of money saved for his children’s inheritance but when he got terminally ill, they all decided that it would be better to spend the money on a home care nurse so that he could die at home like he wanted to. Being in his own home prolongued his life enough for his entire family to fly in from all over the world and say goodbye which everyone was incredibly thankful for. It was worth more than any money in the world.
July 15, 2010 at 12:45 pm
So what gives? Look at: http://blog.canadianbusiness.com/retirement-system-generous-enough/
Can there be two more diametrically opposites views posted on the exact same day? So which of you are talking out of their *** and which of you is right?
I suppose any concept can be spun both ways, it’s just silly when it’s two respected blogs on the same day. Get it together people.
July 15, 2010 at 12:54 pm
Ray:
The beginning of the article explains the reliability of the statements made:
“A report prepared by pension consultant Keith Horner for the Department of Finance.” Remember that often the government wants people to keep spending in order to keep the economy rolling so that people do fear parting with their money. I am sticking to Gail’s wisdom.
July 15, 2010 at 1:51 pm
I think what they are saying in the above article is that lower income Canadians will have 70% of their income “replaced” with the government retirement programs.
The study doesn’t speak at all about whether this same group will have debt to pay off in retirement. I suspect many will.
Many in the < $40,000 crowd are living off debt now – spending more than they make. Going down in income to say $25-$30k may not work well if they have debt remaining.
Either way, this is certainly not the retirement that I dream of or look forward to !!!
July 15, 2010 at 3:30 pm
@Ray If I had to pick someone talking out of their *** I would pick a report sponsered by ANYONE. Sponsered = Vested Interest. And I *especially* would pick a report sponsered by the government to be full of b.s.
And besides, that article doesn’t really make sense…. it lists something about “taking out anomolies” — really? And that 50% of the people live below 40K would have an increased standard of living…. that means 50% are having decreased. There numbers are wonky…. I’ve gotten the slip of paper from the government that states how much I will receie a month. It’s a pittance… and there’s nothing listed about taking the increased cost of living into effect.
Gail mentioned requiring 70% of current income. A number that you can apply to any situation to know where you stand.
Dunno, seems pretty clear who’s talking out there ***.
July 15, 2010 at 4:44 pm
well, what a terrifically difficult blog gail! i have to say, thinking that my parents’ death would result in my receiving a financial windfall makes me want to vomit! i miss my mother so much it is painful to even write that.
my father soldiers on, completely content filling his life with his volunteer activities. fortunately he retired from the us navy with a good pension & my mother’s years of quietly saving (literally) her nickels and dimes has left him in a great financial position. no mortgage to pay, no debt. he pays for everything in cash. no cash, no purchase.
yes, there is money there. yes, two of my 6 siblings are circling like wolves, waiting for the day “their share” becomes available. it literally sickens me to hear them talk about it…while they blow their own money and yes, one of them lost his house but already managed to get into another!
i encourage my dad to make his pilgrimages, read at the local library, help the food bank, all those projects which keep him happy. he worked very hard for many years & deserves a full retirement. as others have already mentioned, i have the best of my mother and my father. the lessons i was taught, the respect, manners, morals, and ethics they instilled. my mom’s sense of humor and my dad’s sense of justice for all. i am rich beyond belief.
and i will get out of debt myself. i created it, i will erase it.
July 15, 2010 at 4:50 pm
I know exactly what it feels like to be in debt at a 70 plus age. I am digging out but it is not easy or fun , but it can be done, and I am doing it.
July 15, 2010 at 6:34 pm
Nadine: If someone’s hopeless with money, an inheritance will not save them. They’ll just go through it like a drunken sailor. A woman in my family inherited two houses, half a million (Euros) in papers, and a 2K net per month lifetime pension when her husband died. He had kept a firm hold of the purse strings, and she went through that money in less than five years, and is now up to the eaves of the remaining house in debt. The pension barely covers the interest payments and food, and she’s still trying to get banks, stores and relatives to lend her money.
No spending spree can be that much fun to offset all the stress and misery that being overextended brings. You are the lucky one.
Also, could your parents purchase a better medical plan, maybe with a one-time payment? So that the money’s out of the house…
My parents both say that they do not want their money spent on “extravagant” care because it should be my inheritance. I fear that there are some very unpleasant discussions in my future.
July 15, 2010 at 7:15 pm
My husband and I are debt free with the exception of 2 small mortgages (totalling 146K), we hope to sell one property this year and that will the balance to less than half. We are agressively putting money towards retirement while keeping in mind to live for today, as we are just getting started late in life. One question our finacial advisor asked was do we plan to leave an inheritance for our children. The answer is a resounding no, we have worked very hard to catch up and helped them as they grew up, this money is ours to enjoy our retirement. We have money planned to be put in a pot for medical expenses and the rest will be for life. If there is anything left over, the kids are welcome to it, but they know we plan to save it and use it and expect nothing at the time of our demise. Those that circle like vultures waiting for an inheritance will be just as broke or worse off a year after they receive any inheritance that may come their way. So stay the course, and ignore siblings whose behaviours leave much to be desired, they are to be pitied not envied.
July 15, 2010 at 7:17 pm
My father was retrenched at 49 and went on a disability pension pretty quickly after that. He had 10 years at home on his own while my Mum worked and then she retired at 59.
Since they both worked from when they were 14 they deserved a great retirement.
So far in the five years since Mum retired they have been on 20 South Pacific cruises, one trip to Europe, two trips to Asia, countless times away with their brothers and sisters who are also retired.
House paid off, having fun!!! I couldn’t be happier for them and I know my brother feels the same way.
Dad’s health is not the best so the way they look at it is that they should do it all while Dad can still walk and see (although as the years pass that is getting worse and I really don’t think he should be driving).
They have their wills and Power of Attorneys set up so everything is equally split and my brother and I are aware of their wishes…
Oh, Mum used to work for a solicitor doing Probate work by the way, which is why everything is so well set up, she saw what happened when it wasn’t!
S
July 15, 2010 at 8:22 pm
inge:
“My parents both say that they do not want their money spent on “extravagant” care because it should be my inheritance.” Tell them that if it is your inheritance, you can spend it how ever you want
July 15, 2010 at 8:54 pm
My family has both sides of the retirement issue…one has had the mortgage paid off for ages and lives within their means the other has no assets and way too much debt. It is a no brainer as far as I’m concerned…there is no way we’ll end up in a bad situation if there’s any way we can help it…and with Gail’s guidance we have a plan and sound advice. My hubby and I both agree it doesn’t matter if we ever get an inheritance from anyone and it is far better to enjoy time with loved ones and be surprised by an inheritance than to live in limbo with a deathbed watch…horrible!
Our house won’t be paid off til we’re 70 if we were to follow the bank’s plan but we fully intend to pay it off much earlier and then focus on putting aside a good retirement savings…what can I say off to a later start than many but still plenty of time to set ourselves up well…with hard work and discippline of course!
July 15, 2010 at 9:15 pm
I have a relative who was very ‘well off’, due to the excellent way that she and her husband managed their money. After losing their business and everything else in the depression, they worked hard and made a very handsome life for themselves. She always felt that her children and grandchildren were only interested in her money and especially their anticipated inheritance. Well life is very funny, she lived well past 100 and used up ALL of her investments. This is a huge lesson!
I always felt that I would not ever receive an inheritance, having one parent die PENNILESS; now I have learned that after losing my remaining parent there will be a small inheritance. This is a huge emotional matter for me for a million and one reasons (and not the ‘usual’ reasons you might expect). My intention is to deposit the money somewhere ’safe’ for at least 6 months. This money will become for the most part, a good emergency fund. Beyond that I will not speculate on it now.
We really are too accepting of debt, it is evil and makes people a lot of money. I value the lessons that I have learned from both ends of the money/debt spectrum in my family. Yet I need this blog and Gail’s wonderful guidance to remind me to keep the balance in my budget and my life.
July 15, 2010 at 10:08 pm
It is a horrible experience to watch parents reach their senior years without preparing financially for their retirement.
My family never saved a dime and reached age 65 without owning a home, no RRSPs, no savings account and no intention of ever saving for their old age. They repeatedly told us that they intended to “work until they died” and that their government pensions would take care of them when needed.
Boy, they couldn’t have been more wrong!!!
Dad was diagnosed with dementia at age 67 and now, 3 years later, he is in a senior’s facility without the means to support himself. His government pensions (Old Age Security, CPP and Guaranteed Income Supplement) amount to $1410 PER MONTH. Currently, his expenses for room & board, incontinence supplies and medications are $1900 per month. Mom is in an even more precarious situation…she has only $1375 per month for her income and can’t pay her own living expenses let alone supplement Dad’s.
They are applying for a “hardship” supplement to their income to try and meet their financial obligations. Do you know what that means??? You, yes you taxpayers, are going to be paying more taxes to cover the living expenses for two people who irresponsibly spent every single penny they earned (and more if you count all the foreclosures, repossessed vehicles and creditors that they left in their wake!).
If you know someone who is living in constant debt, isn’t saving anything for their future and won’t admit that they will someday hit the wall, please show them this post and say “IT WILL HAPPEN TO YOU TOO”.
July 16, 2010 at 12:05 am
Well Gail, thank you for the great post once again. I can easily see how people can be over extended credit since I am one of them, but this is partly due to that fact that my income has been greatly reduced since I became a WAHM. I also experienced yesterday how CC companies try to convince you to keep credit even when you don’t want it. I very happily called a CC company to cancel a card and had to repeat about ten times “Yes I know, but I no longer want this card. I want to close the account.” But you’re a good customer (yeah I bet with all the interest they made off me), you’ve had the account for 15 years, you’ll lose the credit rating, you still have some rewards you can use and so on…BUT I JUST WANT TO CLOSE THE ACCOUNT! My excited call became frustrating BUT it is debt paid and gone. I know if it the card is sitting there I will be tempted so better to have it gone.
It really is a blessing to have this blog to read to keep the financial side of things in perspective. The comments and the other blogs the commenters write have be very helpful as well.
July 16, 2010 at 7:15 am
Jackie;…of course the cc company will try to get you to keep their card…they are a business and no business wants a client to leave….next time you want to close a cc you will be better prepared before you call…give them the old break up line of “it’s not you…it’s me”…LOL…
July 16, 2010 at 9:59 am
[...] Gail Vaz-Oxlade Making Money Make Sense. Much ado about debt. “Much ado is being made about the fact that we are retiring with higher levels of debt than ever before. Y’know why? Because we’ve been racking up debt like never before.” [...]
July 16, 2010 at 12:51 pm
@NorthernBC Mom: Sorry to hear about the tight spot your parents are in and how frustrating it is for you. So, not to sound really callous but is there anything set aside to pay for their funerals? Do your parents have life insurance that might help cover the costs of the casket, the service, the headstone etc? Did they prepay for a funeral before the HST came in? It’s better for the family to be prepared for the huge costs associated with death than to deal with it when it actually happens.
July 16, 2010 at 4:04 pm
My attitude is that you don’t need a credit score when you have money. I suppose when you’re first thinking about digging your way out of debt, it could be a concern. But once you have the money in savings to buy everything you need including your next car, who cares what your score is?
July 17, 2010 at 10:13 pm
Great article Gail. I am only 35 but am already thinking of retirement. We in no way expect any inheritance from our parents and because of my parent’s poor financial planning I am fully expecting to have to take care of them. They can’t afford to retire.
My husband and I are both lucky in that we will both have defined benefit pension plans that will give us about 60% of our income. We have fast tracked our mortgage so it will be paid off in 15 years. That’s 2 years before my husband’s retirement and 10 year’s before mine. My husband plans on working part time while I am still working.
We have a plan so we’ll be consumer debt free in 3 years. Any increases in our salary are going straight against debt.
It is tempting to buy a bigger more splashier house as our income increases but we have decided not to fall into that trap. We’ve seen too many of our friends go that route.
Anyway I should say that all this is happening after years and years of being really irresponsible with our money. And I mean REALLY irresponsible – no savings, buying stuff we do not need, not paying debt, letting stuff go to collections, refinancing TWICE and just racking the debt up again, etc,.
Thank you for your books and your show Gail – it has really helped us see the light.
July 18, 2010 at 3:15 am
My Mum has retired and is getting along nicely. She doens’t have a huge source of money but then she doesn’t have huge spending habits either. If she does buy something out of the ordinary she’ll tell me that she went “SKIing” … Spending Kid’s Inheritance. LOL
July 18, 2010 at 7:33 am
[...] Much Ado about Debt @ Gail Vaz-Oxlade [...]
July 19, 2010 at 2:28 am
[...] Much Ado about Debt @ Gail Vaz-Oxlade [...]
June 2, 2011 at 5:57 am
I will recommend not to wait until you get enough amount of cash to buy all you need! You should just take the loans or short term loan and feel yourself free