Watch Your Step!
Posted by Gail | Filed under Debt Traps
Sometimes I think the money world should have big honkin’ signs that appear to tell you that you’re about to step into a pile of poop. Imagine walking into a store and as you are about to pull out your credit card and huge sign with flashing lights suddenly appears that reads, “Watch Your Step!” It seems some people need to big alarm going off to realize that they’re about to make a mistake.
I say this because of all the people who tell me that they have “found themselves” in trouble. It is as if they just woke up one day in a mess. While they were out buying couches, TVs and their 24th pair of jeans, they didn’t notice the hole they were digging. Now, at the bottom of they hole, they’re looking up and wondering how to get out. A big flashing sign, “Watch Your Step!” might have been handy, eh?
The early signs are the easiest to miss. Maybe you don’t have any financial goals. Yup, that’s a sign. Maybe you’re not living on a budget. A sign. Perhaps you’re spending money on STUFF instead of paying routine bills. And if you’re using your credit cards to buy food or pay for other necessities because you’re out of money, your “Watch Your Step!” sign should be flashing.
Sometimes the things you do seem less obvious. Maybe you’re lying to your buddy about how much you paid for something. Or you’re avoiding talking about money completely. Amber signs. Ditto if you’re repeatedly dipping into savings to pay regular bills or you have little or no savings because you’re spending all the money you make.
Your warning sign should flash more brightly if you apply for a consolidation loan and are turned down, or if you can’t get your interest rate reduced by negotiating. Hey, that sign looks like it’s changing from amber to red! Watch Your Step!
Did you see how high your last cheques bounced? OMG! Have you been paying late or missing payments completely. Red Alert! And as for moving your debt to your home and then building a new balance on your credit card or line of credit , bells and whistles should be going off all over the place.
Consider your situation critical when you find yourself living in overdraft, missing even your minimum payments, or using credit advances from one card (or from your line) to make payments on other forms of credit. If debt repayment is eating more than 15% of your net income, your Watch Your Step Sign should not only be flashing red, the alarm sounds should be deafening. Can you hear it ringing when you don’t even bother opening your bills? How about when you resort to asking family or friends to bail you out? Or when you hit a pay advance loan store?
This is usually the stage at which people find me. They’re up to their eyeballs and don’t know what to do. But there were lots of signs along the way that things were amiss. Trouble is, some people are so unwilling to see their reality that it takes a two-by-four upside the head (me) to get them focused on the truth of their circumstances.
It doesn’t have to be this way. You can – and should – be watching your money and looking for the signs. Caught early, the problems can be reasonably easy to fix. By the time you get to the critical stage, sometimes only bankruptcy will see you out. Oy!
September 7, 2009 at 7:49 am
Thanks for being my 2×4
Love you
September 7, 2009 at 9:21 am
[...] Go here to read the rest: Watch Your Step! [...]
September 7, 2009 at 9:22 am
It was a progrssion for us, just like Gail said. After we moved we had a lot of extra cash from the equity in our house and felt rich. We bought a house at the same mortgagte as what we left begind so all that equity was exactly that… money money money and lots of it.
We invested some, bought a rental house, and then starting eating away at the pile of cash by supporting the farming habit. We don’t have new vehicles and didn’t slurge on furniture or trips but we felt compelled to make the family farm work. There was no budget and everything was justified for those cows.
When we started eating away at our emergency fund I felt a bit sick… but its the family farm and it was worth it. Finally the emergency fund was gone and now we were dipping into credit. The blinders were still on and we kept plugging along. Finally 1/2 of our credit lines were used up and thats when the 2X4 came out.
I went back to work professionally, we sold the cows and the bull and walked away. It was hard too do but we had to. Emotions and nostalgia got us into trouble and we learned an expensive lesson. Its been almost a year now since the Red flashing light came on and we have managed to pay down 30K and have 10K left to go. We weren’t able to really pound away at the debt until I watched a few episodes of TDDUP. Thank you Gail!
Just a note to all you beef eaters out there. While you are paying $24 bucks a pound for your steak all nicely packaged at your local grocery store. The farmer is lucky to get $0.90 per pound these days. Help a farmer and save yourself a wack of cash and buy direct from a farmer. Average wrapping costs plus the cost of the animal comes out to about $2.50 per pound. Sure you have to buy a freezer but in the long run you save a lot of cash and you help a farmer!
September 7, 2009 at 10:24 am
Christy;
can you offer any ideas on how to contact those farmers willing to sell directly to the consumer?
September 7, 2009 at 10:48 am
Great post Gail. EVERYTHING you said makes total sense.
I finally sat down a month ago and made a budget, after coming across your site. I came across your site by accident – I have to admit, I wasnt a fan of your show. Because, everything you said was right and we werent following any of it, so it was easier to change the channel.
After following the budget I made on this site, I am shocked to see how much we have put into savings. Its not a fortune, but considering we had none and now we have $800, it’s a darn good start. As for debt repayment, we were already paying double the minimum on our line of credit, plus doubled the credit card payment, so we are at 14% with that. Thankfully, one credit card and a line of credit is all we have in debt, not including our mortgage. We have never come close to missing a payment, so I think we have been fortunate.
My “ah-ha” moment came this Saturday when I headed out to the big retail department store, which has been a place I have spent $$$ in through the years. The prices are good, so it is hard to avoid totally. I brought my shopping list, my cash and I picked up a basket…..what? Not a cart to fill? Anyways, walked out with what I needed and no more and a total of $22. I was amazed, and money in the bank.
We all can choose to see the signs or ignore. I ignored for a while, but no longer.
September 7, 2009 at 11:20 am
What a timely blog! I’ve been tracking my spending in a journal for a few months. While I’ve been diligently (and sometimes begrudgingly) writing down what I’ve been spending, what I haven’t been doing is looking at the “big picture” and calculating how much I spend on things. Well, after checking in on the balance on my account last week, I got my reality check and calculated what I spent over the past three months. What I’ve learned was that I’ve been “eating away” at my money! I spent twice as much on food (groceries, snacks, dining out, etc) than I had thought I was spending. Funny thing is I’ve been trying to lose weight and now I know why I haven’t dropped a pound. A bag of chips here, dinner out there, it all adds up!! I got my wake up call and am pretty mad at myself for spending that money on food that’s not doing anything for me. Now that I’ve seen the light, I’m going to be more mindful of how I spend my money, devise a budget and stick to it.
September 7, 2009 at 11:34 am
Joanne,
Is there a farmers market out your way? If so, go! There is usually at least one meat farmer there, selling conveniently packaged and frozen meat. They also provide their contact info for how to purchase directly from them without going to the farmers market.
September 7, 2009 at 12:08 pm
I know that after I bought my house it would have been so easy to go into debt. I had to resist the urge to buy furniture (my first place so I don’t have much). Instead I made due with the few pieces I already had and what others gave me. This fall I will have enough money saved for my dresser and nightstands. I think most people feel justified in the purchases they make, but the reality is most of the time the “I need” is really an “I want”. When I moved into my house the number of people that seemed to think I should just go out and buy everything I wanted for the house. I would patiently explain I would not be purchasing anything untill I had cash on hand. For so many people this is a foreign concept.
On the cost of food discussion. Almost anything a farmer can produce in you area will be significantly cheaper at a farmers market. I live in the central valley of California and I can’t believe what the major chains charge. If you can find an independant grocer they may have lower prices. I have friends in larger cities that belong to co-ops. If you are flexible the boxes come once a week with whatever is in season. My local co-op also includes meat and/or dairy if you choose the option.
September 7, 2009 at 12:53 pm
That’s interesting – in my area, I went to the farmer’s market only to find that the prices were quite a bit higher than the supermarkets – by a lot! The quality looks better, but unfortunately, doubling the price of my purchases is not within my budget.
September 7, 2009 at 1:03 pm
I’d agree with Jay. Out here on the prairies, the farmer’s markets are costly. fresh? absolutely. Tasty? far better than a store. but more costly.
When I was in Toronto we walked through the markets in Chinatown and I was positively green with envy at the wealth of produce and the insanely low prices.
Farmer’s markets are probably cheaper where there are a lot of them and there is a bit of competition. I am just guessing here.
I’d have loved one of those flashing Watch Your Step neon signs back when I was first an ‘adult’ and in charge of my own money. I use the term “in charge” loosely
September 7, 2009 at 2:03 pm
Christy-
Our christmas present every year from my mom is 1/2 a cow bought directly from a farmer
September 7, 2009 at 2:06 pm
the farmer’s markets in Vancouver — at least the westside Kits one — has produce and other goods for sale for quite a bit more than the stores. I remember walking up to pay for a bag of apples only to be told the total was $14. Fourteen dollars for one plastic bag of apples!? That’s bonkers.
I try to buy local, I really do, but when I do, it’s typically when I go out to the farms in Ladner to buy direct from the farmer … on his farm. Besides, there is an awful lot of jewelry and soap available for purchase at farmer’s markets these days…some weeks more of that stuff than farm-grown products. Farmer’s Market is a misnomer in my opinion.
September 7, 2009 at 2:44 pm
I like this post because it contains some good reminders of what to pay attention to. I also like it because it just shows that even if some things start to go off the rails, you can correct your behaviour and get back on track.
Regarding the food situation, not all farmers markets are cheaper. Some are, but not all. If you want to buy directly from a farmer, search out small production beef farms that sell directly to the consumer and you might be able to find one that sells whole sides of beef or smaller sampler packs. It depends on where you live. I know there are lots in South Western Ontario.
September 7, 2009 at 2:51 pm
Stephanie H., I felt pressure to “dress-up” my house with new stuff too. My family was horrified that we traded labour for a second-hand fridge, had an empty area where a table should be, and dragged my old college-days couch into our new home for YEARS before we finally coughed up the dough to get nicer stuff (the fridge still works 10 years later). My sister and mom buy NEW furniture and home accessories for every place they move to. Out with the old and in with the new! Sure their homes are truly stunning (within a month of moving in) but they go into hock for it, and I am always sick with worry for them. Incidentally, the warning sirens are going off like mad for them all the time, but I think they get a thrill from the noise and lights or something!
How can two sisters be so different financially?
September 7, 2009 at 5:16 pm
Great post with lots of info. My husband and I raise and sell roasting chickens and turkeys (free range) and free run eggs from our driveway, there is a sign out front. We buy all of our beef and pork from a local farmer. Ask around or post in smaller papers looking to buy 1/2 a beef (you can split with someone else and still get lots of meat for a family) We pay $2.50/lbs that includes all your cuts, pork is $1.79/lbs again all your cuts. Compared to the grocery stores the quality is superior. You don’t get the meat in the fancy wrappers it just comes in brown butcher paper.
We’ve always bought our meat that way and will continue to do so.
We live in the Ottawa area.
Great site Gail!
September 7, 2009 at 5:47 pm
re: meat purchases
If your local college has a meat cutting course, you can purchase meat cut and wrapped from them.
I know that the prices are higher at farmer’s markets, but in the bigger picture of things I would rather support my local farmers than Costco.
Better for my community and better for the environment.
(the whole 100 mile diet idea).
September 7, 2009 at 6:58 pm
As a former financial planner I was so amazed when people would come into my office and literally have no clue about their financial situation. For some people overdraft was as good as cash in the account, until you tell them they were paying about 21% in interest for that borrowed money. People were paying $30/month in bank fees and $120/yr for credit card fees, never really looking at the numbers to see what they are actually paying for. Experience has taught me that people are afraid to ask questions. It’s easy to go to the mechanic when we need the car fixed or to call the hair dresser when we want a haircut, but to call a professional to help with finances, that’s out of the question.
Take good inventory of your current financial situation and if you’re noticing that you’ve gone into overdraft or have done cash advances from the VISA or can only making minimum payments on debt, it’s time to get a specialist to help you get your finances in order.
Great post Gail as it speaks to the financial illiteracy that is so common in today’s society.
September 8, 2009 at 10:07 am
Financial illiteracy is something that is rampant in society. It should be taught in school and one should have case studies on how to manage finances throughout. One thing, though, is human nature. We always want to keep up with the Jones’, even though one explicitly doesn’t say so.
We scored a beautiful used dresser this weekend. We got all of our kids’ clothes from a generous family who knows us and provided for us. It saved us thousands of dollars and tons of hours ’shopping’. We are very grateful.
The trick is to identify what is a “want” and what is a “need”. Our income justifies spending a lot – at least in today’s society – but we don’t. I take pride in living BELOW my means because it’s about being a good steward of what the Lord has provided. Plus, we can sleep better at night!
September 8, 2009 at 12:19 pm
If anyone can tell me where I can go to buy meat directly from a framer somewhat close to Scarborough.(I’ve got a car and am willing to drive) I’d be forever greatful!
We always need to re-evaluate on an ongoing basis to make sure you’re on track for wherever you need to go otherwise, you’ll get lost.
September 8, 2009 at 12:38 pm
As some people mentioned checking out some rural newspapers (small towns), the internet can help. Google “Cattle Breeders” and your area. The Cattle Breeders association is another internet site and a phone call you can make.
A drive in the country can also help. Quite often family farms have signs at their driveways. Hutterite colonies will also sell direct. A call to an Livestock auction mart can also put you in the right direction. Just ask the person who answers that you are looking to buy a beef for your freezer and they will know of many producers in the area that can help you out as there is usually “regulars” you could say that bring thier animals to market.
And one of the best places is to contact a meat processor / butcher. Tell them that you want to buy 1/2 a beef or pork or whatever and they will oftentimes hook you up and even contact the farmer for you and then a week to two weeks later you have a freezer full. As we raised beef we contacted a local meat processor to ask for a pork… I like a bit of variety in my diet, the processor paid the farmer and we paid the processor and we didn’t pay anymore than if we would have found the farmer ourself.
I oftentimes find farmers markets expensive too so hopefully these tips will help you out. As a farmer myslef if I could sell a cow for $800 to the livestock market and then have upwards of $100 to $150 taken in commision charges, brand inspection, trucking, etc. Or I could sell the same animal to you for $800 and keep the $150 buck in my pocket.
Good luck!
September 16, 2009 at 2:52 pm
This post brings back all kinds of memories from my own flashing lights and bells moment…
Throughout my first university degree I acquired 3 credit cards and 3 store credit cards (I didn’t stop to think that getting a new card after maxing another one out wasn’t a good idea). Then I had trouble finding a job upon graduation and starting living on my cards, only to find a bad job that paid $9/hr…not enough to pay rent and pay off my credit cards but apparently enough to take out a $5000 bank loan to buy a car, then insurance payments, gas and maintenance fees followed.
It was after securing a new job that paid a little better (and two years post university still on interest relief from student loans) that I recognized I was in trouble. I had stopped opening bills, unplugged the phone…you name it. Oh and I had also taken out a consolidadted loan for half of my debt and then maxed out the same cards….again…
Then I sucked it up and went to a credit counselling company and began my debt retirement plan.
Over 4 years later I have less than a year to having it paid off and about 7 months from graduating with another (more lucrative) degree.
I am 27 and still have no savings and am living paycheck to paycheck but finally feel I have my life in balance. I am in a co-op program so I scrimp and save during work experiences to help cover the costs during school peroids and have a plan mapped out to re-establish good credit, save for the future, buy a home and finally retire that pesky student loan debt (which has nearly doubled from financing another degree)
If I had listened to the warning signs when I was younger I wouldn’t be in this position but I am on course to be very comfortable by the time I hit 30 which is more than a lot of people can say.