Estimated reading time: 15 minutes
Discover the truth about credit and why it’s not real money. Learn how to use credit responsibly and why savings are essential for financial security.
The Dark Side Of Debt Is A Crisis
Getting credit in Canada seems to be the easy way out when you need money fast, but also a quick way to find yourself where you’d rather avoid debt.
Credit is not real money; if you remind yourself of that often, you will understand you must use it responsibly.
When your credit card debt is more significant than your savings account, you know you’ve gotten into a pickle.
Approximately 70 per cent of Canadian households have debt, with the average indebtedness at 170 per cent of disposable income—meaning that for every dollar households earn after taxes, Canadians owe $1.70.
The situation for some Canadians is even bleaker: approximately one in 10 Canadian households have debt levels of 350 per cent.
Macleans
Not only should you have an emergency savings account with six months to 1 year of budgeted expenses but savings to keep your mind safe from harm’s way.
What I mean by that is when you have a savings plan set up, it makes you feel confident about your financial situation, and you can go on day after day without as much worry.
Having something is better than nothing, but for some reason, the gravitational pull towards loans and credit cards is so strong that it’s like the devil fighting an angel.
Understand Why Real Money vs. Credit Works
Some people get to the point where they feel credit is their only option out of one debt, but it puts them into another, which they are safe from until the subsequent hardship.
Those who do this for whatever reason believe that credit will save them financially, but it does the complete opposite unless it is paid back in full.
I know people who get excited when a new credit card arrives in the mail because they think it’s real money when, in fact, it’s just credit.
That means you have to pay it back; it’s not yours.
A lender is offering you money in plastic on the promise you pay them back.
Please don’t fool yourself because credit card lenders want you to pay only the minimum because you’re making them rich.
This is why they give out credit so freely; they only care about the long-term and minimum payment.
In essence, credit card companies prey on people desperate for cash.
You will see them represented at University, College, and when you walk into a grocery or retail store in Canada.
That drives me mad, especially if they are aggressive.
I sure as hell wouldn’t want to do that as a job, but someone has to, I suppose.
Hey, we have a credit card that can mess up your life if you can’t repay what you use.
Would you like to apply for it?
They are waiting for that one person who desperately needs credit, and they make them feel like they have the answer to all of their financial worries.
Credit Card Marketing
- Credit card companies and lenders are like the financial God to people, and all of those pretty credit card add-ons, including short-term zero interest, are the reel that takes them in.
- Credit cards are getting in and out of debt schemes for those who don’t know how to manage them properly.
- Credit cards need to be used mindfully as cash but with the realization that they’re not your money.
I know some people use credit cards to build credit when they move to Canada or simply for rewards points and pay the credit card off in full each month.
I’ve done both successfully on a minimum wage income and after moving to a new country where I wasn’t yet familiar with the currency.
30 Days To Pay Back Debt
I’m not talking about consumers using credit to get ahead.
It’s consumers who use credit and believe it’s real money they feel entitled to and know they won’t be able to pay it back, if at all.
That’s the real problem.
Keeping the hydro on for one month and using your credit card to pay the bill is a short-term relief.
The problem is that it becomes a revolving door unless handled quickly.
You’ve got 30 days, what is your plan?
So, there are pros and cons to credit cards, but all it boils down to is responsible use.
Get Out Of Credit Debt Schemes
How often have we heard or watched those financial television programs where people bounce from one credit card to the next?
It can be anything from a credit card balance transfer (which is not a bad option depending on the situation) to filling out umpteen credit card applications for more credit.
If only earning real money was that easy, right?
A consumer gets approved, cards get maxed out and then forgotten about, or the minimum payment is paid month after month.
Credit card companies LOVE these mini-payments, which can go on for 100 years, and yes, that’s a tad sarcastic.
Please read the fine print on your credit card statement; it should shock you.
If that information about paying the minimum payment and years to pay the debt off doesn’t scare you, I don’t know what will.
Not only are you wrapping your finances in red tape, you’re ripping away at your credit score and leaving sour notes on your credit report.
You don’t want to do this because your credit report can affect applying for an apartment, getting a mortgage, or even an employment opportunity.
Avoid Missing Debt Repayment
Not paying the debt back on time is a game of catching me if you can.
If you get caught, it’s about catching up or finding yourself in financial jail.
Some of you reading this right now might feel like that is where you are, and no one is coming to let you out.
Unfortunately, you’ll have to work from behind bars to make ends meet and catch up with your debt.
No one cares, and they will leave you to rot with the debt you owe.
It’s not harsh; it’s the reality, but let me reassure you there are ways out of a debt mess if you work hard.
The problem with this is that some people don’t want to hear it, or they have a reason which justifies what they do.
Fair enough, perhaps you’re not ready to escape financial jail yet.
You can’t make people change how they are with their money; they have to do it themselves.
This type of relationship with money can lead people down a dark path.
They could end up losing their house/apartment, business, or vehicle, causing relationship breakdown, filing for bankruptcy, and losing opportunities.
People often scramble and put out all the feelers for help, whether with family, friends, online forums, or social media.
Living On The Streets
Homelessness is a big problem in Canada, and although every single person has a story.
Ultimately, it all boils down to not having enough or any money to take care of themselves.
Call me whatever you will, but I watched a guy get arrested in a second-hand shop for stealing winter boots.
The altercation turned into a struggle, with the man denying the theft.
It was apparent that the sticker was still on his footwear (even I saw that), but he was trying to protect himself from getting arrested.
He was homeless and wanted warm footwear as Ontario’s weather has been raining and snowing at best.
Although I don’t condone what he did, it made me realize how bad it is when someone has to steal from a second-hand store.
Security asked him how he would pay, and he pulled out $5.
He laughed when he asked if he had a debit or credit card. “Dude, I live on the streets because of my credit history.”
I wanted to pay for them and walk away, but I was too scared to get involved as the police were coming, plus I had my son with me.
I also wasn’t sure if it was the right thing to do.
It all happened so fast.
Drugs, Mental Illness, and the Fast Lane
I am aware of mental illness and street drugs and have watched so many documentaries over the past few months.
Most of the shows were about homelessness and drugs, so I would never judge.
This happens all over the world, and the epidemic is crippling cities far and wide and putting our essential services in crisis, dealing with overdoses daily.
In a way, I feel like it’s a downward spiral, one thing leading to another, but it affects all walks of life, not just people with low income or people experiencing homelessness.
Having money doesn’t free you from a world of drugs, financial misery, and despair.
With fentanyl, heroin, and cocaine dominating the drug scene, the outside world is becoming a scary place whether your wallet is half-full, complete, or empty.
Now that Cannabis is legal in Canada, it has added another category to the budget for those who choose to use that hadn’t before.
Iff you were already using it, the money was coming from somewhere.
I’m also not talking about medicinally with a license; I mean recreational drug use.
Mrs. CBB discussed how a financial crisis can rip lives from underneath anyone.
If they struggle to get back up, they just stay down and go further down until they are 10 feet in the ground.
Tent cities are popping up all over Ontario, deep in the forests, behind buildings, or secret spots no one knows about.
This is our new reality; welcome to 2019.
It’s a sad time to be living but a beautiful time to be present and overcome the crisis, as there are so many free resources available that weren’t before.
We all have a story; someone wants to listen and not judge.
Debt Is Not A Dream Come True
One thing leads to another, and then you are somewhere you never dreamed you would be.
I suspect being on the streets is the longest journey home, but many success stories exist.
It takes the beast inside of you to fight your way back from being homeless, financial abuse and misuse, and understanding mental illness.
It’s a sad situation all around, and we can’t protect our son from it, but we can make him aware of how money and drugs are a big problem in society.
No parent or child wants to say that’s my dad, mom, son, or daughter living on a street corner or in the forest.
It’s not about being rich; it’s about understanding what and where debt can place someone in the blink of an eye.
Our friend was married and worked full-time but struggled to pay the bills.
They had no budget, and the husband cared more about drinking his life away after work than picking up the pieces to get out of debt.
Even when they had money, they would blow it, so it became a game of chasing dollar signs and burying emotions.
She’s no longer married to this guy, but she’s still on a wonky financial path because of using credit cards as real money in conjunction with her income.
Make Debt Freedom Happen
Here’s the thing: you must WANT to get out of DEBT for it to happen.
It’s like going on a diet and wanting to lose weight. If you cheat, then weight loss can stall.
The same goes for trying to fight debt, if you don’t plan to stay ahead, you will never beat it.
If you smoke, for example, and struggle to make ends meet, you may have to make a conscious decision to quit smoking.
At nearly $20 a pack in Canada now, that’s big money that could be used to pay down debt or build a savings account.
There are no excuses when debt is involved. You either work to fix it or stay in the pot.
It was January 2012 when Mrs. CBB and I decided to give up smoking, and we haven’t looked back.
The snowball effect of quitting that habit also meant a healthier life and a lowered life insurance premium.
This is the kind of positivity you want in your life.
The money we save is second to our lives, but not everyone sees the big picture.
Health and finances go hand in hand, as I explained above, with the drug epidemic blanketing our country.
Save Real Money And Ditch Credit
As we enter a new year, I urge all of you reading this today to set goals and work on eliminating clutter and debt from your life.
We need less to survive than most believe, and we don’t need new and fancy stuff to live our best lives.
- If that means you kick a habit, I can assure you that you will look back and smile.
- If that means you find a second job to earn more money to pay off debt, go for it.
- If that means you learn about how to budget, grab it by the horns.
- If that means you walk away from toxic relationships, then do what’s best for you.
Whatever you choose to do, understand that if you have debt bigger than your savings account, something must change.
You can read all the financial blog posts you want, but if you don’t have the motivation, it won’t happen.
If you’re that person who starts and stops what you do with excuses, wake up because your financial situation won’t fix itself.
It’s one thing to live on the edge with money and another to rack up debt without a repayment plan.
A short-term victory without a long-term plan is a bad situation.
Remember that credit is not real money you MUST pay back.
Discussion: Why do so many people treat credit like real money?
CBB Home and Blog Update
I don’t think there has been a month in the last year where someone in this house has been ill.
Our son was homesick for 3 days out of 5 school days this past week for a raging cough and runny nose.
Thankfully, Mrs. CBB is home to watch him, but I often wonder what other parents do in this situation.
I’d love to hear your story or any tips for parents to prepare for sick kids and your job.
- Would your boss understand?
- Can you afford to stay at home?
- Do you use sick days?
- Can you use holiday days?
- Do you work from home?
Grocery shopping is going well in 2019, although we are using Amazon and Rakuten quite a bit now because we are getting 8% back plus credit card rewards.
You can’t beat that, especially if they are products that are comparable in price to those in brick-and-mortar stores.
Other than runny noses and lots of cuddles, we did make it to swimming, and that was successful as he finally went underwater.
That’s our exciting life for the past two weeks.
Oh, I’m going to get my eyes checked next week.
I’ll let you know how that goes.
Lastly, we are embracing the Konmari method.
Look at Mrs. CBB’s dresser drawer and how all the clothes are folded.
It’s incredible how much you can fit if you fold your clothes this way.
Happy Budgeting!
Mr.CBB
Finance Canada Read of the Week
I have a friend who works from home, and I often wonder how he gets anything done because he sleeps in and is always late.
I’m unsure how I’d be as a full-time work-from-home dad/husband, so I looked to see how others do it.
I stumbled upon Katy Kicker, who works from home and offers tips for those who want to stay motivated while working from home.
Apart from getting up early, one tip she talks about that stuck out in my mind is to take time off.
I know so many people who work from home who are glued to their work and find it hard to disengage, but you have to do it.
I blog part-time, but even then, it’s tough for me to do this, so it’s part of my goal this year to take time for the family and me.
Working from home means that you have the flexibility to choose when you stop working.
I try to choose my days off on a week to week basis, depending on my workload.
Often I will have time at the weekend where I rest and relax.
I have a pamper session on Sunday afternoons, which sets me up mentally for the week ahead.
I enjoy time off with my husband when he is not working.
At least one day a week I try to visit friends or relatives, depending on their schedules.
This helps us keep in touch with family, avoids the single members of our family feeling lonely and gives us a good excuse to get out of the house regularly.
It’s time to get my pamper session on!! Haha!!
Frugal Recipe Find
I was looking at Pinterest for cool new recipes and stumbled upon The Southern Lady Cooks and this Vinegar Pie.
My first thought was YUCK.
So, I kept looking but couldn’t stop thinking about it.
I went back to read the recipe, and it doesn’t seem as bad as the title sounds, as it’s a mix of sweet and sour.
Who’s ready to try this?
Mr.CBB’s Motivational Corner
Saturday Search Term Giggles
Every week I get thousands of people visiting Canadian Budget Binder because they searched online and found my blog.
(SIC) means I’ve copied the text exactly, and it has spelling errors.
Most times funny, sometimes serious.
- Scanning Business Code Of Practice– ha, that’s a new one. It’s the Scanning Code of Practice.
- Pay down BET cut expenses– Pay down a BET or a DEBT.
- Most Frugal Canadian Blogger– Oh, why thanks but I don’t think I’m the MOST FRUGAL, but I am frugal.
- Financial stability or pregnancy, which is important?– Oh boy, this is my personal opinion, but I’d wait until I can manage the bills I already have before adding the expenses of a child.
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