The debt trap is so easy to fall into that many people aren’t aware they are in it until they cannot keep up with the bills nor balance their budget.
Last night while waiting for Mrs CBB to wander around the kitchen section at Canadian Tire I was hanging out with our son in the seasonal department.
We were testing out the various deck furniture that they had set up when I watched an older couple stroll by with a full shopping cart of goods.
Insert The Debt Trap
In an instant, a credit card rep for Canadian Tire swoops in and stops them with a credit card promotion.
They were intrigued not so much about the credit card but more about the 10% discount they would get off what they had in their cart.
The gentleman let his wife do the talking and joined my son and me in the garden furniture where we chatted about buying a $400 fire pit.
In the meantime, his wife had signed them up for a Canadian Tire MasterCard in minutes and they were on their way.
Perhaps it doesn’t bother them to get the credit card just for the discount of the day even if they don’t use the card.
I know some people who don’t mind the added credit that will affect their credit score since it is all accounted for.
Credit Card Responsibility
The problem is when people fall into traps like the credit card bonuses and continue to use the credit card when they can’t afford to do so.
Its times like these when consumers need to ask themselves how having extra credit on their plate will affect their financial situation.
The above is only one situation where you can easily fall into a debt trap without even knowing it.
It’s so easy to be persuaded by savings, coupons and discounts that we always have to dig deeper to find out what’s in it for them.
For credit card companies they bank on you not paying your bill in full earning them far more than that measly savings promo they initially offered you.
They win but if you’re responsible with your credit card, you win.
How to Avoid The Debt Trap
Thankfully the only debt we’ve had during our marriage was our mortgage which we successfully paid off in only 5 years.
Although the speed of which we paid our mortgage is excessive for many we followed 5 simple rules so we didn’t get caught up in the debt trap that plague Canadians today.
Canadian household debt as a share of income, a measure closely watched by policy makers, slipped to 173 per cent in the first quarter from 173.7 per cent in the fourth quarter but is still near record levels, Statistics Canada said. Source: Canadian Household Debt Globe and Mail.
With the price of everything going up including the cost of living and pay cheques not budging it’s easy for people to fall prey to anyone offering them something that is too good to be true.
While you may be working with a lean budget it’s important to remember it’s far better to have little than to fall into a debt trap where you are strapped even further for years.
1. Limit Credit Cards and Loans
Credit card debt and bank loans are the worst types of debt to get involved in and the easiest type of credit to get.
Whatever your reasons are for getting a credit card or loan you must pay it back and in some cases with interest.
For example, a school loan, mortgage or any other loan to help you pay off debt or consolidate other loans will cost you money.
If you own a credit card only charge what you can afford to pay in full each month otherwise you’re just increasing debt.
Never take cash advances from your credit card as they are too costly and never miss a credit card payment.
If you think that your credit card limit is too high ask your credit card company to lower it and maybe even ask for a better interest rate.
2. Create a Budget
I’m a huge advocate of using a budget and that’s because we saw what a budget did for our finances over the past 11 years of marriage.
The last thing we wanted was for money problems to come between our relationship which happens more often than not for couples.
If I didn’t believe in budgeting so much I wouldn’t be using one nor wasting my time on this blog telling you to use one.
The 3 main components of budgeting are;
- Understanding how much money you net or earn.
- Where your money is going.
- How much money you have left after all your bills are paid.
If you are spending more than you earn you will know it because the numbers never lie.
In the least, you will have the opportunity to swoop in and do your best to fix your financial situation before it gets out of hand.
3. Plan Spending
Before we leave to go shopping we have always had an idea of what we were going to by since we plan our spending.
There is no way we would make a big purchase without first knowing whether we had enough money that month to pay it in full.
Any time we grocery shop we have a grocery budget we follow and list although this is one area we’ve been working on improving over the years.
We also never put fun-stuff, vacations or anything we should be saving for in full on credit including renovations, home improvement or decor updates.
The moment you rely on something else to pay for a purchase it has a hold on you.
If you want to avoid something having a hold on your finances avoid giving them that power to do so.
4. Buy Used
I know that some people are not fans of second-hand shops, online buy and sell sites or garage sales but they all have financial benefits.
Buying used has saved us thousands of dollars off retail prices over the years which attributed to us saving more to pay off our mortgage.
Depending on what your goals are if you can lean towards buying used instead of retail to help you save money to put towards your debts you’ll see how fast you crush it.
5. Avoid Showing Off
This is one area we’ve never been in because we avoid it at all costs since it comes with consequences, consumer debt.
Over the years we’ve known many people who buy houses bigger than they can afford and cars way out of their financial zone.
It’s easy to get credit to fund all the bling but it’s hard to pay it all back which is why people can live pay to pay.
Related: How to catch up with a late payment
Avoid trying to show your friends that you are successful when you are not and live the life you can afford.
They would rather see you happy than living under a pile of debt.
Don’t Let The Debt Trap Get You
If you’re finding yourself in a debt trap that you want out of first evaluate your debt to income ratio and then create a payback plan.
Discussion: What ways do you avoid falling prey to the debt trap? Leave me your comments below.
CBB Posts You May Have Missed
These are the blog posts I’ve written the past two weeks that you can catch up on if you’ve missed them.
If you don’t already please subscribe to the blog and you will get my posts to come straight to your email.
- How To Choose A Hobby That Won’t Cost You The World
- 11 Inexpensive Water Play Activities For Kids
- 5 Cheap Living Tips For Financial Freedom
- Keto Chicken Bone Broth Egg Drop Soup
- Survive Life After University With These 8 Tips
- How To Easily Track Your Credit Card Spending (Free Budget Binder Printable)
Mr CBB’s Motivational Corner
Frugal Recipe Find
I made my way over to Just So Tasty by Fiona because I wanted to know more about her Chewy Coconut Cookies.
Growing up I was a huge fan of eating coconut macaroons because they were easy to make and I love coconut.
I’ve yet to make a coconut cookie that is chewy with a bit of crunch and I thought this might be the perfect recipe.
My plan is to take her inspiration and turn it into a keto coconut cookie.
Stay tuned for that one! Click the link above to read Fiona’s full recipe instructions.
- 1/2 cup unsalted butter, softened to room temperature
- 2/3 cup packed brown sugar
- 1/4 cup granulated sugar
- 1 tablespoon honey
- 1/2 teaspoon vanilla
- 1 large egg, room temperature
- 1 and 1/3 cup all-purpose flour
- 1/2 teaspoon baking soda
- 1/4 teaspoon salt
- 1 and 1/3 cups sweetened shredded coconut
- 2 teaspoons boiling water
Garage Sale Finds
If you have some awesome deals you’d like to share from your garage sale outings this Spring and Summer email me your photo and tell us what you found and how much it cost you to be featured.
Today’s Garage Sale Deals:
- Like new booster seat $3 (asking was $5)
- Two microwave egg cookers (something Ken has been looking for to take to work) $.50
- 3 pack of men’s shaving gel $4 (asking was $6)
- 15lb weight $1
- A large bottle of bubbles $1
- 10 squeeze/fidget balls and game $2 (for kids at work)
- Chalkboard brush – free!
- Kids sweater, jeans and track pants $2 (asking was $3)
Total spent: $13.50
Thanks, Jen P.
Home and Blog Update
Every two weeks I update you on what’s been happening around the CBB house and on the Blog.
Over the past year, I’ve been working on increasing subscribers to the blog in hopes of building solid relationships with my readers.
Thank you all for being here.
We’ve just recently in the past week had our wild strawberries turn red and the mulberries on our mulberry tree turn purple.
This week the plan is to start picking the mulberries before the birds eat them up and turn it into mulberry jam.
I may even share the recipe on the blog if anyone is interested. Who doesn’t like jam?
Actually, it would be a great jam to layer in between my mum’s British Sponge Cake recipe.
Bathroom Renovation Update
I’m well into our bathroom renovation and have stripped it down to the studs.
While lurking behind the drywall I found what no homeowner wants to see, mould, mice poop and dead mice from years ago.
I found the problem and thankfully I ripped it all up before just installing a new bathroom.
This was all the builder’s fault for not sealing the wall which left a gap for rodents to get in.
Trust me when I’m done with this house I don’t think I will want to move and do this crap all over again.
You can’t trust any builders because there’s always some doughnut trying to cut corners.
That’s my update and mini-rant for the week.
I’ll keep you in the loop moving forward but for now, things are on track and I’m awaiting shipment of our tub.
Not too much has happened on the blog since my last update however we will be adding password protection to our Downloads page so it is only available to subscribers only.
I will let current subscribers know what that password is once we have it up and running.
Favourite Blog Read
This week Mark from My Own Advisor talks about Retirement at Age 60 on a lower income and whether that is feasible.
One of his readers sent in their investment portfolio asking Mark for his feedback in regards to his retirement plan.
We’ve been in talks with our financial advisor this past month discussing retirement income and honestly, we don’t really know how much we will need.
As Mark points out most of what is planned is all based on assumptions.
We aimed for a higher number but for some people like my mother-in-law who is a low-income earner with only government pensions she is walking a fine line in her retirement years.
Saturday Search Term Giggles
Every week I get tens of thousands of people who visit Canadian Budget Binder because they did a search online and found my blog.
Yes, I can see your search terms and sometimes they are funny.
- Canada, How Are You Notified Of Jury Duty? – I read it like, Alexa, How Are You Notified Of Jury Duty? Haha!
- How to wright a resignation letter?– Definitely with spell-check.
- If there is no price on an item is it free? – Think about that.
- My husband is a rich miser– Might as well be broke
If you see the acronym (SIC) next to a word that means I’ve copied the text exactly as it was typed in Google and it has spelling errors.