#MoneyMasterClass Recap-Week 37

This week Gail talked about how long we take to pay off our debt and the realities of debt fatigue. She also talked about her preferences on where to go and get help.

Debt Fatigue

Debt fatigue occurs when you’ve been in debt for a long period of time, you aren’t making much headway in paying the debt off, and you “run out of steam” for dealing with the debt.

#MoneyMasterClass When I tell people about debt fatigue, they only half believe me. “Hey, those payments aren’t so bad.” Here’s the problem: if you're just making the payments as opposed to actively paying off the debt you'll eventually run out of steam.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass Just making the payments = settling for the amt that fits into your budget. Actively paying off the debt = deciding how much it’ll take to get to debt free & doing whatever you have to.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass At the crux of just paying what you can afford is an unwillingness to do the really hard thing: put up the money to get out of debt.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass Equally important is to STOP SPENDING $$. As a consumer-driven society with temptation around every corner, not shopping is really, really hard. But to get out of debt, you MUST stop shopping.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass Today, draw a line in the sand & say, "Enough!" Make a debt repayment plan that sees you out of the hole. Don't spend a dime on anything that isn’t an essential expense until the debt is gone.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass While tightening your belts until they squeak, find the things that you love to do that don't cost a penny so you can laugh, have fun, and feel like you have a life.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass Getting to debt-free takes gumption. You can whine about how hard your life is, or you can decide to take responsibility for the mess you made & do whatever it takes to clean up the poop.
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

#MoneyMasterClass You didn’t need any help getting into debt; you’re going to have to rely on your own resources to get yourself out. Are you up to it?
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

Re-Order Your Debt

The first assignment this week was to re-order the debt on our list, so the most expensive (ie. debt with the highest interest rate) was at the top.

#MoneyMasterClass Ready to roll up your sleeves? Start by re-ordering your debt list so the most expensive debt is on top. My definition of "most expensive" is the one with the highest interest rate.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Most expensive is one criterion for deciding what to pay off first. Another criterion is the type of credit. Your car loan / consolidation loan are Instalment credit and already have an end date.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Your credit cards, OD protection, and LOC (secured or not) are Revolving credit, which has no end date for payoff, which is why I prioritize getting rid of it.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Finished juggling your debt list so they are in descending order from highest interest rate to lowest? If the debt is instalment debt, run it through with your highlighter. We're working with revolving debt first.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

When will you get out of debt?

Next came the decision for how long you want to be in debt. The recommendation to avoid debt fatigue is to pay off your debt within 3 years.

For this task, have your Debt Repayment Worksheet from last week handy.

#MoneyMasterClass Today you decide when you're getting out of debt. Today. Choose the 1st debt at the top of your list that is not highlighted. When do you want that debt out of your life? Pick a # of months: 6, 12, 24, 36? You can't go beyond 36 mnths (debt fatigue, remember)
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass If you decide you want a $1200 credit card paid off in 6 mnths, your principal repayment will be $1200 ÷ 6 = $200. So divide what you owe by the # of mnths you chose and, eh viola, your principal repayment amount.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Now you have to add the interest amount to the payment. You already know it, it's on your Debt Repayment Worksheet. Now add that to your principal repayment amount: $47.60 (interest) + $200 (principal repayment) = $247.60 is the New Monthly Payment.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Your Debt Repayment Worksheet now has the top line completed, right? Great, now just copy the required minimum payments for all your other debts into the New Monthly Payment.
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

#MoneyMasterClass Your "snowball amount" is the $$$ you committed to paying towards your principal on that first debt every month. We'll talk more about snowballing in the future. For now it is enough to know that debt you committed to getting rid off in xx months will be gone!
— Gail Vaz-Oxlade (@GailVazOxlade) September 8, 2020

What if it’s Too Much?

Now’s the time to get honest with yourself.

Do you have too much debt?
Will it take you over 3 years to pay off your debt? Over 5 years?

At this point, it’s good to seek out help and advice.

#MoneyMasterClass What if when you added up what you owe and how much you're supposed to repay you looked at your list and said, "impossible" what next?
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

#MoneyMasterClass If you are overwhelmed by the amount of debt you have, there are plenty of people willing to help. Some will help creditors (I'm looking at you credit counselling). Some will help YOU. You've got to find your helper.
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

#MoneyMasterClass I have a strong dislike for credit counselling. Not because the people are bad. Rather it's because the premise is wrong. If they're getting their money from credit card companies, how can they serve YOUR best interests? Not a rhetorical Q!
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

#MoneyMasterClass The recidivism rate for debtors who use credit counselling is high. a) it's a voluntary process so "we'll fix this and get back to biz", and b) they don't teach you to do better, so you're just as unprepared as when you walked in the door.
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

#MoneyMasterClass Most people don't realize that when you go to credit counselling you're admitting you're a $$$ dope and your credit history is going to take a big kick!
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

#MoneyMasterClass Between the fees (10-15%) and having to make double the payments compared to a Consumer Proposal, Credit Counselling is only a deal for credit counselling companies. Skip 'em.
— Gail Vaz-Oxlade (@GailVazOxlade) September 9, 2020

Finding Help

#MoneyMasterClass So what SHOULD you do if you add up your debt and it's way more than you can repay in 5 years or less (5 yrs is the outside line)? Go and see a bankruptcy trustee. Make sure you pick someone trustworthy so you don't get fleeced.
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

#MoneyMasterClass A bankruptcy trustee will present you with options. The two most popular are 1) a Consumer Proposal (CP) and 2) bankruptcy. Both will cost you in terms of your credit history. But both will save you in terms of real $$$.
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

#MoneyMasterClass I could spend the day explaining the difference between CP and bankruptcy, who, when, where, why and how, but I'll just refer you to the experts: https://t.co/ew3PGpBzSL
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

#MoneyMasterClass WARNING: You already know I love these guys right? Not only have they been a huge help with the MMC, but I've never met a more honest, thoughtful, and compassionate man than Doug Hoyes. Now I'm done.
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

Mistakes Happen

Gail closed out the week again with some of her pearls of wisdom.

#MoneyMasterClass I’ve learned over my long life is that I am not my mistakes. But how I think about my mistakes has a big impact on my ability to move forward.
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

#MoneyMasterClass If I hold on to my mistakes tightly, if I don’t talk about them with someone I trust, if I leave them to fester inside me, they can turn my sunniest days cloudy by popping to mind at the most unexpected times.
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

#MoneyMasterClass Life lessons, too, show up when we least expect them. The most profound lessons – the ones that teach us the most about ourselves – just appear when least expected.
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

#MoneyMasterClass Whatever you’re beating yourself up for right now, stop. Breathe. Figure out what you need to do differently the next time and then move on.
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

#MoneyMasterClass Think of the person you love the most. Now, would you say the things you are saying to yourself to that person? If the answer is no, then stop being so mean to yourself.
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

Advice

There were a couple extra pieces of financial advice this week that weren’t Money Master Class specific, but are certainly on topic.

Lots: 1. make a budget that balances and stick to it religiously; 2. start saving – even small amounts work; 3. once you are able get a CC, use it, and pay it off in full every frickin' month; once you've done those, get back to me. https://t.co/Vridd2XvyJ
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

you're going to steadily rebuild your credit history, 1st with a CC and then with a small loan (to, say, contribute to a TFSA or RRSP) which you pay back within 90 days (because you already have the money saved that you plan to borrow) https://t.co/w08I4XxAZq
— Gail Vaz-Oxlade (@GailVazOxlade) September 10, 2020

you could have done the same thing with a secured CC, but yes, that was fine https://t.co/5EnH6grZb3
— Gail Vaz-Oxlade (@GailVazOxlade) September 11, 2020

Y'all are pretty smart. You don't need to trick yourselves into saving. Here's one of those Stupid Bank Tricks and my suggestion: pic.twitter.com/Cbff5LlMrt
— Gail Vaz-Oxlade (@GailVazOxlade) September 7, 2020

New to the Money Master Class? There’s still time to get started!
Check out this Twitter Archive to see all of Gail Vaz-Oxlade’s #MoneyMasterClass tweets from the start.
Find the resources, spreadsheets, and quizzes here: Money Master Class
Check out my weekly recaps to get caught up.
Start here with the Money Master Class Intro and Week One Recap

Check out Gail Vaz Oxlade’s books here:*

Money Rules
Debt Free Forever
CEO of Everything
Money Smart Kids

2 Comments

Ellis James Designs

September 14, 2020 at 1:46 am Reply

“You don’t have to trick yourselves into saving” to be honest I find that I still do! Though maybe not trickery but rather trying to set a desirable goal to get the savings rolling but ultimately not touching the savings for that goal anyway? Is that trickery, perhaps it is!
- A Sustainably Simple Life
  
  September 14, 2020 at 9:10 pm Reply
  
  I think that works. Starting a savings habit and not touching the savings involves getting our minds to believe it’s a good and necessary. 🙂

Debt Fatigue

Re-Order Your Debt

When will you get out of debt?

What if it’s Too Much?

Finding Help

Mistakes Happen

Advice

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2 Comments

Ellis James Designs

A Sustainably Simple Life

What are your thoughts? Let us know in the comments!Cancel reply

Debt Fatigue

Re-Order Your Debt

When will you get out of debt?

What if it’s Too Much?

Finding Help

Mistakes Happen

Advice

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Like this:

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2 Comments

Ellis James Designs

A Sustainably Simple Life

What are your thoughts? Let us know in the comments!Cancel reply