Debt Free in 30

You hear the stories about the person who paid off $100,000 in debt in just 3 years; sounds great, but how did they do it, and is that realistic for the average person? The short answer is no, if you earn $25,000 per year it is mathematically impossible to pay off $100,000 in three years, but you do have options, which we discuss on today's show.

If you think your finances are under control because you're keeping up with minimum monthly payments on credit card debt, think again. To become debt free, you need to pay down more of your balances. How do minimum payments work and why do they keep you in debt? And what do you do if all you can afford are the minimum payments or less? We discuss that on today's podcast.

We hear the same thing repeatedly. If you rent, you're throwing away your money. Why? Because you have nothing to show for it at the end of the month. On the other hand, if you own your home, you're paying down your mortgage and building equity. But is this true? Why can't you build wealth by renting? Today's guest thinks you can. Some points to consider, according to Alex Avery: It's not one-size-fits-all. Buying isn't for everyone. Neither is renting. Consider how long you expect to be in a particular location. If you have precarious employment, or know that a job will be moving you to another location, renting is a more suitable choice. On the other hand, if you know exactly where your life will be in the next 10 years and you'll have children, who will go to school, then it's probably better to invest in a home. When making the decision to rent or buy, don't forget all the negative carrying costs of owning and selling a home. Count that against your 'investment' decision. Be aware of you biases that might make you want to scale up, buy more, renovate more. Alex uses the term investment creep to explain this bias. Understand how the pro ownership lobby can influence your decision - from the government, to real estate agents, even your friends talking around the dinner table. Don't be persuaded by someone else giving you advice that reflects their objectives, not yours.

Because it's not the level of debt that causes the problem necessarily. It's whether or not you can service it. On show #174, we gave the example of someone with a $500,000 mortgage and 25-year amortization. If the interest on it went from 3.29% to 4.29%, the monthly payment would go from $2,400 to just over $2,700. That's about an 11% increase. On today's show we discuss which debts should you pay first, and how to make that decision.

What will happen in 2018 that could water the seeds of a financial crisis? Ted Michalos and Doug Hoyes believe there are three big stories to watch in 2018: Minimum wage going up in Ontario from $11.60 to $14.00, effective January 1st. This means any employer that is already marginal or has very tight margins is probably going to employ fewer people. Debt. According to the Canadian Payroll Association's September 2017 survey, 49% of Ontarians are living paycheque to paycheque and 43% of them save less than 5% of their earnings. Canadians are also the most indebted in the world by at least one measure, as household debt is more than our GDP. Real estate value and mortgage interest rates. The Bank of Canada predicts that 47% of Canadian real estate mortgages will renew in 2018 and a lot of people are going to be facing an increase because rates are higher than they were a year ago. For more insight and detailed breakdown of our predictions for 2018, tune into the podcast.

On today's podcast we explain how, even though your house may have increased in value, if you don't have enough cash to meet your monthly expenses, you are house rich but cash poor. We give four tips to avoid being house poor. The most important tip: decide what kind of life you want, and use that decision to decide on the house you really need.

Every year, the focus of the holiday season is on consumerism and the need to spend money on the perfect gifts, the perfect decorations and creating the perfect dinner. And every year, Canadians end up spending too much money, putting them at risk for financial difficulties once the holiday season is over. On today's show we rebroadcast a podcast from 2015 where my guest is Heather Cudmore, who at the time was the manager of Credit Counselling at Carizon Family Services in Kitchener, and is now a credit counsellor in the Hoyes Michalos London office. Heather has lots of great advice on how to make a memorable Christmas, without spending a lot of money.

Should you ever loan money to family and friends? It's a tough question. Some of you might say, "sure, why not?" And others might think, "Maybe just to family." Well, if you do decide to loan money, I'd recommend asking yourself this question: Do I have to borrow money to do it? If you do have to borrow to help, you shouldn't loan money… even if it's to family and even if they say they'll pay you back. Now I realize that sounds harsh, but it's in your best interest to not get yourself into financial trouble. On today's show I discuss why you should never loan money to family and friends, and I explain how you should help them if they are in need.

On today's show, I review 10 personal finance books that would make great gifts and/or would be a great start to your own personal finance library. All 10 books are listed below, with the time stamp from the podcast, if you wish to jump ahead and listen to my comments on a particular book: General Money Management The Wealthy Barber Returns by David Chilton (2:35) Wealthing Like Rabbits by Robert Brown (3:20) 397 Ways to Save Money by Kerry K. Taylor (9:40) Stop Over-Thinking Your Money by Preet Banerjee (11:06) Debt-Free Forever by Gail Vaz-Oxlade (11:54) Protecting Your Money – A Guide to Identity Theft and Fraud by Kelley Keehn (14:24) Real Estate When the Bubble Bursts by Hilliard Macbeth (19:32) Burn Your Mortgage by Sean Cooper (23:26) Retirement Victory Lap Retirement by Jonathan Chevreau and Mike Drak (27:19) Thinking Thinking, Fast and Slow by Daniel Kahneman (28:48) Of course, I am also quite proud of my own book, Straight Talk on Your Money, which I discuss briefly at the end of the show.The first five books on the list are great for all age groups. Books #6 and #9 are particularly good for either seniors or adult children of seniors, and book #10 is great for anyone who wants to take a "deep dive" into how our brains work. I hope you enjoy the list!

Have you ever wondered why a credit card isn't called a debt card like it should be? Think about it. That's what a credit card really does – it gives you debt. Well, I'll tell you why. Because it's not good marketing. And credit card companies know this. In Myth 4 of my book, Straight Talk on your Money, I point out that financial institutions know we are guided by our emotions. Banks and credit card companies have manipulated you into thinking that credit is good, and they do it constantly. Credit can also be used to describe a source of pride or honour like, 'you are a credit to your family.' Here's another example: "I'm a good person because I have a high credit score." How many times has been idea been shared? That maintaining a good credit score means you're responsible with your money and you're not a reckless spender. I disagree. Although my focus today isn't on credit scores - I already discussed that on my podcast a couple weeks back, episode 167 - I will say that a credit score, which should (once again) really be called a debt score, is another example of using positive language (aka good marketing) to make us think differently about financial concepts than we're supposed to. Calling it a credit card does not change the fact that it is really a debt card. Personally, I'd rather be blunt with these terms. All I'd really like to accomplish is to have you consider being more honest about the terminology too. See how it affects your decision-making. I share more details on why words matter in this podcast and why financial institutions benefit from their manipulation.