A Money Coach in Canada

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nancy_small.jpg1. Top priority is … me! My own bank balances and RRSP savings that is. After 4 years of giving every. spare. dime. to my business, Your Money by Design, I am financially fatigued! And it took Thicken My Wallet’s post on that topic to bring it home to me. So this year, I’ll do whatever needs to be done to get back to $500/month into an RRSP (I can’t wait to start making my own stock choices again – all the more, in the company of great pf bloggers opinions) , funds for a proper holiday, and finally (!) I’m going to invest money into fixing a bunch of little broken items around my house that I’ve been living with far too long. This may mean my business will not grow as fast as I’d like, but so be it. I need replenishment.

2. Embrace my inner Radical. As Money Relations has noted in comments past, I’m increasingly oriented towards the social angles of money. What do our aggregate spending choices say about our culture? What do we make of the fact that sexy, sophisticated Vancouver – glittering towers and audis (I love them too!) – has increasing numbers of women sleeping outside under cardboard? I spoke out at city hall against plopping a stadium onto the downtown eastside (it’s going through, anyway). I think I may step further out of my comfort zone and – gasp! – start turning up at rallies and protests on various citizenship/money issues. I would never have dreamed in a million years ….

3. Reinvigorate my own praxis – when I spend a mere 15 minutes a day keeping on top of my money, things work like a charm. I’ve been slipping on this, then stuck with a Big Project of getting up to date every couple weeks. So back to 15 a day for me.

Over on Ethical Banker  Erik wrote,

    Is it ethical for Banks to let your checking account go negative in order to charge and profit from NSF fees?
From a purely business standpoint I see why this is such a profit center.  A good percentage of people get into a financial bind from time to time. Unforeseen auto repairs, medical expenses, etc… but, the extent in which the banks charge these fees can make it almost impossible to recover from a financial issue.
For instance I had an emergency medical issue which tapped my checking account.  The payment was posted to my account immediately putting me a few dollars negative.  in the next few days charges made previous to the incident began to post.  Things like a cup of coffee at starbucks, dry cleaning, etc. Small charges.  Yet I incurred a $31 NSF fee for everyone costing me an additional $310 dollars on top of the negative balance.  $310 dollars for charges totaling less that $50 dollars?  This kick them while there down philosophy  in my opinion is unethical.  What are your feelings on this issue? Are there alternatives to traditional banking?

Most readers know that as I build my money-coaching business (Your Money by Design) I work part time for Citizens Bank of Canada.  CB (as we insiders call it.  Well, I do, anyway) prides itself on its ethics, and does business only with companies that are not in the nicotene, arms, nuclear, animal testing etc. business (that still leaves a lot of scope!).

We’re owned by a credit union (VanCity) although operate completely independently, but it means we genuinely put members first.  Nevertheless, we absolutely charge NSF fees.  First, there’s an OD fee of $5.  The member has about 24 hours to get the funds in, before we send the item back NSF.  If the member doesn’t, we charge an additional $25.

Why do we charge?  Because it honestly costs us.  For each OD, a live human being has to monitor the account:  will the member get the money in?  If not, a live human being also has to get the funds back from whoever we gave them to (eg. if it was a payment to your auto-insurance, we have to electronically contact them to reclaim the funds).   Many people erroneously think this is all automated and instantaneous.  It’s not as much as we think.  There are massive regulatory and privacy requirements, so electronic data is not flying across the web like we think it may be.   There are checks, balances and a wee bit of human intervention along each step.

The case you stated seems extreme.  If a member called me and pointed out what would happen, I would likely go to the mat arguing for a refund of the majority of fees (providing it did all indeed occur in one fell swoop, rather than over a month of routine mishaps).  The fact is, NSF fees frequently do hit us when it hurts – I’ve been there!  (I’m a money coach because I took my share of lumps and bruises).  It’s easy to interpret this as the bank hitting us when we’re down.  It’s not.   It’s simply a function of reclaiming costs-of-services-provided even though the ‘service’ is reclaiming your money (you didn’t have), an unwelcome service.

gaolorder_1729.jpgOne of my clients from the US has – with little more than cheerleading from me! – gone from a pretty dark place with his finances to increasingly bright daylight. I’m thrilled for him. One part of the picture has been his debt, which originally overwhelmed him. He chose to take charge, though, and started gathering information (remember I’m not a debt expert. I was helping in other areas, but he took the debt research on as an invaluable project). Here are his straight-shooting words of advice (again, remember, this is in the US):

Here is a post that is going to win me absolutely no friends with the credit card industry or even my colleagues. But what the hell…here it goes.

Are you delinquent with your credit card debt? Is the credit card company dunning you? You should know that it is highly unlikely that they will compromise this debt. If you want to save your credit rating, do your best to make a deal. BUT…if you are not as concerned about your credit rating (translation…this ain’t the only debt on your record), then here is my advise….IGNORE THEM. Simply tell them once, kindly, not to contact you. If it is a consumer type debt, then under the Fair Debt Collection Practices Act, they have to comply. They will then take one of 3 possible actions against you:

1. They will refer your debt to a collection agency which is good news for you),
2. They will refer it to law firm to file suit against you (which is even better news for you) or
3. They will sell your debt to a third party (which is great news for you.) Here is why…

1. If the credit card company refers your balance to a collection agency, the agency typically has some settlement authority with which to make a deal with you. They usually have far more authority to compromise your debt than the collector at the credit card company did. If you can make a deal at this point, you might want to consider it. But, if you want to screw with them a little, then just tell the nice collector from the agency to not call you anymore and wait for the debt to go to a law firm or a debt buyer.

2. Law firms – typically don’t like suing on credit card debt. Why? Because if you present any kind of a defense to it, you may actually get out of paying the debt altogether. I know of several judges in Michigan that hate this kind of debt coming into their courtroom. Moreover, unless the debt is really really high, it is unlikely that the credit card company is going to send a witness to trial. If you demand a trial and don’t back down, the law firm will go to some pretty great lengths to make a deal with you.

3. Credit card purchasers. This is the Tri-fecta for a debtor. First of all, these credit card purchasers usually do NOT get the back data on their debts. Thus when they take you to court, tell the judge that you want “discovery.” This means that you want the debt buyer to come across with a copy of the contract that you signed when you opened the account. They almost never have this information. When you demand this discovery and the law firm comes up short,l they will bend over backwards to make a deal with you. There is a sizable debt collection law firm in West Bloomfield that does a brisk business in credit card collections. When debtors demand discovery, this firm will usually come across with a paltry offer or simply dismiss their case.

There you have it. Credit card debt is highly manageable depending on the level of risk you are willing to take and also depending on who is collecting the debt. If you can stand the heat, I would suggest that you wait until the debt falls into the hands of a third party. You can make your best deal at that level.

Talk about learning the lessons I preach!

I had a crash-and-burn with my plans to eat at home this month, and had to connect it to part of how I equip my money-coaching clients to manage change for the long haul.

Many clients discouragedly tell me, “I’ve tried so many times to manage my money effectively, but I always seem to end back in debt, spending my money on crap, fill-in-the-blank”.

That’s the time for a conversation about the Process of Change.

It goes like this.

Stage 1: Precontemplation.

There’s a problem, or something that’s not working favourably for you, but you don’t know it yet, or acknowledge it. Overspending would be an obvious example; or flitting from one job to the next, quitting just before you get your finances stabilized; or always giving away money to family and friends in need, without ensuring your own basic needs are covered.

If an outsider pointed this out as a problem, you would be resistant and resentful. In your mind, there either isn’t a problem, or you feel trapped so that change is impossible.

Stage 2: Contemplation.

You receive direct, relevant feedback pointing out the need for change. It causes you, now, to seriously consider whether you should change your habits. For example, you reach a new threshold of debt, and begin to panic. Or you have a child, and realize you need to get your finances in stronger shape for her sake. Or it starts to sink in that retirement is not that far away, and you have little to show for it.

Stage 3: Determination.

You decide change is required! This is a very precarious and wonderful stage. It’s wonderful because if you pull it off, the change will benefit you. It’s precarious, because many of us go off half-cocked with an overly ambitious plan. “I’m going to stop eating out until this credit card is paid off!” or “I’m going to start putting 30% of my take-home straight into RRSP investments!” or “I’m going to sell my condo and move back in with mom!”. Shameless self promotion: a money coach at this stage will help you create a sane, sustainable strategy that sets you up for success, rather than failure.

Stage 4: Action

You start to move forward on your plan. It feels good. You begin to experience results.

Stage 5: Relapse.

Ah! this is what I was getting at. Relapse – slipping back to a greater or lesser degree is simply part of the process that ultimately leads to lasting change … if you stick with it. So you are back in debt. So you withdrew from your RRSPs to finance something you now regret. So you sold your condo, and discover had you kept it, it would be double in value now, and you feel like an idiot.

Coming to terms with this relapse, this set-back, is part of what will ultimately get you to Lasting Change. How to manage the impact of the relapse and get back on the plan is the topic of a future post. For now, take courage knowing it’s simply a part of the journey.

Lasting Change.

This is what we’re gunning for. With a few back-and-forths eventually we get to a new place, with new habits and new outcomes. Overspending is a thing of the past. The debt is gone, or minimal, for good. We are taking responsibility for our retirement savings and building a nest egg. I’ve seen this happen time and again with my clients, and certainly have experienced it in my own life.

So, how does this connect to menu planning and eating home this month?

Here’s how. Not once, but twice, I experienced the exact same ‘relapse’. It’s not the end of the world, but it puts me out of the running for the $25, that’s for sure! Two weekends in a row, I was rushed for time, hungry-and-not-thinking-clearly, and didn’t have proper provisions (that I could think of) in my home. Two weekends in a row, without even thinking twice, I darted into the neighbourhood deli and grabbed a sandwhich – $8 each time. The first time, I didn’t realize what I’d done until I was out the door. The second time, the penny dropped (ha ha, sorry!) as I was keying in my PIN. Too late to back out.

Here’s what I did that was helpful:

1. I chose right away not to make a big deal of it – not to catastrophize.

2. I chose right away to get myself organized for an eat-in supper.

3. After the 2nd time, I’ve revisited my ‘determination’ stage and am now giving myself permission, once/week when desperate, to grab the chicken sandwich. My lifestyle, somewhat like money relation’s, makes eating home every single meal pretty challenging. Building in a realistic pressure valve will increase my likelihood of overall success.

As usual, case studies are real situations of my past or present money coaching clients. The situations are real, but the identities involved are heavily disguised.

j0385427.jpgJeff and his two siblings, a brother and sister, each inherited a sizeable legacy when their parents died. Jeff was conservative, and grew his legacy into an even more significant nest egg and is now independently wealthy. He came to me because there was an unintended consequence to his wisdom: his siblings have very little left to show for their inheritance. He is too uncomfortable to let them know of his secret small fortune in comparison. As you can imagine he then has to hide his lifestyle which has resulted in increasing distance between him and his brother and sister.

Families and money!

What approaches might you suggest to Jeff for bridging the gap, while protecting his own inner boundaries about his wealth?

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