A Money Coach in Canada

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wow. I wish I’d said this (click to see the video):

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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.

Move over, Nancy! Money Relations is here!

When Nancy first approached me to do this guest post, I… shuffled my feet at the opportunity.

What was she saying? Blog about my baby steps towards investing…? Was there a hidden message somewhere – that any idiot can do it?!

Good thing I’m not that easily offended by the truth. Below describes my financial story with notes of insight along the way.

My first investing experience came when I was a kid banking at the Bank of Mom . I had saved my birthday/Xmas monies and I had deposited it with BMOM at separate installments. Little did I know that the bank did not keep good accounting records and when it came time to withdraw, I got an NSF.

As you can imagine, that was the last time I banked with Mom and I opened an account with a CDIC institution member.

Note to self 1: Keep track of own dang money.

Things went swimmingly after that, I had my own pocket money at an early age with a paper route and I could afford my own things.

Note to self 2: Lugging newspapers in winter sucks. Need to retire from newspaper biz. Save money.

Later on, I puttered around in university but I have to admit I really didn’t find my calling until I was hanging in the computer labs. Unfortunately, I hadn’t signed up for any computer courses. As a result, I flunked the courses that I was registered for and I enrolled in college instead for computer engineering. I had already blown 2 years of tuition in university.

To this day, it nags me that I don’t have a degree as I’m pretty bright (really, I swear). I graduated from college and Mom bailed me out of tuition debt.

Note to self 3: Thank and forgive Mom for BMOM fiasco.

I got my first real job in the tech field during the dot com meltdown. It was with a small company and I considered myself lucky that I could even find a job. During the interview process, I said my expected salary was 42k. I started at 28k!

Luckily, after my 3 month probation, I got what I had asked for (which was unexpected). At my year end review, my salary was raised to 52k (which was also unexpected as I didn’t even negotiate nor was it requested).

Note to self 4: Get foot in door. Shut pie-hole and work. Project positivity – rewards will come.

It was rough times working with this company as all the R&D money had dried up to go to defense contracts after 9/11. Still, being in such a small organization I learned a lot. And Mom was at it AGAIN nagging me to save.

Note to self 5: Look towards future. Start saving and investing for real. Begin with mutual funds.

After 3 years with the company, my hours were reduced in half. It wasn’t unexpected as bodies had started disappearing (in a non-murderous way). During my off days, I started to look for work elsewhere.

Note to self 6: Financially stability rocks. Don’t live paycheque to paycheque.

Within three months, I got a job at my current organization. I earn a good living and it’s secure with a great pension and health benefits plan. The chances of career development are low and I’m not sure if I want to put in the same blood, sweat and tears as I did with my old company.

Note to self 7: Don’t live for job. Nice to have choice to work or not. Seek financial freedom.

So here I am today. I’ve done my due diligence with savings and I’m debt free. I don’t own a house and I rent. I’ve reached the step in my financial progression where I want my money to work for me.

I looked into my previously invested mutual funds and I realized that their performance trailed comparable funds that track indexes – with much lower management fees. Now why would I pay more to people to screw up for me? I can do that very well on my own, thanks.

And that’s exactly what I have been doing… investing by myself and screwing up here and there but it’s okay. I’m learning from my mistakes and my good decisions have outweighed my poor ones. I just need to do this more consistently.

Note to self 8: Start small. Get in the game and learn. Motivation: don’t lose money.

I started my blog to write down my journey in life as it relates to money. It helps keep my finances on the front burner but I don’t obsess about it. Making money for its own sake is meaningless. I am lucky in that I grew up in a family that stressed financial prudence but I don’t let its influences dictate who I am.

Note to self 9: Need to find own investment style. Gather information from internal and external sources. Make decisions best for self.

So there you have my financial story up to now. We each tell unique stories with different chapter emphasis on budgeting, savings, investments, etc. It just depends on your life circumstances.

Now go write your own fairy-tale by finding out what works best for you.

Note to self 10: Tell readers to write their own dang notes.

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.

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