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Is College In A Bubble?

Nelson Smith — Thu, 12 Jan 2012 10:00:55 +0000

This is the third and final instalment of our Thursday bubble series. The first part looked at Canadian housing, while the second looked at gold. This one is a little more, shall we say, contrarian in nature.

These days, I don’t know anyone who will discourage a young person from going to college. (Except me. Plug alert!) Haven’t you heard the studies? You know, the ones that say that college graduates make more than their lesser educated brethren? Or the ones that argue the difference can be as much as a million dollars over a lifetime? If you’re not going off to get some sort of higher education, you’re missing out.

I won’t discourage anyone from attending post secondary if they want to. Higher education is a noble goal, and often one that will directly result in higher wages, since we live in an increasingly specialized world. Often, companies won’t even look at a prospective employee if that person doesn’t have the relevant university degree. A college degree is becoming the minimum barrier to entry in a lot of fields.

Keep in mind though, there are alternatives, especially for those poor students out there. Trade school generally takes a fraction of the time a full university degree does. You can start at the bottom rung of a big company with the assurance that you’ll eventually move up the ladder. You can even take a few years off to hone your ability to study. The possibilities are endless.

But we’re not here to talk about the pros and cons about getting a degree. We’re here to talk about the crippling debt levels.

Massive Debt

The percentage of high school graduates who go on to take college courses is at a record high. And, partially as a result of all this demand, debt has also reached record highs. It’s not uncommon for 22 year old kids to finish their university programs with $30,000 to $50,000 in debt, and that’s just from (comparatively) cheap Canadian schools. Students from ultra-expensive private schools often graduate with 6 figures in debt.

And then, we have the for-profit schools in the United States. (Also in Canada. But there’s not nearly as many of them.) These money making institutions often push strictly online courses, since housing students in virtual classrooms is considerably cheaper than real ones. These schools allow you to study at your own pace, a great solution for someone who wants to work and get a degree at the same time.

There’s just a couple problems. Firstly, they’re expensive. To counter that, students do what they’ve done for decades – take out loans. These schools make it easy, often holding the student’s hand throughout the whole loan application process and encouraging them to take out as much as they can. Hey, it’s good business to make sure your customer doesn’t run out of money halfway through purchasing your product.

There’s just one problem. Dropout rates at these types of colleges are huge. There are many reasons for this. It’s tough to work and go to school at the same time. If you’ve ever seen the ads promoting these schools, they’re often directed at people who don’t have a whole lot of education to begin with, or people who have been out of school for years. These people aren’t typically the best students. These people often end up with nothing more than a shattered dream and high student loans.

College debt is getting to the point where people can’t afford to take on the level of debt required to get the education.

Worthless Degrees

And then we have people who are taking on all this debt to get a degree that has very little potential to be leveraged into anything more than pouring coffee. Usually these degrees are in the arts, but there are exceptions. Or, so many people are getting into a field that they’re creating an oversupply of workers, kind of like the tech industry circa about 2003.

Which brings me to an interesting theory. As economic conditions worsen, young people can’t find jobs. So instead of joining the workforce, they go to school. Some will enrol in an undergrad program, while others will continue their education and take their masters. At some point, all these people will enter the workforce. And, since education is an investment of time as well as money, often these graduates will enter a decent job market. But, the job market improves for everyone, not just college graduates.

With college participation rates sitting at record highs, is this the peak for education? Or, will society continue to specialize to the point where everyone has to get some sort of degree? The comment section is all yours.

Is College In A Bubble? originally appeared on Canadian Finance Blog on January 12, 2012.

Will Record Debt Levels Lead To Disaster?

Nelson Smith — Mon, 19 Dec 2011 13:00:25 +0000

Back in 2008, there was a bit of a financial crisis. You may have heard about it.

Of course you did. To recap, the bursting of the American housing bubble helped lead to a liquidity crisis around the world, culminating in the collapse of Bear Stearns and Lehman Brothers, as well as the bailout of the entire U.S. banking system. As an interested market observer, those few months were absolutely riveting. There were legitimate concerns the whole financial system was going to collapse.

Essentially, the crisis was caused by liquidity, or a lack thereof. For those of you who need an explanation, liquidity is a person (or business’s) ability to raise cash when they need it. The reason why so many personal finance bloggers stress the emergency fund so much is because it serves as liquidity during times of need. Since banks don’t make money on cash reserves, they typically don’t keep a lot of cash just kicking around. They lend it out, often using leverage to lend out their reserves many times over. When business is going well, this is an effective strategy for making money. When things aren’t going so well, these creditors refuse to lend the money needed. When liquidity dries up, disaster happens, and banks go under.

Record Debt Levels In Canada

Seemingly every quarter, Canadian households set a new record for indebtedness. In the 3rd quarter of this year, Canadians debt levels sat at 152.9 percent of their disposable income. In fact, according to Bank of Canada Governor Mark Carney, household debt is Canada’s greatest financial risk, at least domestically. One in ten Canadians are in serious danger of defaulting on their debts, meaning that greater than 40% of their income is being used to service their debt.

Considering how low interest rates are, this is an alarming development. Canadian debt to income levels have passed both the U.S. and U.K. record levels, which peaked in 2007, just a year before the big financial crisis. For many Canadians, just a few weeks without a steady paycheque would spell financial disaster. They just don’t have the liquidity required to weather any sort of financial storm.

If you combine record debt levels with record Canadian home prices, it seems Canadians are walking a treacherous financial tightrope. If interest rates ever go up in a significant way, many Canadians who are living on the edge may be knocked off that ledge. At least in this author’s opinion, this can’t end well.

European Debt Crisis

Meanwhile, we have a bit of a situation over in Europe. Greece, as we all know, is a fiscal disaster. The country has been bailed out by the wealthier members of the European Union several times, and they’re still not out of the boat. Spain, Portugal, and Italy are among the countries that have government debts exceeding 100% of GDP. The market is concerned about default, so it’s making it more and more expensive for these nations to issue debt, in the form of higher interest rates.

To make matters worse, there are beginning to be concerns about the rest of the European Union. I’ve heard rumblings that Belgium and France will be the next countries to run into debt problems. At what point does the European Central Bank admit defeat, and just let these countries default on their debt? Sure, it would mean the collapse of the Union, but they don’t have unlimited amounts of capital to bail everybody out anyway, unless they start printing the money. This would in turn create inflation, hence devaluing the Euro.

Unless the entire European union manages to get their government spending under control very quickly, this situation could end very badly. I’d avoid all investments in Europe, especially financials.

Meanwhile, There’s Japan

Many people mistakenly assume the country with the highest debt to GDP ratio is the United States. While the United States is high, Japan’s government actually owes more as a percentage of GDP.

Many smart economic minds aren’t concerned about Japan, since most of their government debt is held by its own citizens. (unlike the U.S., who actually lists Japan as one of its largest creditors) Since Japan has had a solid personal savings rate throughout the years, their citizens have the excess capital to buy government debt.

This is changing.

Japan is the oldest country in the world. They are slowly losing people, as more die than are replaced. Immigration into the country is practically non-existent. Soon, they’ll have more people collecting pension benefits than are contributing to the system. Since more and more people will start drawing from their savings, this will quickly turn the savings rate negative. Without their own people to buy the government debt, Japan will have to depend on foreign investment. Japan’s balance sheet is in worse shape than Italy’s or Spain’s. This foreign investment will be expensive, if it even happens.

What Does This Mean For You?

If a massive European or Japanese debt crisis happens, the pain will be felt all over the world. North American stock markets will take it on the chin. Investors will run to the exits, since defaults in general kind of make them nervous.

I’m not going to tell you what you should do with your money, because that’s ultimately up to you. I’m selling some winning positions, and sitting on a little more cash than usual. I think, a year from now, there will be a cheaper stock market out there. What do you think about the record debt levels? Will we see defaults in the near future? Or am I some sort of weird crazy guy?

Will Record Debt Levels Lead To Disaster? originally appeared on Canadian Finance Blog on December 19, 2011.

Pay Off Student Loans Or Save?

Robb Engen — Tue, 06 Dec 2011 10:00:18 +0000

After eight years of monthly payments, we finally managed to pay off our student loans last month. Even though it’s a nice feeling to rid ourselves of student debt, we deliberately chose to make the minimum payments for years in order to get the rest of our finances in order.

Very few students can afford to pay for post secondary education without some type of financing in place. Canadian students are graduating with more than $20,000 in student loan debt, which is seriously affecting their financial position as they enter the workforce. Should young people make it a goal to pay off student loans right away, or save money to help improve their finances down the road?

My Experience With Student Loans

My wife and I left University with nearly $60,000 in student loans to repay. I was fortunate enough to have purchased a house when I was 19 (with my parents co-signing), and after University I sold the house for about a $30,000 profit.

Instead of using the proceeds from the house sale to pay off student loans, which would leave us with no savings, I paid off a portion of our debt and used the remainder for a down payment on a new house.

That house doubled in value in the eight years that we owned it. We leveraged an asset, which gave us more potential for financial gains that would not have been possible had just paid off our student loans.

Paying The Minimum

There are plenty of financial pressures facing young people these days. Most new graduates are worried about getting a job in their field, finding a suitable place to live, and making car payments. Paying down your student loans doesn’t need to be an initial priority in your life. Here are a few reasons why:

The interest rate is low – If you choose the floating rate option the interest rate on your National Student Loan will be prime + 2.5 percent, which currently equals 5.5 percent. Provincial loans are at prime rate which is currently at 3 percent (Newfoundland does not charge interest on student loans)
Income Tax credit – Any interest paid on your student loan is eligible for a 15 percent Income Tax credit. So if you paid $1,000 in interest over the course of a year, you would get $150 back on your Income Tax paid
Cash Flow – Why use all of your cash flow to pay off student loans when you could be establishing an emergency fund, saving for a down payment on a house, or paying off higher interest credit card debt?

Pay Off Student Loans On Your Terms

My approach to paying off student loans was to make the minimum monthly payments initially and then increase the payment each year as our finances improved. We each had two loans (Federal and Provincial), and when one of the loans got within striking distance ($2,000 or less), I took some of our savings to pay it off, and then applied the freed up cash-flow to a different loan.

While we could have paid off our student loans faster, I thought that we would be better off investing in our RRSP and TFSA, or paying off our mortgage.

Surprisingly many smart graduates say that their student loans aren’t costing them a lot of money, so they decide to just pay them off early. However a loan this cheap doesn’t need to be paid off more quickly than necessary.

Top priorities for young graduates out of school should be to eliminate any high interest rate debt and then to build up some savings inside a tax free savings account. Doubling, or even tripling your monthly payments in an effort to pay off student loans early is a lot for a young graduate to take on. There’s no need to place an unnecessary burden on yourself with many other priorities to look after.

Do you think the top priority for new graduates should be to pay off student loans, or should they concentrate on building up their savings?

No related posts.

Pay Off Student Loans Or Save? originally appeared on Canadian Finance Blog on December 6, 2011.

Five Lies About Your Credit Report

Tom Drake — Mon, 14 Nov 2011 10:00:00 +0000

Your credit report is important and because of that, a lot is written about it as well as talked about over dinner or as topics of water cooler conversations. Although some of the advice comes from well meaning people trying to help, misinformation or failing to go to trusted sources could make for some unfortunate surprises if you were to later view your credit score.

“Once I Pay Off the Collection Agency, It Will Leave my Credit Report”

Wouldn’t that be nice? In most cases that’s not true. Once you pay off a debt that was in collections, the best you can hope for is the debt to be listed as “closed” but often it’s listed as “paid collection”.

When an account is listed as a collection, it remains on your credit report for seven years. Once you pay the debt, it is listed as “paid collection” for the remainder of the seven year period. It may be a bit of good news to know that the seven years doesn’t start over. The other bright spot is that an account listed as a “paid collection” is not as bad as an unpaid account that was referred to a collection agent.

“I make my minimum payment. That’s good enough”

Not true. Although paying the minimum balance is certainly better for your credit than not paying at all, those outstanding balances are strikes against you when your score is calculated so paying off the debt in a timely manner is the only way to help your credit score.

“Only errors involving money affect my credit score”

Once again, not true. What if your credit report has a wrong middle initial and the information in your credit report is actually the information of somebody else with a bankruptcy on their report? Fixing errors on your credit report takes a lot of time and if you wait until you try to qualify for a loan, you may have to reapply at a much later date. Check your credit report today.

“I shouldn’t shop online because it’s not secure.”

This one may be true but there are ways to check. Any time you are entering sensitive information in to a website look at the address at the top of your internet browser. If the address begins with “https” the site is secure and you’re safe to shop online. If it only says “http” do not enter any information about you or your credit card.

“Debit cards are as safe as credit cards”

Fraud protection and other safeguards that come with credit cards are quickly being adopted for debit cards but your debit card is a direct line to your bank account where a credit card is not. If somebody steals your credit card information, they may run up a balance but you still have money in your bank account until the problem is resolved. That’s not the case with a debit card. Be careful

Remember…

Don’t believe everything you hear and verify everything, including the information in this article, with a trusted source before you make financial decisions based on it.

Five Lies About Your Credit Report originally appeared on Canadian Finance Blog on November 14, 2011.

Want Your Kids to Manage Money Well? Teach Them

Tom Drake — Mon, 24 Oct 2011 09:00:00 +0000

When we think about the lessons we as parents want to teach our children we think of things like religious beliefs, values, and encouraging them to attain the highest levels of education but we don’t often think of practical lessons on money management.

Schools don’t teach money management. They teach algebra, calculus, and geometry and although each of those is useful for developing abstract thinking, these skills have little practical purpose when it comes to everyday money management. (When was the last time you used a quadratic equation?)

If you want your children to someday become independent adults you have to teach your children these lessons. What should you teach your children about money? Here are a few ideas.

Saving

Teach your children that money isn’t meant to be spent, it’s meant to be saved so the person later has options. Those who save have little exposure to economic events because saving gives a person options. The nation’s richest people are often vilified but most are rich because they’ve managed their money well and that first starts with savings instead of spending.

Pay your Credit Cards off Each Month

Ideally, cash would be the ideal way to live but in a digitized world, cash is becoming less practical although still very possible. Teach them that if they’re going to use a credit card it must be paid off in full each month and if they find that they can’t do that, get rid of the credit card and only use their bank card or cash.

Where Does Money Come From?

Money comes from work. It doesn’t come from government assistance programs, the lottery, gambling, or get rich quick schemes. Money is the direct result of working hard every day. This lesson is best taught practically. If your children want money, they should do something around the house to earn it. Since education often equals higher paying jobs, pay them to reach the highest educational goals.

Giving

Money should be saved but it should also be used for the good of society. Teach your children to find valuable, true needs in the world and donate. Set up an account in their name on sites like Kiva to allow them to understand the power of giving. Although Kiva isn’t a true donation, it allows them to lend it back out to somebody else in need making the giving perpetual allowing your children to continue learning this lesson over time.

Live By Example

What’s the best way to teach your children how to be good money managers? Live the life and show them real world examples of how you save today for prosperity tomorrow.

Kids who don’t learn how to manage money become adults without the skills needed to live prosperously. Prosperously doesn’t have to mean rich. It only needs to mean comfortable and with the ability to purchase what you need without resorting to credit cards and for those who hope to be among the nations wealthy, spend less and invest more.

Want Your Kids to Manage Money Well? Teach Them originally appeared on Canadian Finance Blog on October 24, 2011.

What Is Simple Interest and Compound Interest?

Tom Drake — Mon, 12 Sep 2011 09:00:00 +0000

We hear about it all the time. There are few things in the financial world that are givens but even in the most uncertain environment, interest or in terms of stocks, dividends are one of those income streams that make us feel good. Often seen as unchanging, nearly all consumers understand interest because they often pay it on their loans or they earn it in their savings accounts.

If you’ve ever applied for a car loan, one of the items you look at first is the interest rate. We all understand that the higher the interest rate, the more money we will pay in the end but let’s look at a few other facts about interest rates that you may not know.

Simple interest is not as SIMPLE as you think

Simple interest is the easiest type of interest to understand. If you loaned a buddy $100 and told him that when he pays you back, he has to pay you $106, you charged him 6% on the loan. In finance terms, simple interest is calculated by multiplying the principal amount (100) times the rate (6%) times the amount of time (let’s say 1 year) 100 X .06 X 1 = $6. Pretty easy.

Banks are much more savvy than that, though. They aren’t going to give you $10,000 for a car and charge you 6% each year spread equally between interest and principal. They front load the interest in case you pay the $10,000 off early. If you looked at the amortization table that came with your loan documents you noticed that more interested is factored in to the first few years of the loan and as you reach the end, it becomes almost all principal.

This is far from “simple” and if you saw the calculations, you would agree. If you didn’t know what an amortization table was before now, just remember that it lays out how your total payment is broken down. If you want to see how interest is frontloaded in your loan, you can create your own amortization table by going to www.amortization-calc.com.

If you own certain fixed income investments the interest being paid to you is paid using a simple interest formula. You can reinvest your dividends (called the coupon) if you would like but it’s not compounded within the investment itself.

Compound interest IS SIMPLER than you think

Compound interest is more difficult to calculate and for most of our purposes, the way it is calculated isn’t overly important. Since there is a seemingly endless supply of compound interest calculators, we won’t worry about the particulars but here’s what you need to know when you’re shopping around: Unless you’re working with six figure numbers, the type of compounding is unimportant. Let’s look at an example:

I found a compound interest rate calculator at webmath.com and came up with these figures:

Let’s say that you have $50,000 in a 1 year Guaranteed Investment Certificate at 5% interest that is compounded monthly. After one year you will have in your account $52,558.09.

Now, let’s say that you have that money in a GIC from a different bank but the interest is compounded daily. After one year you will have in your account $52,563.37.

Although many unknowing consumers find themselves comparing the different types of compounding, in reality, it makes very little difference. Some may argue that if you’re investing in GICs for 30 years that $5 difference adds up. It’s true. Over 30 years that would be about $674 but once 30 years of inflation eats in to it, that $674 is far less impressive.

Look at the “Y” instead of the “R”

When comparing loan rates, don’t look at the APR. The APR or annual percentage rate is the amount of money you would pay or receive if the interest was calculated using simple interest. Since the APR doesn’t account for any compounding, look at the APY or annual percentage yield. The APY takes into account the type of compounding used.

For example, if a car dealership offered to finance a $10,000 loan at a 5% APR, you could go to another dealership and get the same APR but pay those couple of dollars more per year because of the compounding. A $10,000 loan at 5% compounded daily has an APY of 5.13% but if it is compounded monthly the APY is 5.12%. (By the way, the difference annually is all of $1.05)

Don’t Count on Compounding

If you’re investing, there’s no doubt that when you reinvest your returns over time, compounding does wonders for your portfolio. You can’t live on your RRSP contribution alone for entire retirement so you have to rely on compounding to grow your nest egg.

However, you can’t use compounding as an excuse to not take an active part in the management of your retirement plan. If the world markets have another meltdown, compounding isn’t going to save you if you’re close to retirement. Make sure you have a qualified and more importantly, approachable investment advisor.

What Is Simple Interest and Compound Interest? originally appeared on Canadian Finance Blog on September 12, 2011.

Dispelling 3 Personal Finance Myths

Guest — Thu, 01 Sep 2011 09:00:00 +0000

There are many beliefs about personal finances that are sometimes unfounded and often not interpreted correctly. As people’s relationship with money can vary a great deal, when it comes to personal finances there are unfortunately no magic formulas for ‘getting rich’, ‘saving’, or ‘eliminating debt’ that can be applied to everyone.

Here we’ll look at 3 common personal finance beliefs and dispel the myth behind them.

Myth: A credit counselor is required to repair credit.

This is not true. You can repair your own credit using patience and fortitude. Credit companies can help, but they can virtually do nothing that you cannot do yourself. The first thing is to order a free credit report. Northern Credit will give you one free report per year while TransUnion Canada and Northern Credit Bureau will provide them as requested. Report any errors in writing to each of the agencies. You can contact credit companies and work out a plan that can fit your income. You must be willing to show income statements, a budget and a plan. You may be able to re-negotiate the debt.

It is a myth that by closing accounts you can get more credit score points. Dropping a card may actually reduce your credit. It’s important to show that you are paying off credit with credit on time. If you already have or wish to apply to get airmiles card, it is one of the best reasons for having a credit card as it allows appreciation in travel miles. Do not get a new credit card if you are already in debt.

Myth: Interest rates will rise. This is the time to buy a house.

The Canadian housing market has been robust, resilient and growing. It has managed to remain outside the speculative quagmire that has snarled housing sales for our southern neighbour. The Canadian Real Estate Association changed a previous negative sales forecast to now show a 1 percent increase in sales, predicting 450,800 homes for 2011. CREA has reported only a 1.6 percent drop in sales from a year ago same period. The current average sale price, $363,500, represents an annual 7.2 percent increase, with the Vancouver market driving the lead.

Would one be desperate to rush into the market while interest rates are at their lowest? The Toronto-Dominion Bank reports home inspection rates and mortgage pre-approvals are several points down from last year. The Manpower job outlook for Canada, backing up home sales, appears positive.
This may very well be the time to get into the housing market. Due diligence must be pursued. Investigate and compare rates across the various provinces. One must understand that the Canadian economy is also part of a world macro-economic frame that is still under correction.

Myth: A college education bears multiple values.

Total student debt has been estimated at $20 billion, and student loans owed to the government increase by $1.2 million daily. With tuition rates uncharacteristically rising, up to 27 percent of students graduate with over $25,000 in debt. Defaults on the 8 percent government loans can easily compound a $30,000 loan into a $60,000 debt.

Graduating students are being forced to delay careers by taking up low-paying jobs outside their specialties. With no opportunity to build individual wealth, these students are unable to obtain credit to buy automobiles or homes.

Is college the way to go? A family’s personal finance figures importantly on planning foreseeable costs for college education. While some pundits point to a job market demanding college degrees or diplomas, others are saying the resulting student debt burden outweighs the benefit.

There’s a variety of non-repayable resources available when planning for education, just as there is a line of thought that a worthwhile profession can be obtained outside college. The family or individual must take a detailed, personal look at career prospects before committing financials or signing loans. Get a copy of “Canada Job Trends Update 2011” and go to the Working in Canada government site, among others, to obtain practical views of job outlooks

Dispelling 3 Personal Finance Myths originally appeared on Canadian Finance Blog on September 1, 2011.

Low Interest Rates: Good or Bad?

Jim Yih — Tue, 16 Aug 2011 09:00:48 +0000

Last night I was on the Alberta Primetime Money Panel and one of the questions we were asked was whether Canada will increase or decrease interest rates. There has been a lot of media speculation about interest rates and many pundits for a while have felt that rate need to rise but now with the debt situation in the US and their commitment to maintaining low rates, there is new speculation that we may see low interest rates in Canada.

The truth is I have no idea whether interest rates will increase or decrease. I’m not an economist and nor do I want to be one. I do think that rates need to stay low because debt levels are too high. significant increases in interest rates could push a lot of people into foreclosures and bankruptcy.

From a personal finance perspective low interest rates present Canadians with some key strategies for debt reduction in a low interest rate environment

Pay down debts. Paying down debts in a low interest environment allows you to pay down debt faster because more of your payment goes to reducing principle. Let’s say for example, you have a $50,000 debt at 6% interest and you are paying $550 per month for that debt. It will be paid off in 10 years. But if rates fell to 4% and you kept the payment the same, that debt would be paid off sooner by more than 1 year.
Control your spending and don’t go into more debt. From an economic perspective, low interest rates is good for the economy because it fosters consumer spending. This is an example of short term gains for long term pains and the debt situation we are seeing around the world is a prime example of the consequence of consistent overspending over years and decades. If there is one thing we as individuals can learn from this is there is no free lunch. The only way to succeed financially over the long haul is to watch your spending and spend less than you earn. The current economic environment should be an alarm clock for people waking them up from the dream of spending more than we make and having no consequence.
Consolidate your loans (but don’t forget #2). Low interest rates also create an opportunity for Canadians to consolidate high interest debt into low interest debt. A lower interest on debt is a good strategy to paying down debts faster so consolidation loans are feasible as long as you don’t continue to overspend and accumulate more debt on credit cards and other high interest debt vehicles.

Guessing whether interest rates go up or down, is really a waste of time because it’s something that we cannot control nor predict. I always so focus on what you can control. In this case, it’s about controlling your spending so you can use more of your cashflow towards debt reduction. Paying off debt can be one of the best investments you make. That’s a guaranteed winning strategy!

Low Interest Rates: Good or Bad? originally appeared on Canadian Finance Blog on August 16, 2011.

How To Get Out Of Debt

Tom Drake — Mon, 23 May 2011 09:00:00 +0000

Do you want to know how to get out of debt, but are not sure where to start? Last summer my wife and I were able to pay off all our consumer debt by reducing our expenses, increasing our income and increasing our payments.

Reduce Your Expenses

The first step to get out of debt is to find out how to save money each month. The can be anything from reducing your electricity bill to making sure you always save money on groceries. You can find room to save in almost every expense… try not buying new clothes for awhile or staying home to eat instead of heading out the restaurant.

Increase Your Income

You might have more options to increase your income than you realize. Many people might assume that the only way they’ll make more money in to get a raise at work. But other sources of income could include selling items on craigslist, having a garage sale, or more passive income streams like dividends from your investments.

Increase Debt Payments

If your serious about wanting to get out of debt, you’ll need to start paying off debt at a faster rate as you free up money or earn more income. You can pay your debts with a debt snowball, where you make a larger payment to your smallest balance until that account is paid off. This is mostly for the momentum it gives you psychologically to see some credit cards being eliminated quickly.

Instead of a debt snowball, we applied any extra money to the highest interest debt first. While it might not have been the smallest balance, I knew I wanted to eliminate the drag from high interest debts.

Have you been in debt and paid it all off? What steps did you take to get out of debt?

How To Get Out Of Debt originally appeared on Canadian Finance Blog on May 23, 2011.

The Truth About Auto Title Loans

Guest — Mon, 16 May 2011 09:00:00 +0000

For years, people have been warned against the pitfalls of using a car title loan. In the past, these types of loans were notorious for charging people outrageous fees in their time of need, and often making them dependent on their services. However, that is not the case with auto title loans.

What is an Auto Title Loan?

An auto title loan is similar to a personal loan received from a bank. The only difference is that you use your car title to secure the loan as opposed to your credit. Because credit is not attached to an auto title loan, even potential borrowers with poor credit may receive a loan based on the value of their car.

What are the Benefits of Using an Auto Title Loan?

The worldwide economy has affected everyone in some way, and for many it has caused them to tighten their wallets. However, some have been even more affected and have experienced layoffs or the inability to pay certain bills on time each month as the cost of living rises.

When life causes unexpected financial burdens, such as car repairs or lawyer fees, an auto title loan can get you the money you need in as little as one hour without forcing you to sell assets or further compromise your emergency funds. Other benefits to using an auto title loan include:

• No additional out-of-pocket expenses

• Monthly repayments suited to your budget

• A 36 month repayment period

• No pre-payment penalties

How Do I Obtain an Auto Title Loan?

Only companies properly licensed to obtain auto titles may provide a person with an auto title loan, and they will require that you have ownership of the vehicle and that the vehicle is worth at least $4,000 in order to provide a loan. Auto title companies do not generally require a credit check to secure a loan, but they all do require certain auto and income related documentation. Basic documentation that is usually required to secure a loan includes:

• Personal references

• Proof of vehicle ownership

• Proof of residency

• Proof of income

• Proof of insurance

• Drivers license

When used responsibly, an auto title loan can be a good way to supplement income without having to worry about short repayment periods or high financing charges. When considering the decision to acquire an auto title loan, always choose a credible company with a long standing reputation of excellent customer service to work with. Don’t be afraid to ask for recommendations or to turn down a company’s service when they don’t seem reputable.

Author Bio: Taylor Lawrence is a freelance writer from Lincoln, NE.

The Truth About Auto Title Loans originally appeared on Canadian Finance Blog on May 16, 2011.