How to avoid going into debt over Christmas Holidays

Stop Collection Calls

With the holiday season fast approaching, many Canadians find themselves less excited about the Joys of Christmas and more anxious about the debt that follows into the New Year.  According to a 2013 article on, Canadians – on average – spent or planned to spend close to $1200.00 on Christmas, a slight increase from the previous year.  This year, Canadians are expected to spend nearly $1500.00, with the highest priced gifts on most wish lists averaging $711.00[1].

On average, Canadians owed just under $16,000 in personal debt after the 2013 holiday season. All of this amounts to greater stress during the holidays and – by nature – a less than Merry Christmas. There are many practical ways to save money and properly budget for the Christmas Holidays without turning into Scrooge.  Whether you are trying to avoid the massive credit card bills in January or finding a way to still enjoy the holidays in the midst of a consumer proposal or personal bankruptcy, here are a few tips to help you budget and save this Christmas Season.

Tip # 1: Search for Cash Flow  

One of the biggest hurdles many people face during the holidays is setting a budget for gifts. Most people often neglect setting aside a bit each month to put towards the holidays, and instead find themselves with an inflated budget leading into the New Year. If you find it tough to put some money aside each paycheque, consider bringing in a bit of extra money by sell old clothing, books or toys to stores like Once Upon a Child or Plato’s Closet – and even used book stores and pawn shops. While you might only get somewhere between 15% and 25% of what you originally spent on it, you’ll not only be creating additional cash flow, but providing an opportunity for those less fortunate – who often rely on these type of stores through the holidays – to enjoy the season as well.

Another option is to turn your points for gas or other retailer rewards cards into gift cards that can be used to purchase gifts when the big ticket sales are happening, such as Black Friday or Boxing Day. By simply saving your points from gas purchases or purchases at retailers with rewards cards throughout the year, you can prevent yourself from overspending during the holidays. You can often redeem them for restaurant gift cards, retail chains and online stores. Gas cards themselves make excellent stocking stuffers for university and college student.

 Tip # 2: Budget & Pay Cash

A recent Bank of Montreal survey shows that 57% of Canadians admitted to making impulsive purchases when holiday shopping.[2] If you want to avoid overspending during the holidays, make a budget and stick to it.

It is always good practice for those holiday shopping on a budget to plan your gifts ahead. By doing so, you can make note of your holiday expenditures and only spend what you have to. A good way to do this is to put the cash aside for each gift into envelopes with the name of each person you’re getting a gift for on the front. This way, you only spend what you need, and avoid additional purchases that can contribute towards credit card debt.

You can avoid many impulse and extra purchases at Christmas by sticking with your budget and not falling into trap of “Keeping up with Jones” Much of the need to increase spending during the holiday season has to do with the influence of social media and advertising. Keep in mind that retailers have an immense impact on what the holidays “should look like”, thus creating an environment of materialism driving consumers to get the newest and biggest fade that drives their bottom dollar.

With a specified budget in hand, you allow yourself to keep your eyes open for the best deal on the gifts you need.

At its roots, the holiday season is about giving and togetherness. The biggest thing you can do for someone during this stressful season is to just wish someone a happy holidays, and to be there to celebrate it with them. It’s often our love for our friends and family that makes us want to give them a memorable holiday. At Don Allen & Associates, we have a number of online budgeting tools to help you budget and keep out of debt.

If you find yourself with credit card debt following the holiday season, you should turn to a bankruptcy trustee to see what your options are. At Don Allen & Associates, we can guide you in the correct path to clearing your credit card debt, whether it is through bankruptcy or a consumer proposal. Contact us today for more information.

[1] –

[2] –

How Can I Stop Debt Collection Calls?

Stop Collection Calls It’s no surprise to anyone that – whether you are in the midst of a financial crisis, or have had to miss or otherwise forgo a bill payment – debt collection calls only add on to the stress you’re already dealing with. The last thing you need is someone reminding you that you owe money, but nevertheless, a collection agency still has a job to do.

What you should be aware of are your rights, and collection regulations, if you find yourself being harassed by a collection agency. You should note that it is not the prerogative of a collection agency to inform you of your rights with regards to collections.

What is a Collection Agency allowed to do?

How a collection agency works is simple: your creditor does not feel that the amount owing warrants legal action, so they pass along your file to a collection agency. The collection agency will then send you a letter, which informs you of your debt owing, your creditor’s information, any other pertinent information, and above all, that they are now the company in which you will be dealing with to repay whatever is owed.

A collection agency can contact you regarding the debt(s) that you owe, and is allowed to use any means – given that they are reasonable – to get you to pay your debt. A reasonable means should not, in any way, be detrimental. An example of reasonable means would be assisting you in setting up a payment plan in which to pay off your debt.

What are Collection Agencies not allowed to do?

  • A collection agency cannot threaten you regarding your debt
  • A collection agency cannot charge you with something that has nothing to do with your debt
  • Collection agencies are not allowed to make abusive phone calls, which include bullying, harassing, foul language, or any other forms of verbal abuse.
  • Collection agencies cannot contact your employer without your written consent, with the exception of one call to confirm your employment
  • The hours a collection agency can contact you are as follows:
    • Sundays between 1PM and 5PM
    • Mondays through Saturdays between 7AM and 9PM
  • The hours a collection agency cannot contact you are as follows:
    • Any day of the week outside of the allowed hours listed above
    • Contact is not allowed on statutory holidays
  • Following the initial conversation with a collection agency, the collection agency cannot contact you more than 3 times per week.
  • A collection agency cannot give false, misleading or defaming information to any person, for any reason
  • Collection agencies cannot make legal recommendations to a creditor that would result in any court process without first notifying you of this intention

I Feel I Am Being Harassed – What Should I Do?

If you feel like you are being harassed, refer to the above list of what a collection agency cannot do. If they are in any violation of these rules, you can file a formal complaint. The official website for the Province of Ontario has all the information you’ll need in making a consumer complaint:

What Should I Do When I Receive A Collection Notice?

First and foremost, contact the collection agency right away. This helps you avoid further complications with collection agencies.

Your next step, with the initial call to the collection agency, is to make arrangements to pay. Collection agencies are 99.9% of the time more than willing to assist you with a payment plan.

If you’ve made a payment plan, or other arrangements to make payment(s), make these payments. The only sure-fire way of getting collection agencies to stop calling is to make your payments. One thing you should not do is arrange to make payments that you cannot make. This will only complicate issues further.

If you find yourself unable to make payments, then your next step should be to contact a Personal Insolvency Trustee. At Don Allen & Associates Inc, we can assist you with a number of options from consumer proposals or bankruptcy, and help you get your life back on track.

How to Survive Without Credit Cards – Part 2

Flight Without Credit Card Booking a Flight without a Credit Card

Filing for a Consumer Proposal or Bankruptcy can be a very intimidating process.  There are a lot of questions and concerns about managing without having Credit Cards.  Our previous blog discussed two questions that often arise regarding this, “How do I book a flight without a credit card?” and “How can I reserve a hotel without a credit card?”  The key to both situations is always plan ahead.  Reserving a flight can often times be easier than reserving a hotel without a credit card.  Here are a few keys to get you started.

Do Your Homework

West Jet Airlines

Although many airlines and websites require you to pay by credit card for a flight reservation there are still many other airlines that accommodate patrons who wish to pay by cash or debit.  Be sure to call around and do your research the same way you do when you are looking for a cheap flight.  For instance, in Toronto, one Canadian airline that is good to start with is West Jet.  Here is a look at their policy regarding booking from their website.

  1. When do I have to pay for my flight?
    WestJet requires payment at the time of booking. If you do not have a payment card, you can book your flight at one of our airport locations or at a travel agency.
  2. How can I pay for my flight?
    We accept American Express®, Discover® and Diners Club International® cards, MasterCard®, Visa®, Visa Debit®, and Universal Air Travel Plan (UATP). WestJet gift certificates purchased prior to October 1, 2009, may be redeemed* by calling 1-800-581-9499 or at a WestJet ticket counter. We also accept debit and Canadian cash at our Canadian airport locations, and U.S. cash at U.S. airport locations. For international airport locations, the accepted forms of payment vary. Please call us for information on a specific location.

As you can see the one significant detail regarding booking a flight with cash or debit is the need for you to do so at either an airport or travel agency.  Keep this in mind and again make sure you plan ahead.  It may mean a trip to the airport a few weeks prior to your trip in order to make sure you get the flight you desire.

Visit a Local Travel Agency

If getting to the airport is not an option because of distance or time restraints you can also look into booking a flight through a local travel agency.  For example, Flight Centre in Barrie offers a wide variety of options when booking a flight or travel package.  Some options include paying by cash or debit for the flight or buying gift cards to use towards flights in the future.  Also they offer an option of starting an account that you set aside money in to help with saving up for a vacation or flight that you can redeem when you have saved the needed funds.

No matter the situation you are facing, getting a handle on your debt is an important step and whether you are filing for bankruptcy or a consumer proposal, with proper budgeting and some planning ahead you can still enjoy vacations and travel without out the need of credit cards.

How to Survive Without Credit Cards – Part 1

Hotel without Credit Card Booking a Hotel without a Credit Card

Often when entering into a Bankruptcy or Consumer Proposal many people are concerned with how they can manage without the use of Credit Cards.  Two of the most common questions people face are, “How do I book a flight without a credit card?” and “How can I reserve a hotel without a credit card?” Although the process can sometimes be more complicated, it still is possible.  Here are some simple tips to keep in mind when facing this situation.

Plan ahead

When booking a hotel you will want to make sure you call ahead to the city or destination and see what hotels allow for debit or cash reservations.  When searching places to stay look for local, non-chain hotels or even bed and breakfasts as well as more common hotel franchises.

Prepare For Security Deposits

Make sure you also state that you will be paying by cash or debit and that you won’t have a credit card for a security deposit.  Some hotels will allow you to stay if you authorize a security withdrawal to cover incidentals, damage, or amenities like mini bar and pay-per-view.  This money will be refunded to you at check out, but be sure to check if there are any delays for refund as some hotels can hold deposits for several days.

Pay Upfront

Debit Credit Card Logos By paying for the stay upfront you ensure to the hotel manager that they will get the appropriate funds for the stay.  This is often a guarantee for hotels with credit cards.  An upfront payment on your room limits the risk and conveys a certain sense of responsibility and liability for the room. As well many debit cards now come with Visa and MasterCard logos making it easier to use debit as an alternative to credit.

Finally, remember to budget accordingly.  Make sure you set aside the appropriate amounts needed for the stay and still have extra finances and cash to cover your meals, gas and other travel expenses like souvenirs and attractions.  Preparation is the key to a great vacation.

Secrets of Plastic Debt: Finance Infographic

We came across a very interesting article that shed a lot of much needed light on a very dark section of our wallet, the Plastic Debt! We were stirred up by many of the points and wanted to share some with you in a unique way. Hope you enjoy some of our favourite points!

  • The host of Til Debt Do Us Part, Gail Vaz-Oxlade tells the couples that she counsels to try and live on only cash for one whole month, create a budget and record all purchases.
  • When someone pays with cash, our first thought is “They were not approved for credit.” We couple the fact that someone uses cash to poverty. As if they are scrounging to get enough money together to pay their bills.
  • When someone pays with credit, we assume they have all their financial ducks in a row. When in reality, they either are well educated on how to use credit properly, or they are driving themselves further into debt.
  • Now a days, our issue is that most of us don’t really know what our income is. Our credit gives us the illusion of a bloated income, although reality is we are sinking in debt.
  • In order to put together a manageable and accurate budget, it’s necessary to do a spending analysis. In order to complete this analysis and come up with an honest review, you will need to consult both your credit and banking statements to get a full picture of your spending. For instance, your actual grocery list might average a total of $200 a week, but you are spending additional funds on lunches while you’re out and a coffee every day on your way to work. By examining every spending habit, your able to give yourself a better idea as to how much you are spending and where is feasible to cut your spending if needed.
  • Many financial experts say the best way to tackle a manageable budget is to seriously consider your needs vs. your wants, and to continually pay off as much debt as possible. These experts include Ms. Vaz-Oxlade of Til Debt Do Us Part, Don Allen, trustee and owner of Don Allen & Associates, and Jeffery Schwartz, executive director of Consolidated Credit Counseling Services of Canada Inc.
  • Ms. Vaz Oxlade separates these into three categories, one being your “essentials needs”: debt repayment, savings, rent, transportation etc. The second being “nice to have needs” : clothing, addition food allowance. All extras fall into the third category. Although your income may be minimal or inconsistent, it is best to plan each budget a month in advance, to guarantee that  this month’s income will cover next month’s budget needs.
  • We know what you’re thinking, what about all those unexpected expenses that bust our budgets out of the water. It’s best to setup a fund for these expenses. This way when you need that new set of glasses, or a new part for your car, you can refer back to this fund. It may take awhile to build up this fund, but deposit whatever you can into it, whenever you can. Every penny adds up and every dollar counts. A good way to keep up with this, is to give yourself a challenge. Add a dollar every day to your emergency jar, or every time you come home, empty your pockets into the jar. Remember, this is your EMERGENCY fund, not your chocolate emergency fund.


Cars and Increasing Debt

The average Canadian non-mortgage debt reached $26,211 this year, the highest level since 2004 and 2.4% higher than a year ago. A large portion of this increase was an increase in car loan debt, which is up 13.2% over a year ago. Credit card debt and lines of credit remained virtually unchanged.

Canadians are continuing to take on debt faster than incomes are growing. Disposable income grew at an annual rate of 2.3% in May but households are taking on debts at a rate of increase of 5.7%.

Household debt is at a record high of 150% of GDP, which is higher than in the USA.  People are thinking that low interest rates will continue to be with us for a while and therefore they are getting more into debt.

The Bank of Canada has done some studies and estimates that “highly indebted” households (those that spend 40% or more of income on servicing debt) could rise to 10% in 2016 from 6% in 2011 if interest rates reach 4.25%.

In addition to the cost of buying a car, there is the maintenance, insurance and ever increasing gas cost. A 2006 study estimated the average vehicle costs $8,003 per year to own and operate – $3,421 for purchasing costs, $2,227 for gas and oil and $2,355 in other vehicle-related costs. Other studies have estimated that the gas, maintenance, license, registration, loan finance and depreciation for a small sedan model is $.50 per mile if you average 10,000 miles, $.41 if 15,000 miles and $.37 if 20,000 miles. This does not include parking costs.

Consider reducing your costs of this expensive asset by; taking more public transportation, car pooling, alternate driving with friends, drive as small and fuel efficient 4 cylinder car as possible, ride a bike or walk more for errands and consolidate your trips.

Learning to Live Off CASH

Learning to live off cash, without credit cards, can be a challenge initially if you have been used to living with the help of credit cards.  We help all of the people we see with budgeting, to show them how to budget and live off cash, without the use of any credit cards.

First, buy a small notebook to use as your spending journal. To really understand where you have been spending, you have to go back over at least the last 6 months of bank statements and credit card bills to see what you have been doing with your money. You need to know this to change your behaviour and cut your spending. Come up with average weekly amounts spent in each major category of expenses.

Get your last year’s tax return or assessment or your most recent pay stub and calculate the average monthly net take home pay you are making.

Summarize your expenditures under the major expense categories eg. Food/Personal Care, Transportation, Rent, Utilities, Entertainment/Gifts; Clothing and Other. You will have to adjust the numbers you have been spending to match the net income received.

For unexpected emergencies, you need to set aside a small amount whenever you can to contribute toward these. Take the change out of your pocket each day and put it aside to deposit weekly into this savings account so it will build up and be available when needed. Automatic pay deductions of 5 or 10% off each pay directly deposited into this account are good and you will learn to live without this money until the emergency.

Take clean jars and some envelopes and label them for the expense categories above.  Load each jar with what you determine is a week’s worth of cash for each expense category. When you go out to spend, take what you need in the appropriate envelopes. Then, it is very important to keep receipts and record in your notebook what you spent on the same day you spent it so you will remember accurately.  Review this each week to ensure you are staying on track.

Doing this will become easier and will give you amazing peace of mind, not having to deal with the stress of credit card bills and hounding creditors.

Low interest rates are luring us into borrowing with equity loans

Catherine and her husband tapped into their first home equity line of credit 15 years ago to borrow $15,000 to buy a car at low interest rates.

A few years later they needed another car so the bank raised the loan to $70,000.
Then Catherine unexpectedly lost her job and it took her over a year to get another job with much lower pay.

Now the line of credit is just around the maximum level.

“We try to put in $1,000 per month to pay it down and we just end up taking it right back out. The money is just too accessible.”

Catherine would like to boost their line of credit by another $40,000, use that to pay for another kitchen she badly wants and then repackage all of their debts into a mortgage, which they would eliminate though structured monthly payments.”

Their story is a common one. Lured by very low interest rates, Canadians are taking on record debt.

A recent Statistics Canada report showed that household debt rose to a new high in the second quarter of 2011, surpassing U.S. levels.

TransUnion credit bureau states that the average Canadian has more than $25,000 in consumer debt including credit cards, lines of credit, student debt and car loans but excluding mortgages. The bulk of it is from lines of credit with low interest rates.

Consumer spending accounts for 64% of our economy.

People sometimes take out a line of credit to pay down more expensive credit card debt. You then lose track of the increased loan amount you owe and the credit card spending levels start to creep back up.

Lines of credit balances have increased 95 fold since 1985, compared to incomes and economic output having increased only 3 times. Some of this has gone into investments but a lot has gone into financing second cars, vacations and other non- appreciating goods.

You should ask yourself the following questions:

  • How much debt do you have? 
  • Will you be debt free at retirement? Take your total family debt and divide it by the years to retirement. Say it is $200,000 and you want to retire in 10 years. Can you handle repaying an average of $20,000 per year compared to your family after tax income?
  • What is the ratio of debt to your family income? The average Canadian household has a debt-to-personal disposable income ratio of 151%. Calculate this by your total family debt divided by your family’s annual after tax income. If you are below this level, you are in a better position.
  • What type of debt is it? If most of your debt is consumer debt (credit cards, lines of credit) to buy consumer debt, this is more risky that mortgage debt to buy the home you live in.
  • What interest rate will you pay? Credit card debt is especially high. If you are going to add debt, obviously it is better to add lower interest type of debt.
  • Will a fixed-rate mortgage protect me? Many people have mortgages and lines of credit at variable interest rates tied to the prime rate, which is currently 3%. When the interest rates rise (likely we are told, starting in 2012), the resulting increased monthly payments may be too much for many to handle.