I think it's only fair that I start this post with a picture of me in a different phase of life. It shows that everyone starts somewhere, as I laid out for my young padawan this very evening.Young Chris I'll call him to preserve his identity said to me "Peter, Master, I have accumulated debt, but I want to be like you one day, where should I start?"
I looked upon him with kindness and asked how much debt we're dealing with. He said it was somewhere short of 50'000 in student loans, credit and vehicle. I had to think hard. I've a lot of places in this life, but never that far down the debt road, and I've obviously never paid for education. I took three long sips of whiskey, bummed a cigarette, then pulled an answer out of my posterior.
"Chris, it's going to be a while before you're out of debt" I said "the best thing you can do is consolidate to a single loan payment with a ten year term which will cost around 550 a month. You can then write off the interest. The next thing is to make sure you have a home business to obtain as many write offs as possible. Then exercise some discipline, and put something into savings each month."
I know he makes a worthy wage, and so I told him my secret to wealth: "Buy East Coast Canada. The rent to purchase ratio is very much in favor of the investor."
He told me that he thought of buying a love pad for him and his wife, but upon reading B.L.I.P. he realized it ain't such a hot idea. His rent is in the 900 range so he needs to stay renting and put aside 500 a month to purchase his first investment.
I told him that as a treat, when he purchases he can have the privilege of being an admin on this blog, because until he buys, he ain't got nuthin to say.
Mr. Taylor (#2) - reached full jedi status
5 comments:
Dear Chris,
First of all, you have done well seeking advice from Taylor 2 - he has amassed for himself large quantities of experience. And what I admire most about him is that he is willing to try, willing to fail, willing to get up and try again all while raising a family and pulling answers out of his posterior. Note that this will be my last compliment to that white gansta bum.
I would only ask T2 why he recommended just 1 consolidated loan? Is it more for the convenience of managing or is it because there are many folks competing for our debt interest and wouldn't mind paying off our debtors, take on the debt, and still make a decent interest payment off us? I'm most interest in this topic. I think Disposable Joe might have something brain-like to say about Red Frog and those kind of consolidation dealios..?
I would also encourage you to focus on that home business aspect. I have read in many sources and started myself a home business (actually 2) to make sure that I can shelter as much cash from the tax mang.
The good news for our generation is that there are many, many multi-level marketing businesses out there. I strongly recommend these as a starting point because
a) they are legitimate businesses (there are freaky ones, too, so do your homework) that offer legitimate tax write-offs
b) they are usually quite reasonable to start
c) they usually come with great support systems (like a franchise, if you will)
d) you will learn how to deal with rejection as you build it
e) you will learn a million other skills.
Otherwise, you may have a business interest such as a woodworkin', drywallin' or guitar teachin'. I would strongly recommend that you change your current 'job' into a feasible 'business'. For example, if you are teaching guitar for Big Ralph's Guitar Shop, why not start "MC Joe Dog's Private Guitar Consulting Firm" and make $5/hour more and get a wack of tax write-offs? That's what I'm talking about, Chris. Work it.
Hope that helped.
Quite right Mr. Taylor (#1), I do have a few [red] frogs in my throat to share.
The Red Frog (www.redfrog.ca) and the Manulife M-1 plan (http://www1.manulifebank.ca/E/m1/calculator.html)
[err calculator?]
Anyway these fancy names follow the idea of consolidated debt. Yes, it is easier to manage one pool instead of multiple pools of dept. I use the term "pool" because this is how the consolidation works:
[delete long, confusing analogy about frogs in a pool]
[delete explanation again]
OK, after multiple failures, I recommend just watching the flash animation on the redfrog.ca website.
But, here are a few points about consolidation:
1. One prime interest rate instead of multiple different rates.
2. One payment pool. The more money you put in, then less debt you have (instantly!) and the less interest you pay, since it is calculated daily.
e.g. You owe $100,000. You input $3,000 into the account. You now instantly owe $97,000, and the interest you pay is on the $97,000 instead of the $100,000 for that day.
2a. Pay off your debt faster. Since you don't have to separate your savings from your debt paying, all of your income can go towards the paying off the debt, though in actuality that money is still available if you need to take it out. But, you only take out as much as you need; the rest still goes toward the loan for that day.
OK, so I failed again at explaining. It really requires pictures. Just watch the demo!
The main point is that it's not just about management. Consolidating debt actually saves you money.
I gotta get back to "MC Joe Dog's Private Guitar Consulting Firm."
DJ! Congrats on your guitar consulting firm. You really took that idea and ran with it.
T2 - who's the long-haird wacko in the photo you posted? Good thing I'm not a bank cuz I'd say "sorry we're closed, son." Incidentally, one day I might have such a photo to post if one were to keep on me long enough.
Red Frog - it would appear you need a mortgage to start taking advantage. Bummer! It was looking good until I saw that. But it all comes back to buying versus owning (refer to our other hot topic). They only want your house because the house is the only thing that has a guaranteed lasting value. That's why Red Frog will let you borrown 90% of the value of your 400K house (that's the example they give). So you consolidate those debst based on borrowing on your house.
So how do they profit? I guess they get your mortgage.
Ok. I'm in the middle of trying to buy this coffee shop so if I'm not checkin' in much, it's not because I don't have a lot of hot air to share. I'm just a busy bee, thou and thee.
I did consider red frog (not realizing it was mortgage only) because I usually have a good lump in my account, but that being said, then I would have to change all my banking over, and that's a lot of work.
Well, when I contacted RBC and gave a hint that I was looking at Red Frog as an option, they immediately gave me a speel (how do you spell that dang word anyways?) about how RBC also has a 'homeline' program or something. She said it worked the same way. I figured that if Red Frog had a good thing going that the big boys would be on their arsenic shortly after patenting it. So, maybe you could talk to your financial institution and say "I'm thinking of switching to Red Frog. Do what they can do for me or lose me, baby." And see what kind of cool programs they pull out of their hindquarters.
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