If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 8  Pay your small debts first. It will give you a feeling of accomplishment and then you can pay the larger ones

Better

The highest priority would be the debts with the highest interest rates

The next is callable or secured debt.

The interest rates imply the rule of 72, pay the highest off and you save money. Callable debt is a demand debt such as a line of credit. Remember all financial institutions does a soft credit check on their borrowing customers quarterly and with more artificial intelligence and use of big data, many more often.

Myth 9   Cash in your Registered  Money to Pay off your Debts

If you have assets in registered funds for your retirement they are locked in and unless your income has fallen because there are income tax considerations to take into affect when taking money out of registered money, it may be better to leave it. The collection agencies can not get the courts to unlock your registered money to pay the bills.

What a bankruptcy court can take is

Tax free savings accounts

Registered education savings plans

Investor accounts

Bank accounts

Contributions to your registered accounts in the last year.

If you went into bankruptcy, you need to know what accounts can be and cannot be touched. If you are going to lose them, take the money and pay down the debt. If not perhaps the answer is to wait.

Myth 10  Payday Loans are a short-term fix for a temporary problem

Other than a loan shark (who will break your legs if you do not pay), a payday loan is the most expensive form of borrowing there is. A charge of $18 per $100 borrowed for a year cost 468%. The conventional wisdom is a payday loan to tie you over to payday, but the reality is 83% had other outstanding loans and are repeat customers. The real issue is high debt being carried by many people so they have very little option except to go to payday loans.

Myth 11   There is Good Debt and Bad Debt

The truth – debt is neither good nor bad, debt is a tool.

Linking to dividend paying stocks, unlike debt which people can make moral judgements about, dividend payments means the company is profitable and shares its earnings with its shareholders. There is no morality there, it is better to invest in profitable companies and if those companies stay profitable for a number of years your investments based on share price and dividends (total return) will be secure and be good. The more you receive the more options you have to do what you think is right.

There are more questions than answers, till the next time – to raising questions.