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I have a truck loan(50k), 3 lines of credit(140k combined), and a visa (6k).
I make ~[REDACTED]/year total income from all sources. But I am not getting ahead. At least it doesn't feel like it to me.
Should I be seeking a debt consolidation expert? a financial advisor? a tea-leaf reader?
It depends : do you thing you can do it all by yourself?
Do you have a budget? This is usually the first step we'll recommend here, as knowing where your money goes is important to understand why you're aren't getting ahead. If you can post more details here on your income, your spendings and your current debt (amount, rate, minimum payment), we may also be able to point you toward the right direction.
I definitely can't do it on my own. There are so many intricacies involved in all the different options.
Without going into much detail. My debts grew when I was making much less salary. Like... less than a quarter of what I make now - and now that I am in a new position I think I need to speak to an expert and give them access to everything.
The stupid part of my question really is: Who should I be talking to? Does the expert I need have a single title/role? Or are they multiple people?
A debt consolidation expert will usually look at how to reduce your debt payments, and a financial advisor will usually try to sell you investments, which may not be appropriate here.
While that's not the right wording, I think you need some kind of money coach (please do not search that on Google, you'll mostly get grifters and scammers): I feel a financial planner (CFP or maybe QAFP) would be better suited for your needs, but not all of them go as far as you seems to be interested in. You could still identify a few of them in your area, and check if that's something they'd offer. I have also met a few accountants/CPA that offered these kind of services: going through your spendings and debt with you, making a budget and a savings plan, and following up every now and then to see that the plan was executed correctly, but I haven't seen it offered recently, as CPA have been in quite a high demand these last few years.
This is a great answer! Thank you kindly for the well thought-out response. I will contact a few CFP/QAFP folks, and send a line out to local CPAs. I think the latter would probably be the most comfortable for me. Someone who I can get a relationship going with, and who has an interest in me making progress beyond trying to sell me an investment when I'm so much in debt.
I will now edit my post to remove the salary amount, as a few people have messaged to let me know that is probably not a great idea :p
Just a quick FYI on the CPA vs CFP debate: they really have different missions. To make it simple, a CPA's goal will usually be to give you more money now, which will usually imply reducing how much money you give to the government this year, and the next, and the next. A CFP's goal will usually be to give you more money over your life, which will usually means having less now and more later, especially during retirement
To give you an example: I work through my own corporation, and my CPA advises me to pay myself through dividends as much as possible, as it allows me to lessen my tax burden, while my CFP advises me to take part of my revenue as salary, which costs me more in the short term but give me access to both QPP (Quebec equivalent to CPP) and RRSP room.
They are both right, and both very useful and complementary, but they have very different philosophies that you need to account for when deciding which way to go.
Thanks! It sounds like my best bet is a CPA to figure out how to get the most out of the money I am bringing in now, and then take the numbers to a debt expert to see if I can make it happen.
Would it make sense to go to a new bank (all my current debt is with one bank) and speak to them about moving my finances there and doing consolidation/reworking to get the best payment scheme to get the debt serviced quickly without impoverishing me? Or would you recommend going back to my current bank first?
Quite frankly, no advice here, YMMV: maybe your bank want to keep you as a customer and will give you the best deal, or maybe a new bank will give you a better deal to get your business.
There is no risk in getting in touch with a new bank to see what they can offer you, or to look for better deals, even for part of your debt if you don't mind the complexity.
Depending on your credit card debt interest rate, and your LOC rates, a good first step may be to repay your credit card with your LOC if you have some room, as CC rates (often 20-30%) are generally higher than LOC rates (10-20%). It will also make your situation more simple.
How do I get out of this state of mind and get serious about taking accountability with personal finance.
I was hopping someone else would chime in as I don't really feel competent in term of state of mind, but I'm going to try my best.
First : don't feel behind, you're probably not. You may have bought a place at peak market, but your living in a place you like (I hope) and you have options in case things go south, wether renting your rooms to other people, or even selling the house.
In terme of finance in general, taking accountability is kind of hard, as it seems overwhelming. The flowchart that you got in the other comment is great and you can follow it if you feel like, it'll get your finance in order if you give it time.
I recently had to deal with someone, my brother, that had neither the mental space nor the interest to deal with something so complicated but needed to get his finances in order, so we did the following :
• listed all his mandatory expenses (utilities, rent, food, phone, internet, ...). Those came out below his income, which was awesome.
• we then added some padding to these expenses to account for unexpected expenses and things he had forgotten, and planned some amount to be saved, and some to be invested.
• we automated his finances as much as possible : most of his bills are paid automatically, and so are his credit cards, his rent, his savings and his investments. He had a credit card that didn't offer automatic payment : we closed it.
• we opened a new account with a prepaid card (like KOHO), where he receives an "allocation" from his income every week : that's the money he can spend this week. If he tries to spend more than there is on this account, the transaction is refused by the bank.
We did that a little more than a year ago, and he has been much better since : he is able to make all his payments, has some money invested, his savings have been kind of depleted by a holiday he took recently but that's what they are here for so no big deal, and he even has some money left on his prepaid account so that he can pay for something more expensive if he wants to, as he know he can spend this money. He still has absolutely no interest for it though, but we now take around 1h each month to review his numbers around a beer, to adjust what's needed, and that's more than sufficient.
So much of information everywhere - it's overwhelming for someone like me who's looking forward to getting started on generating wealth through investing.
Where do I start with investing. Is there a flowchart for that just like the one for general PF?
You can refer to the flowchart in the stickied post, you can find it here.
It hasn't been updated to take into account the FHSA yet, but it's otherwise relevant.
Would be nice to get a sanity check: I'm planning my portfolio as 40% CASH, 40% VEQT, 10% private credit and 10% managed portfolio (Wealthsimple). Is that reasonable? Am I silly for using those WS offerings and would be better to just focus on CASH/VEQT? Should I balance 1/2 CASH and 1/2 VEQT on all self directed (TFSA, FHSA, RRSP, non-registered) or is there a more efficient allocation?
10% managed portfolio (Wealthsimple)
Depending on your risk level, it should be equivalent to 50% VEQT-50% CASH, but with more fees. IMO, you're better off with CASH/VEQT, as I hate WS habit of tinkering every few months with their managed portfolios in order to justify their higher fees.
10% private credit
One question: why? What are you trying to achieve? The fees are quite high (asset management fee of 1.25% + Wealthsimple’s standard managed account fees + a 15% performance fee on returns over 5%), and the results are completely unproven at the moment.
is there a more efficient allocation?
There is indeed a more efficient allocation: basically, you're better off keeping your equities in registered accounts, and your CASH in NREG, but the math get quite complicated quickly. Justin Bender has had a few articles on the topic, for example here and Ben Felix has a great video on this topic.
IMO, you’re better off with CASH/VEQT
Sounds plausible, thank you for your input!
One question: why? What are you trying to achieve?
An experiment. I believe in the power of index funds but I also believe that we're living weird times and I'm curious to see if they can deliver on the promise.
There is indeed a more efficient allocation: basically, you’re better off keeping your equities in registered accounts, and your CASH in NREG, but the math get quite complicated quickly. Justin Bender has had a few articles on the topic, for example here and Ben Felix has a great video on this topic.
Amazing, that's what I was looking for. Thank you!
