Overcome Your Fears about Money

As the deadline for this week’s blog approached, I caught myself making excuses.

“I don’t have to write.”

 “I can skip a week.”

“No one will miss hearing my writing voice.”

“I don’t have time to write.  The financial plans I am working on are piling up.” 

Ironically, the biggest reason for not wanting to write about “fear” was because I was afraid. I felt like I couldn’t pull enough information together to create the “perfect” blog.   Maybe I was meant to encounter this anxiety so anything I would say would be truly authentic.  Now you know you are not the only one who has fears.  The fact is most people are afraid of something.  Having fear about money may very well be on the top of peoples’ lists.

I know the anxiety that comes with money shortfalls. Following my divorce, I went on a spending spree.  I took a vacation to Vegas, shopped for clothes, and spent money needlessly.  After consoling myself, the reality hit home when the credit card statement arrived.  This kind of behavior was abnormal; it had to stop or I would be in financial doo-doo.   Since I was supporting not only myself but a child, I needed to control my spending.    

Your fear may be having too much debt or not having enough money to meet your lifestyle needs.  You feel stuck.   The unknown is frightening.  But here’s news for you.  You can overcome those fears with a plan of action. 

Life isn’t intended to be lived in fear.  You have to find a way to move in the direction you wish to go rather than digress in the opposite direction because you are afraid.  Finding ways to personally deal with the fear about money is the ideal solution.  Books, articles, and Internet searches reveal a wealth of information on the subject.    In my quick search of resources, I found an entire chapter in the book, The Secret, dedicated to “The Secret of Money”.  Jack Canfield’s book, The Success Principles, devoted a chapter to “Feel the Fear and Do It Anyways” which coincidentally is the same title to a book written by Susan Jeffers. From the 352,000,000 links on the Internet, I picked only two, Kristin Wong’s blog, A Guide to Managing your Fear of Money and Tony Robbins’, Are You Free of Financial Fear.  Obviously, the fear of money is something shared by an astounding number of people.

 

 

Certainly, I am not an expert in overcoming fear.  I know, however, from my experience that fears can be overcome.  My simple prescription is to follow the 3 D’s:  Decide, Decipher, and Devise.   

Decide

You have to decide whether you want to live in fear or whether you step forward courageously and do something (anything) to get out of your rut. Understand that when you acknowledge your fear, you are now in a stronger position to take control.   You might even seek professional help.  Setting aside any feelings of shame or embarrassment is not only a bold step on your part but an important one in the right direction.

Decipher

You will need to decipher the best approach to conquer your fear. When dealing with debt, you need to determine your options. This may require working with your creditors to pay off the debt, looking at your sources of income, or examining your spending habits to identify the necessary changes. If this means living on the bare minimum for a time, so be it.   

 

 

Devise

Once your decision is made and your options deciphered, you are prepared to devise the plan.  Sticking to the grueling task of doing what needs to be done will give you immense peace of mind.  When things get out of hand, handling money responsibly becomes extremely important. Taking ownership of your mistakes with a well-devised plan will help overcome your fears.  This only happens because you are doing “something” to rectify your past mistakes.  Make your phone calls. Take advice from appropriate people who offer assistance. Execute your strategy. 

Litany Against Fear

This litany may be your best ammunition against fear.  When you resolve to tell yourself there is nothing to fear, your mind has no room for the fear.  The greatest favor you can do for yourself is to put this into practise.  Read this litany repeatedly.  Your fears should dissipate into nothing because you had the courage to face them.   

 

Understanding the True Cost of Payday Loans and Cash Advances

Anyone strolling down Robson Street in downtown Vancouver may disregard this type of sale advertisement unless you happen to be a financial planner or desperate for a cash advance.   As a financial planner, I took note of this particular signage because my plans were to address this in a blog post.   But I also remembered the first time I applied for credit. I made an application for a Sears credit card and was declined.   I felt devastated and ashamed yet I trusted that the company’s reasoning must have been valid. The reason for the decline could have been missing or inadequate information and even lack of credit history.  I didn’t understand and I didn’t ask. Now I will never know.

When people are refused credit, they become desperate in times of distress.  Payday Loans and Cash Advance stores are frequently being used by people who find themselves in these types of situations. They may not fully understand the fees and true cost of borrowing from these venues.  At first glance these may sound like great deals but really aren’t.     

Calculating the Cost of Borrowing

The Financial Consumer Agency of Canada (FCAC) provides a clear illustration of the cost involved with payday loan compared to other ways of borrowing.  Undoubtedly, you can see the price difference you pay when you borrow $300 for 14 days.  This information should convince anyone from using cash stores. It’s all in the math. 



Financial Consumer Agency of Canada


The costs shown in this example are for illustration purposes only. Calculations of costs are based on the following assumptions:

• a payday loan costs $21 per $100
• a line of credit includes a $5 administration fee plus 7% annual interest on the borrowed amount
• overdraft protection includes a $5 fee plus 19% annual interest on the borrowed amount
• a cash advance on a credit card includes a $5 fee plus 21% annual interest on the borrowed amount.

 

The Good, the Bad and the Ugly

One cannot dispute the “good” about the payday loans.  They are convenient, providing quick access to money within the hour. The advertisements proclaim “no credit check”. These are probably the only visible “good” things about payday loans.

Behind the good is also the “bad”. Some people find themselves growing dependent on regular advances every payday.  When a part of a paycheque is used to pay off your debt, a person will find themselves short of money for other expenses.  Once again, they will be forced to apply for another advance. The endless cycle begins and develops into larger advances.  The associated cost takes more from their paycheque than just repaying the borrowed principal.

The “ugly” is the fees deemed to be reasonable by the Canadian Payday Loan Association (CPLA).  The cash stores make no mention of an annual interest rate since they only charge a fee for their service.  When these fees are translated into an annual interest rate, they’re ugly.   The law requires the cost of credit to be disclosed by defining the APR (Annual Percentage Rate), the rate of interest charged on a loan each year.  At the Money Mart® website, the fine print states for Saskatchewan residents, the APR on a $300.00 loan for 14 days is 599.64% on a rate of $23.00 per $100.00 borrowed.  This calculated annual interest rate of 599.64% is not a typing error.  That’s enough to blow anyone’s mind.  The cautionary message can’t be any clearer than this “Payday Loans are High Cost Loans.”   

Breaking the Cycle 

People depend on these types of loans because they may have been misled into believing their credit is poor.  Although their credit is below the standard requirement, they may not have any direction how to fix their credit score.  Any effort to improve a credit score in order to apply for a Line of Credit or Overdraft Protection at a bank or credit union will save money when borrowing is necessary.

People have also felt intimidated by financial institutions because of what others have told them or even from their past experiences. Their fears may be unwarranted.  Finding the courage to develop a relationship with someone at a bank or credit union where they feel comfortable will diminish their fears. 

In his book, The Success Principles, Jack Canfield emphasizes taking 100% responsibility for your life.

Don’t be afraid to ask. Most people are afraid to ask for feedback about how they are doing because they are afraid of what they are going to hear.  There is nothing to be afraid of.  The truth is the truth.  You are better off knowing the truth than not knowing it.  And once you know, you can do something about it.

Fixing the Problem

The only way to wean oneself from using payday loans may be to find some way to earn extra cash.  The purpose is to simply get ahead.  If that means working an extra job for a short period of time, then do it.  If it means borrowing money from friends and family with full intentions of paying them back, then do it.  Doing nothing other than paying more money in fees than you borrowed does not make financial sense. Two other solutions also come to mind. First, learn how to prepare for an emergency. Second, apply the teaching by Bob Proctor who instills the message, You Were Born Rich.  The answer might not be so simple but you must do something so that cash stores will not be the solution to put food on the table.