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The Team
 

Meredith MacLeod
Business reporter
905-526-3408
mmacleod@thespec.com

Lisa Grace Marr
Business reporter
905-526-3992
lmarr@thespec.com

Photos and Video
by

Barry Gray
Staff photographer
bgray@thespec.com

About the series

The Way We Spend is a 13-week multimedia series appearing each Thursday in The Hamilton Spectator and on thespec.com. It will feature four local families who are learning how to tighten fiscal belts, cut back on indulgent spending and save in a healthy way. The Lepp, Greenway, Hamilton and Butler-Morris families were selected from more than 50 submissions. They have been paired with local financial experts, set financial goals and are embarking on a money makeover. They will each receive a $500 gift card from Staples and other gifts.


Cindy and Steve Greenway will hold one another accountable for sticking to their budget.

Bankruptcy’s relief: family breathes easier

Drastic step gives Greenways opportunity to set goals, communicate, de-stress

By Meredith Macleod

In the end, it takes 32 signatures and 14 postdated cheques totalling $3,690, and the Greenways are bankrupt. “We can start answering the phone again,” Cindy says, as she signs her name for the 25th time.
Coming to this decision has been agonizing, but the Greenways say it is a great relief. They’ve known for a long time it was necessary, but a combination of pride, hope and a desire to pay what they owed kept them from making the move.
Plus, when they first considered bankruptcy four years ago, Cindy backed out because she didn’t think Steve would change his habits or mindset.
Now she has faith they’re on the same page. They are doing it for their kids, Alexis and Mackenzie and twins due in December, to provide a better life and teach them what they’ve learned.
The Greenways say laying all their cards out for this series and sitting down with experts to examine their options have brought them closer.
They communicate equally about finances now. Cindy, 35, doesn’t feel as if she has to drag Steve, 37, along.
“I have been guilty of placing my head in the sand when it came to dealing with issues head-on, and he was guilty for not working with me on it,” Cindy wrote in an e-mail partway through the makeover.
“We have learned through this process that it is not about blame, but about working together and asking for help and coming up to a decision and implementing change.”
Cindy admits they have made poor choices along the way, and she takes full responsibility for them.
“I really don’t want anyone walking away from this story thinking that I absolve myself from blame. I am honestly grateful for the opportunity you have given us, and for the country we live in that a fresh start is available …. ”
But they’ve had some bad luck along the way, including a fire in the fuse box in their basement in October. Everyone got out of the house safely, and the Greenways are extremely grateful for that. But it forced them into Cindy’s parents’ house for more than a week.
The fire broke out just two days after the last instalment of the Greenways’ tale in which they worried about something going wrong with their house.
Insurance took care of most of it, but it’s the kind of emergency the couple doesn’t have a financial cushion to absorb. Steve had to take 21⁄2 days off work.
But their budget will see them through.
People often balk at the thought of budgeting, saying it’s too much work, says Terry Bennett, a credit counsellor and financial coach at Catholic Family Services, who has been guiding the Greenways through their financial overhaul.
“I ask people how much time they spend researching a holiday. They think nothing of that. Your money, day in and day out, is the single most important thing we handle, yet people put no thought into it.”
Bennett loves to budget — pencil to paper or keystrokes to spreadsheet. It’s all about tracking money in, money out, paying bills on a schedule and setting aside regular lumps of savings.
Bennett has been using her system for years, ever since she consulted a credit counsellor herself and was alarmed at how much she and her husband were spending on eating out.
Cindy has had a budget in place for a long time, but it mattered little when expenses far outstripped income. Now that a big chunk of their $66,000 debt has been lifted, the budget actually works.
She sets it up in two-week blocks to match each pay period. She tracks what needs to be paid in each period, and sets aside $430 to pay for gas, groceries, lunches, tobacco and entertainment.
Big monthly bills such as property taxes and furnace payment are spread over two paycheques. Plus, there is $246 for 15 months to bankruptcy trustee Taylor Leibow to cover what they are obliged to pay.  
According to the rough numbers, the family should be able build up about $500 by the end of this month. Still, Cindy worries about the two-week wait period for employment insurance when she goes on maternity leave at month’s end. They’ll need to have a cushion by then.
Cindy is teaching Steve the budget so he can take over when she’s in hospital. They plan to hold each other accountable.
The couple has a goal to set aside $1,200 in a savings account for emergencies, and never let the balance dip below that.
A great surprise for the couple was a call from their bank offering to renew their mortgage. It turns out the manager at their bank is a board member of Catholic Family Services, and she had been following the family’s story.
Steve and Cindy had been very nervous that their interest rate would rise when their renewal came due in June in light of the bankruptcy and a summertime four-month reprieve from mortgage payments that they hoped would help keep them afloat.
Instead, the bank offered them a slightly reduced interest rate, and rolled in the cost of the reprieve to raise their mortgage by $80 a month.
During their last couple of meetings, Bennett initiates a discussion about goals and priorities going forward. It shows the Greenways are focused on rebuilding credit, repaying remaining debts, building an emergency fund and communicating with each other.
The couple agrees to set aside 15 minutes a week to talk about the budget and their goals.
To rebuild their credit, Bennett says their continued mortgage and car payments will be big factors in their favour. But they can expect to pay higher interest rates to creditors until their scores improve.
Once their bankruptcy is finished, they will get a discharge letter. Their creditors will get it too, but Bennett urges the Greenways to contact the credit bureaus directly because it can take a while for creditors to update the information.
She recommends the couple get a secured credit card (where the $500 or $1,000 security is set aside by the lender in an interest-bearing account). The card looks no different than any other, and a good history of on-time payments will raise a credit score.
Bennett also tells them to wait a few months and get a gas card or department store card, and pay the balance in full each month.
It’s not necessary to use the card every month to build credit, and an on-time payment of $20 counts just as much as one of $2,000, she says.

Investment term glossary



Annuity
This is a contract that you buy from your insurance company for your retirement. It provides monthly payments to you.

Canada Pension Plan (CCP)
The government will provide you with a monthly pension plan beginning at age 60. This amount will be determined according to your contributions during your working years.

Canada Savings Bonds
You simply lend the government money for a predetermined period of time at a fixed rate of interest. This low-risk investment is cashable at any time.

Equities
Also known as stocks, they represent a share in the ownership of a company. It gives you a claim to a share in the assets of the company as well as its profits.

Insolvency
The condition of having more debts (liabilities) than total assets that might be available to pay them, even if the assets were mortgaged or sold.

Bankruptcy
A determination by a bankruptcy court or trustee that a person or business cannot raise the funds to pay all of his/her debts. The court will then “discharge” (forgive) some or all of the debts, leaving those creditors not getting what is owed them. The insolvent individual debtor, even though found to be bankrupt, is allowed certain exemptions, which permit him/her to retain a car, business equipment, personal property, and often a home as long as he/she continues to make payments on a loan secured by the property.

Locked-In Retirement Account (LIRA)
This account holds money transferred out of a pension plan when you have or retire from your place of business and it allows you keep investing your money until you decide to retire. One catch is that you must open your LIRA before the end of the calendar year that you turn 69 and you must make your withdrawal before the end of the following year.

Net worth
The difference between an individual’s or company’s liabilities and assets.

Portfolio
A compilation of the stocks, bonds and mutual funds held by an individual or organization.

Registered Education Savings Plan (RESP)
A tax-free education savings plan that you save for your child’s post-secondary education. Contributions are matched by the government at 20 per cent.

Registered Retirement Income Fund (RRIF)
This account allows you to invest and hold your RRSP savings when you retire. With a RRIF, you take money out instead of putting it in. Withdrawals are taxable, but the money that stays in your account can grow tax-free.

Registered Retirement Savings Plan (RRSP)
This account helps you save for retirement while lowering your income taxes. Earned income is usually taxed when you withdraw it from the account. You’re able to choose which investments you want to hold inside your RRSP, including cash, GICs, mutual funds, stocks and bonds.

Reverse mortgage
This allows you to free up cash from the equity in your home. You take the mortgage on your house to purchase investments that will support your income. After your death, and following the sale of your home, your estate will pay back the amount you borrowed including the interest that has accumulated.

Spousal RRSP
An RRSP that one spouse sets up for another. The advantage is that it creates two separate sources of income, which generally results in tax savings when you retire. A higher earner sets up a spousal RRSP in their spouse’s name and contributes to it. The contributor receives a tax deduction, but when the spouse withdraws the money at retirement, it will be taxed on the spouse’s lower income. You will both benefit because the income can be split at retirement.

The Greenway family


•Who: Steve, 37, and Cindy, 35, Alexis, 4, Mackenzie, 2, and twins due in December.
•Jobs: Cindy is an accounts
receivable clerk for a Hamilton manufacturer; Steve is a forklift driver for a Burlington construction company.
•When they came to us: The Greenways have an after-tax income of $48,492, including child tax benefit and baby bonus. They had $1,400 in RRSPs and roughly $14,000 in home equity against a $128,000 mortgage and $66,000 in bank loans, credit card balances, back taxes and loans from family. They were falling behind by more than $1,000 each month after paying bills and minimum payments on their debts. Their net worth was -$50,446;
it is now -$6,600.
•Their progress: The Greenways declared bankruptcy in September. That wiped out most of their debt, except $22,000 owed to Cindy’s parents and sister. They have set up a monthly budget to cover bills and set aside money for a $1,200 emergency fund, clothes and gifts.
•Next steps: Building an emergency fund, recalculating the budget when Cindy goes on maternity leave and rebuilding credit when their bankruptcy is over.

Greenways monthly budget
Total income: $4,041 (Child support of $375 has been deducted.)
Total expenses: $3,933

Expenses

•Mortgage: $840
•Day care: $300
•Car payment: $320
•Gas for van: $300
•Groceries: $400
•Cigarettes: $60
•Lunches: $60
•Entertainment: $40
•Furnace loan: $160
•Property taxes: $195
•House insurance: $96
•Car insurance: $173
•Mortgage insurance: $34
•Union Gas: $186
•Hydro: $140
•Phone/cable/Internet: $130
•Bankruptcy fees: $246
•Clothing: $75
•Church donation: $40
•Gifts (incl. Christmas): $75
•Vehicle licence/upkeep: $50
•Bank charges: $13



‘Credit’ sharks want to take a bite of you

By Meredith MacLeod


Buyer beware applies just as much to credit counselling as it does to all the purchases that landed you in financial trouble in the first place.
Henrietta Ross, executive director of Grimsby-based Ontario Association of Credit Counselling Services, says many organizations claiming to offer counselling are in fact debt consolidators or bankruptcy officers. She’s heard of for-profit credit agencies charging $1,500 for a consolidation or payment plan.
“Creditable organizations don’t charge exorbitant fees,” she says.
Ross, whose association certifies and accredits nonprofit credit counsellors and represents about 70 per cent of the sector, says there is no quick way to fix financial foul-ups. If an agency doesn’t examine a consumer’s habits, help with budgeting or offer long-term financial education, its mission isn’t counselling.
“They imply to the consumer that they can magically eliminate debt. Consumers … don’t know the mandate is do consumer proposals and bankruptcies.”
Another red flag: If someone tells you they can have negative information removed from your credit history, run. If the information is accurate, no one can wipe it out.
Ross says many consumers don’t know counselling is an option. A credit counsellor can negotiate with creditors, come up with a debt-management plan and pay lenders directly. The hit to a person’s credit rating isn’t as severe as bankruptcy, but equal to a consumer proposal.
Doug Welbanks, a 35-year veteran of nonprofit credit counselling, also worries about vulnerable people getting bad advice.
“Credit counselling has become an industry, and people struggling have become a meal ticket.”
Often, debt-consolidation or debt-management plans are unaffordable, and Welbanks, ex-director of British Columbia’s debtor assistance and debt collection, says credit counselling should not be based on profit, but be neutral, unbiased, honest and aimed at getting people immediate and long-term aid. “A lot of what’s out there is not getting at causes or roots. But bad or indifferent advice can ruin these people’s lives.”
Saul Schwartz, a professor of public policy and administration at Carleton University, urges the federal government to regulate the credit-counselling industry.
“There is no oversight or regulation … anybody can hang out a shingle or take out an ad and call themselves a credit counsellor.”
Instead, Schwartz says there should be a government agency that consumers can call to get unbiased and independent advice.
“Right now, anyone in serious debt problems is on their own.”
While the bankruptcy system is overseen by a federal agency, and licensed trustees are required to give free advice and lay out options during an initial meeting, the fact is they have a vested interest in consumers declaring bankruptcy, says Schwartz. They are also obligated to maximize returns to creditors.
Credit counsellors get paid through debt-consolidation or debt-management plans. They negotiate to lower interest and stretch out payment terms, collect monthly payments from consumers, and divide that among creditors.
They collect a chunk, too, says Schwartz. As much as 24 per cent.
Many for-profit agencies don’t offer even a pretense of education. Some do little (or nothing) a consumer couldn’t do for themselves, and charge huge fees for it. Cases have been prosecuted in the U.S. where no money went to creditors at all. Even some nonprofits are questionable, he says. Some are affiliated with American companies that make tiny donations, and then call themselves nonprofits.
“The big ones spend a lot of money on advertising, promise to eliminate debt and don’t disclose their fees clearly. Many run 24/7 phone lines.
“The problem is people simply don’t shop around for these types of services. They are desperate and up against a wall.”




Questions to ask a credit counsellor


1. What kind of services do you offer?
If credit counselling, budget education and savings and debt-management courses are not mentioned early, that should raise a red flag. Some agencies are solely interested in signing people for debt-management plans for which they get paid.
2. What fees do you charge and how are staff paid?
If there are not simple answers to these questions, second red flag. Some require upfront fees, others don’t. If staff members are paid by the number of debt management plans they write, the agency is not legitimate. Ask for a written quote.
3. Do you charge for an initial meeting?
If the answer is yes, or you feel you are being pressured, keep shopping.
4. What happens if I can’t afford the minimum payment to creditors?
If the agency doesn’t offer a hardship program or pushes bankruptcy as your only option, move on.
5. What kind of accreditation does your agency have, and what qualifications do your counsellors have?
Again, these should be easily answered. The Ontario Association of Credit Counselling Services, for instance, accredits agencies and offers certified credit-counselling qualifications.
6. Finally, ask to see references from previous clients, and check the agency’s standing with the Better Business Bureau.
If an agency guarantees it can remove unsecured debt or fix your credit score, doesn’t take time to analyze your situation, explain your options or tell you the consequences of each route, or if they demand substantial fees or pressure you to sign a contract, go elsewhere.



Darren and Ruth Kaulback and daughters Jenna, 9, and Emily, 7.

Living small allows family to revel in rich North End life

Stories by Meredith MacLeod


Ruth and Darren Kaulback don’t make their lifestyle decisions with dollar signs in their eyes, but they are finding ways to build a rich life without spending a lot of money.
For one, they live in the North End, in a modest house on MacNab Street North. They might have afforded a bigger house, more property, a more polished neighbourhood. But they intentionally chose the North End 10 years ago, early in their marriage.
“People assume it’s because we can’t afford to live elsewhere, but we love the character, the ethos, the market, the waterfront,” said Ruth, co-ordinator of New Horizons Thrift Store on James Street North.
“We don’t feel like we do without. Some of our friends think our lifestyle is sacrificial. We don’t feel that way at all.”
Ruth walks to work and Darren, a freelance TV director, walks or bikes to his jobs.
They walk their children, ages seven and nine, to school, and spend weekends exploring their neighbourhood on foot. They go to the library, rather than buy books. They’ve disconnected their satellite, tired of the impact of ads on their kids. They buy fresh and local food and make meals in batches.
They shop only when necessary, often second-hand. The motivation isn’t financial, at least not totally. “It’s about living a high-quality life with richness and soulfulness,” said Ruth. “Walking down James Street, there is something life-giving about that.”
They’ve watched their neighbourhood evolve, too. It felt rough when they moved there, but now it feels neighbourly.
Darren says reading Your Money or Your Life (by Vicki Robin, Penguin, $ 17.50) transformed his views about money. The couple wonders if people spend more than they have to compensate for a lost sense of community and family. “On my good days I hope this economic downturn can breathe more life into our society, and bring us back to what really matters,” said Darren.

Charm on James North New Horizons Thrift Store (520 James St. N.) had its beginnings at Welcome Inn Community Centre in the late 1970s, and later became its own charity. The current store opened to the public in April 2008. Aside from co-ordinator Ruth Kaulback, the store is operated by volunteers, some seeking job experience. Others are local businesspeople or retirees.
Kaulback celebrates the charm and neighbourliness of New Horizons, saying it’s become a gathering place for the community. “There’s no stigma. It feels like Cheers … It’s an alternative form of shopping. It feels soulful.”
All proceeds of the store are reinvested in the North End through the programs and services of Welcome Inn.


Urban farming taking root


Russ Ohrt plants garlic for next season in a rented North End plot.

Russ Ohrt teaches others what he’s mastered at home: growing his own food.
Ohrt and his wife, Liz, grow fruit, vegetables, herbs and nuts on their small corner lot on Pearl Street North.
Russ translated his hobby into a business, Backyard Harvest, earlier this year. There are two components to the venture.
He rents out large (1,000 square-foot or more) urban lots to grow food, and pays the property owner back with the harvest. He sells the remainder to restaurants and at makers’ markets in the city.
Ohrt is also a consultant or contractor for people who want to start their own gardens. He’ll remove trees, condition soil, build composters, design, plant and maintain gardens.
Some people want to eat from their property but don’t have the skills or know-how to get started. Others just need advice.
His best words of wisdom: “Start small but start with courage.” He encourages yard gardeners to plant a diverse crop. Too many people only plant tomatoes and get discouraged when the pickings are poor, as they were this year.
Having a bountiful garden has helped the Ohrts cut back on their grocery and restaurant bills. They also do a lot of preserving to stretch the harvest throughout the year.
Although Russ has a truck for his gardening business, the family tries to walk as much as possible. Liz walks to her part-time job at a stationery store in Westdale.
The family is part of a natural food-buying club in which they buy dried beans, flour, sugar, snacks, teas, nut butters and frozen organic meat. It saves them money, but more important to the Ohrts, they know where the food comes from.
Urban gardening is gaining steam, says Ohrt. Concerns over climate change, the climbing cost of produce and the urge to be active are behind the momentum.
The Ohrts, including their two preschool sons, spend a lot of time in their yard, socializing with their neighbours and people walking by.
Plus, people are realizing that edible gardens can be attractive, and that edibles can be mixed in with ornamentals, he says.
“It’s such a treasure to look outside and decide what I’ll make for dinner based on what’s right here,” said Liz.

Fast facts

•Number of online banking transactions made in 2008 with the six largest Canadian banks: 445.7 million
•Number of transactions at bank-owned ABMs in 2008: 980.9 million
•Canadians are among the highest users of debit cards in the world with 105 debit-card purchases per person in 2007.
•Number of bank-owned ABMs in Canada in 2007: 16,424
•Number of Visa and Mastercards in circulation in 2008: 68.2 million

Source: Canadian Bankers Association





Our expert

The Greenways were paired with credit counsellor Terry Bennett at Catholic Family Services. She’s been a credit counsellor for more than 15 years and worked as a social worker before that. She is a qualified bankruptcy and insolvency counsellor, and is an accredited financial coach through the Ontario Association of Credit Counselling Services and the Association of Financial Counselling and Planning Educators.
She resides in Dundas with her family, and is the CFO of her home, her husband’s private practice and her own home-based business.