Tommy Schnurmacher: Good morning, welcome back to CJAD and welcome back to the Tommy Schnurmacher show. And uhhh if you’re sitting there, kind of tilted to the left because you’re so deep in debt uhhh boy, I would say go out and buy yourself a lottery ticket although you may not have the money to do that. You should, because today is your lucky day because why, because sitting across from me is Lama Faran, sheès a money coach who is going to give us tips on how to get out of mounting debt. The first thing on the list of things to do, I guess is a) to say welcome to CJAD.
Lama Farran: Thank you for having me
TS: And B) to say what is the difference between a Financial Advisor and Money Coach
LF: yeah, i find there is a lot of confusion around what money coaches do. In my experience every time i tell somebody that i’m a money coach, they say oh so you’re a financial advisor. I’m like, no I’m not, I don’t even have my financial advisor designation. Now the main difference really is that money coaches are more focused on giving the knowledge around budgeting and money management skills. And there is also another aspect to money coaching that is more related to the psychological aspect of money. For example, some of the work that i do with my clients is to make them aware of their behavioural patterns around money. For example so if you hear somebody saying “i keep spending, but i know i shouldn’t, but i don’t know why i keep doing it” so right there you have a hint that they might have some subconscious limiting beliefs about money and they are self sabotaging their own financial health.
TS: Let’s let’s, you know, and I know we have to be careful about words here so let me be the one who commits the potential gaft. On the one hand there are people who say that it’s amazing the lack of financial literacy that there is out there – on the other hand people say that it’s amazing in this day and age how stupid people are about money. They have no idea what to do with their money other then take it and put it in the bank, sometimes they over spend. What is, someone turns to you, you’re a money coach, usually what is the most common problem they have and what is the first thing that you’ll tell them?
LF: The first problem they have is debt – they can’t make it month to month. The money comes in and it’s already spent before it even comes in. They have no clue – there is a total lack of clarity around where is this money going. There is actually one of my favorite quotes, that says: “More people should learn to tell their money where to go, instead of asking where it went.” The problem is people don’t know where their money is going, they live in what I call financial fog. So, usually the reason they would come to see me in debt and living paycheck to paycheck. And always, this habit of dipping into your line of credit because every month your short and you’re not sure why and don’t know how to fix it.
TS: I’m sure a lot of listeners are saying, well you know she’s talking about living paycheck to paycheck that’s got to be like young people, that’s got to be like kids. Is that true? Is that more of a generational thing, or are people pretty out to lunch when it comes to money across the whole demographic?
LF: I think that it really affects everybody the paycheck to paycheck. The younger generation maybe more, because we’re into this instant gratification, so the latest IPod comes out, we are the first one in the lineup to go get it but we haven’t looked at our bank account to see how is that going to affect our bank. Can I really pay my VIsa once the gadget bill comes in. Or they just put on their Future Shop Credit Card for example at 30% interest rate and then they say, it’s okay if it takes me a year to pay it off.
TS: Let me ask you, and if you’re just joining us we are here with Lama Faran, she’s a money coach and uhhh if i pause there for a second, because once again i want to phrase this question carefully. I’m here talking to you, and i’m guessing that when you deal with your clients you’re not dealing with them on the phone or via email or via some filter. But is that one of the reasons you actually have a clientele? Has the human equation become so absent in finances, we bank online, its credit cards, we hardly ever – you know you’re a money coach but who handles money any more? Like actual cash. Is that part of the problem, that people don’t realize that this is for real stuff. That you actually down the road, you actually have to pay for this. Is that part of the problem?
LF: Yeah, I think it’s really people taking what i call the ostrich approach to things. They burry their heads in the sand they are in trouble, they don’t know who to turn to, and the way they deal with it – is just they just don’t deal with it. And then they say, okay when i go to my bank i don’t know if i can trust them. I know they are going to sell me this problem or that problem, and they aren’t sure who can solve their problem from an objective point of view. And who can really look into their bank account, and tell them you know this is what you should be doing, this is what you’re spending money on, this is where your money should be spent instead. There’s really a lot of help out there when it comes to getting help for your budgeting needs.
TS: How do people find out about you?
LF: Articles. I write articles in newspapers. Networking. I do talks in libraries. I do a lot of workshops. So people are starting to find me. The funny thing, every time somebody find me, they say I was looking for somebody exactly like you, but I didn’t know the term, what to search for, what to google for. I knew I didn’t need a Financial Planner, I knew I didn’t that I didn’t need a Debt Consolidation service, but I didn’t know what your job is. What the title is.
TS: Well, I’ll tell you. For those of you now you’ve been listening to us now for about 5 minutes. If you have any questions for Lama, just give us a call 514-790-0800, remember she is not a FInancial Advisor she is your Money coach. We have one question. Were going to hear from James. Welcome to CJAD.
James: I recently got married, I have a $360 000 house with a $110 000 mortgage left to pay which is due for renewal next year. My wife comes in with two debts of $20 000 MasterCard that were only paying about $600 a month on, and $15 000 regular line credit whose interest rate is 8%. I’ve asked my bank to possibly combine all these things and have a regular line of credit attached to the house which is only 3%. So should I put all of my debt into a new mortgage or not?
LF: Okay, the thing is that I have a love/hate relationship when it comes to the line of credit attached to the house. And the reason for that is now it’s going to solve your problem in the short run. You’re going to get rid of those two debts that you have, and have one payment and life is good and it’s at a low interest rate. But it didn’t fix the problem on how did you get those cards up? So you have to work on that behaviour of how did I find myself using the Line of Credit and using the credit card and not paying them off month after month? So, it’s okay, but it’s a short term solution. The longer term solution is how can i make sure not to find myself in the same situation. For example, I’m going to commit to having an emergency fund so next time an emergency comes up I’m not going to use my line of credit to bail me out, but I’m going to use my emergency fund. See what i mean?
TS: So in other words the short answer is you’ve dealt with the effect but you have to spend a little more time taking a look at the cause. Thank you very much for the call. I have a great question. For those of us in debt, how much does a money coach cost?
LF: I work on different packages, it really depends. I usually have an initial consultation with the client to see how far they are in debt, how much do they need me. Is it a little tune – up? I have 6 months packages, 1 year packages, 3 months packages or it could be one session for a tune up. So it really depends on your situation.
TS: When we come back I have a whack of questions here from people listening to us via text messages. I have a few questions of my own. We’re speaking with Lama Farran. She is a Money Coach, no not a FInancial Advisor. And if you’ve been listening so far she seems to know what she’s talking about. If you have any questions, give us a call 514 790 0800, star talk or 1-800-491-CJAD.
TS: GOod morning welcome back. If you’re just joining us were here with Lana Faran. She is a Money Coach and she’s been giving us tips on how to get out of mounting debt and frankly be a little smarter about our money. I have to tell you Lama, during the break were getting all sort of texts here, and i’ll try to sum them up. There’s a good one here actually from Oliver. Hi – I always tell people if you work on a cash diet you’ll live within your means and you’ll help our merchants on their card fee. Cut up your cards people. Have you ever looked at decline and said you know what, you’ve got to get the plastic out of your life right now because that’s what is driving you into the ground.
LF: Definitely, because people don’t have the discipline of putting something on their credit card and paying it. As I always say, your Credit Card is not your money. The limit on your credit card people think that’s it’s their money. It’s not your. If you’re not going to be able to pay it off at the end of the month – do not use it. I personally use Credit Card just because I don’t like carrying cash but I have paid $0 of interest in the past 20 years.
TS: And they must love you at the credit card companies because you’re clearing your balance.
LF: Yeah, i’m like the worse customer.
TS: I’m being a bit sardonic but that’s really, and I mean, you’re saying it outloud and I remember when, I have a few years on you my friend, and I’m telling you that’s the first lesson that I learnt, you’ve got to clear that. Because really as you say, people think it’s their money but actually it’s a loan at a ridiculous high rate which you’ll never get out of.
LF: Exactly – and i’m happy because back in September 2010, there was a new regulation forcing the Financial Institution how long it’s going to take you to pay down your credit card. And that should really be a wake up call for you, when you receive your bill and you look at that it’s going to take me 10 years to pay off my grocery bill.
TS: But honestly, and you’re going to think i’m being snarky now, but in your experience, yes people get their statement but apart from looking literally at the bottom the line, do you get the impression that people are actually paying attention to how they are spending their money?
LF: No. Because this what I call being on autopilot. We run our lives on autopilot, we eat on auto-pilot, we drive on auto-pilot and we spend our money on auto pilot. We don’t think, we don’t look and we don’t take time to do a financial health check. I tell people have a date with your money every single week. Once a week you sit down and you have a date with your money. You pull out your statements, you look at them, do not pay them blondy, look at what they say, look at the little asterix and little fine print because this is where your attention should go.
TS: It’s where your attention should go, but is it? Maybe i’m being too negative here. Do you have any success stories? Do you actually have people who you’ve turned around. Like really really i can’t believe you dug a hole this deep for yourself and you actually got out of it.
LF: Yes. I had a client recently, she was a big big over spender. Her income is amazing. But you can’t see anything because it’s all going to what I call waste. And a few weeks ago, oh my god I’m so excited to save vs spending these days. I’m like wow. So, she was getting what I call the pleasure of saving over the pleasure of spending.
TS: You eluded to it a little earlier in the show, but I wonder if generally we talk about people winding up in debt, and generally we talk about people living beyond their means. Is it just the bells and whistles and gizmos that really piles it up? What are people spending their money on?
LF: THere are a lot of gadgets but I think one of the major things is the house. You go to the bank, they approve you for a mortgage. I say don’t take it right away. Go home and do your homework and see if you can really afford your mortgage. That’s the big one. People are getting themselves into houses with 5% down payment that they just withdraw from their RSPs and without any other plans, without any emergency fund. The thing is the banks are going to make their money from selling you mortgages. And i read an article recently it wa called “The Rise of the Miserable Canadian Homeowners”. Of course they are miserable, we give them mortgages that they can’t afford and they move into the house and then reality hits, how am i going to pay for this thing? So mortgages are a big thing. And there’s also the feeling that, I think adverstors really try hard to instill this in us that we are enough. We are not enough, whatever we have is not enough or it’s not good enough. So for you to fulfill that inadequate feeling that they are poking inside of you, well you go and spend and try to fulfil this. Ime nugh now.
TS: I’m glad you mentioned that because as a former homeowner i can recall that, one of the biggest, yes you’re in there and you have the mortgage. But there’s always something in the house. Even if you aren’t buying into all the ads, there’s always something that you have to do that costs money to do. There are a lot of things that you take for granted while you’re growing up. You’ve got to go out and buy, well I can’t buy a lawn mower, a snow blower and rake for the lawn and whatever. That all costs money, that all winds up as part of your debt load.
LF: The way i would do it, they way I did it, instead of following the buy now pay later, you save now and buy later. We bought a house, the deck that came with the house was tiny, it barely fit two chairs and a table. It took us 12 years to save for a deck and we built it last year. When we built it we paid it all cash. I didn’t go to HOme Depot and finance my deck over ten years. That’s the difference.
TS: And that’s why you’re a money coach. Lama Faran it’s been a pleasure talking to you. I hope we have a great summer where you can enjoy your deck as well, because it doesn’t look so great right now. If we want to find out more of what you do, is there a place we can go online?
LF: Yes for sure. My website is maxworth.ca. And funny enough I recently bought the domain save now pay later, so if you go there it will also take you to my website.
TS: We will do our best to put that on our Facebook page at CJAD.