The most important definitions are not found in the dictionary; they are the ones you make for yourself to serve your purposes.
You first encountered this idea when your mother told you to clean your room. When you thought you were done she made you clean it some more. The problem was not with the room; the problem was she had a different idea of what a clean room meant (it didn’t mean shove everything under the bed or into the closet and close the door). Besides, you wanted to get outside to play and she wanted the room tidy.
In a posting titled How Findependence differs from Retirement, Jonathan Chevreau makes a case for how he believes the two words are different and why. He argues that you might be financially independent before you retire because you no longer work for a salary. Some who retire need to continue to work because their income doesn’t meet their needs. His definitions for the words are his own.
Your palms are sweaty, your mind is racing! Are you ready for such a commitment? It is the next step in your relationship, isn’t it? Even if the odds are against you, but your love is different … stronger!
Right? If you have been in a serious relationship or are planning to, you will relate to the thoughts and concerns mentioned above. However, I am not talking about marriage; I am referring to joint credit.
How it can hurt
Having joint credit won’t automatically lower your score; however, it does increase your risk. As soon as you put your name on and sign an application, you are fully responsible for the complete balance and paying the minimum payment. The banks and lenders don’t care who spent the money, what it was spent on, who has it now, or what it is now worth. If they don’t get their money back as outlined in the contract you are both on the hook for everything. Even if everything on your credit is great, one collection or one bad account will cost you thousands in high interest and fees. You may even be declined.
The odds are not in your favour!
What are the chances of your relationship ending? I’m not generally a big fan of “what if?” questions but it’s important to weigh risk when it comes to personal finance. It doesn’t matter whether your relationship status is boyfriend, girlfriend, common law, partners, or even married. What are the chances of your relationship ending? Most stats give you around a 50/50 chance. If you are a hopeless romantic or really in love then I’m sure you will give yourself a higher chance of success.
Here is the hard cold truth. There is a 100% chance of your relationship changing. When I talk about joint credit most people assume I am talking just about separation or divorce but there is another “D” word that most people don’t want to think about.
The other “D” word
It doesn’t matter if you are in a relationship with your soul mate — death is still guaranteed. You cannot have a joint account with someone who has passed on. As soon as the bank finds out that one of the applicants is deceased you now have to close that account and apply for a new credit card, line of credit, or loan. If all your established credit is held jointly, you will have to start rebuilding your credit all over again if your spouse passes away.
Joint credit alone doesn’t hurt your credit but you need to know how the scoring system works so you don’t end up in trouble. My advice is to make sure you have built individual accounts if possible to limit your risk and protect yourself from having to start rebuilding your credit later on in life. For more free tips on credit you can visit my blog, www.eCreditFix.ca. If you would like to attend a free event to learn more about the other rules of credit visit our events page.
Richard Moxley is the Author of the book, The Nine Rules of Credit – How to Start, Rebuild, and Always Maintain Great Credit. He is also the founder of eCreditFix.ca. Richard has shared his credit expertise with financial professionals and the Average Joes across Canada and the U.S. His vision is too teach all Canadians the rules of the “Credit Game” so they can play the game to win!
A disturbing survey was released today from Minneapolis-based Allianz Life Insurance Company of North America. Its press release about the Generations Apart survey led off with the statement that “Living with debt has become a way of life for both Generation X (Gen X) and baby boomers as the stigma of owing money is gradually disappearing.”
Here’s the bit that really got me: it found that 48% of both generations “agree that credit cards now function as a survival tool” and 43% agree that “lots of smart, hardworking people who are careful with spending also have a lot of credit-card debt.”
Allianz Life did note that this alarming “growing comfort with debt” may affect the retirement plans of Gen X: “Twice as many Gen Xers (27% versus 11% of boomers) say they are either unsure about when they plan to retire or don’t plan to retire at all.”
The 2,000 Americans surveyed include 1,000 boomers aged 49 to 67, and 1,000 Gen Xers aged 35 to 48. It found Gen Xers are carrying 38% more in mortgage debt (average of US$144,000 versus $90,000 for boomers) and 45% more in non-mortgage debt, comprised of student loan debt (average of US $12,000 versus $5,000 for boomers) and credit-card debt (average of US $8,000 versus $6,000 for boomers).
It suggested one reason Gen Xers have higher debt is there generally earlier use of credit cards – 76% of Gen Xers got their first credit card between the ages of 18 and 24 versus 68% of baby boomers.
Almost half of GenXers revolve their credit card balances
Thus far, the Hub has not commented directly on the ongoing crisis in Greece. Since we’re in something of a pause mode until the Referendum on Sunday, it seems as good a time as any to venture into this issue.
I am as transfixed as anyone by the images of Greek pensioners lining up almost daily for their 60-euro ATM infusions. Those who follow my Twitter feed — which also runs to the right of the Hub’s home page — will know that probably every second tweet or retweet concerns Greece in some way.
The world’s major newspapers and broadcast media seem to me to be doing a more than adequate job in reporting on this crisis. For instance, in Thursday’s Financial Post, Gluskin Sheff’s David Rosenberg wrote a useful piece about Why he still isn’t worried about Grexit. And the cover story in this week’s just-published The Economist nicely lays out the possible near future in Europe’s Future Lies in Greece’s Hands.
There’s little point in adding to the discussion if I can’t provide some unique perspectives. I’m no expert on Greece so I cannot: I’ve never even visited the country, although last fall we were right next door in neighbouring Turkey.
I can say that I’ve not made any changes in our family’s investments in response to this ongoing drama. I briefly owned a tiny position in a Greece ETF in 2014, thinking the worst was over but jettisoned it for tax-loss selling purposes late in 2014 and it will be a long time before I’m tempted to re-enter that position. If ever.
Today, Saturday, the Financial Post ran instalment number 6 in my 7-part series on The Eternal Truths of Personal Finance: Don’t turn down free money from your boss (employer).
On Wednesday instalment number 5 ran at the FP and on the Hub: Be an Owner, Not a Loaner (although they used a different headline).
The seventh and final instalment likely runs next Wednesday.
Home Buyer’s Regret
Boomer & Echo ran a piece this week riffing off Globe & Mail personal finance columnist Rob Carrick’s Facebook page, with readers stating how big a priority it is for them to reduce debt. It’s certainly always been one for me and I continue to declare that “the foundation of financial independence is a paid-for home.” But clearly, young people these days face different circumstances: home prices are sky-high, especially in Vancouver and Toronto, but balancing that are historically low interest rates that seem destined to stay low for as long as the eye can see. (“seem” being the operative word.) Continue Reading…
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