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Speak Up

Do you know the story of the big TV? What a deal at $1,000 plus tax. You were the envy of all your friends. You were going to have it paid in six months before the payment plan started. Life was good.

The first six months of the new TV were awesome. The deal was as amazing as if it was a free TV, no payments were required. You did not have the $1,000 at the six month anniversary, so interest was charged from the date of purchase. You thought: "No problem, things will work out as they always do."

A few years pass. You look at the monthly statement and notice you still owe $1,000. How can that be as you have been paying on it every month like they told you? Oops, that was only the interest charge and nothing was ever paid on the principle.

So, let's calculate your actual costs to date: Purchase $1,000 plus 13% tax= $1,130, plus three years interest at 30%= $1,017. You realize if you only saved what you paid in interest, you could have bought a new TV.

Now, every time you watch the TV, you hope and pray it lasts a few more years until the bill is paid in full. You realize you need to start making higher payments, but wonder how you can. It sounded simple at the start.

Once the envy of your friends, and now they hardly see you. Staying in nights and not going out for entertainment is common as you cannot afford it. Life is no longer feeling awesome. So where did you go wrong?

You, as many consumers, do not have a budget or a financial plan. Yes, a plan was made to pay $188/month for six months so the TV is paid off at the end of the deferred payment plan. The only thing was that the plan was not realistic to your financial reality.

The issue lies in that fact you did not have a budget to know if you could really afford it. The amount seemed reasonable and it covered only a short time period. The reality is when you were going to put the money away you did not expect the car to break down, need cold medication for all the kids, buy Halloween treats, etc.

You needed a budget, a monthly/yearly forecast of expenditures. As well, you needed to figure out what are your household's needs and wants. Most importantly, once all this was decided, you needed to stay focused on your goals. It all sounds simple but it is the key to financial success.

If you need help making a budget, feel free to attend one of PricewaterhouseCoopers' monthly "Budgeting for Financial Success" seminars at Sobey's Community Room on Vaughan Harvey Blvd. Next one is May 27 from 7 to 8:30 p.m. Call 859-8822 to reserve a seat. All are welcome and sessions are free.

* Andrea Mailman is a financial advisor specializing in debt restructuring with the Moncton office of PricewaterhouseCoopers. Utilizing her experience in banking and working with debtors, she assists people to address and deal with their financial challenges. Andrea can be reached at 859-8822 or by e-mail at andrea.j.mailman@ca.pwc.com.