Perspectives podcast: How to get a handle on your money in 2024

Stephen Meurice: The new year is upon us and it’s a perfect time to make a change.  

Bruce Sellery: 100% — the phrase is: ‘New year, new you!’  

SM: That’s personal finance expert Bruce Sellery. And if your resolution is to get a handle on your money, he says this year might be a little more challenging for some people.   

BS: The thing that I would say is different this year is the ridiculous levels of debt that people are carrying and it makes sense, given the environment that we're in, the increase in inflation and a real concern about what's going to happen on the economy.  

SM: As is our annual new year’s tradition, Bruce is our guest this episode — he’s the CEO at Credit Canada Debt Solutions. He's also host of Moolala, the weekly personal finance radio show on SiriusXM. And as always, he has some simple, concrete tips for us. This time for managing your money in a high-interest-rate, high-inflation environment. So you can pay down debt while continuing to save and invest. 

BS: Money is a tool. Learn to use it and use it wisely to build the life you want.  

SM: See, pearls of wisdom like that are why we love having Bruce on the podcast. So philosophical. Modest, too. 

BS: Oh my gosh, that was good. Are we gonna put that on a poster? 

SM: I’m Stephen Meurice and this is Perspectives.  

Bruce, thank you so much for coming back. Really great to have you on the show again. 

BS: Hello there. It's my pleasure. 

SM: Well, it's great to see you. Last two times you were here, we did this remotely. Now you're here in our studio. What do you think? 

BS: Yeah, I think I look much taller than you thought I looked. Now that you see me in person, isn't that what you think? You’re like, “wow, he's much taller.” 

SM: Yeah, no comment.

BS: The studios are amazing. It's fantastic. It's very professional. I'm very impressed. 

SM: Well, I'm glad you say that, because we only validate parking here if you're nice to us. 

BS: [laughs] I took the subway. 

SM: All right. We always like having you in just as the new year is kicking off so people can build the rest of their year around whatever it is that you say. 

BS: That is a heck of a burden you're putting on me here. They will build their year based on what I say. Okay, alright. 

SM: [laughs] It's a lot of pressure, but I'm sure you're up to it.  

BS: I am. 

SM: Do you get at this time of year, do you find a lot more people pestering you for advice as they make their resolutions and think about the year ahead? 

BS: 100%. The sort of phrase is: ‘New Year, new you.’  And this is in every category of people's lives. They think about their physical health and their mental health and their relationships and what are they going to do for vacation and how are they going to try to get a handle on their money in new and improved ways in the year ahead? So certainly that's a part of it. The thing that I would say is different this year is the ridiculous levels of debt that people are carrying. Sure, it's mortgage, but it's also credit cards and lines of credit and all those sorts of things. So that's a real issue for people in the moment at a time when we are headed into another significant period of mortgage renewals in which hundreds and hundreds and hundreds of thousands of people are going to be faced with a payment shock, like their payment was X, it's now X plus 20, 30, 40%. 

SM: Yep, absolutely. We will get into some of the details of that, but I just wanted to lay out the context a little bit and maybe starting with what does it feel like now, what are you hearing from your clients? Do you have more people come to you at Credit Canada now than you did, say, a year ago? How does it compare to a year ago? 

BS: We're up 38%.  

SM: Wow. 

BS: 38% year over year. So, listen, we're glad we can provide support for people, but the phones are ringing off the hook and it makes sense, given the environment that we're in, the ridiculous increase in inflation and a real concern about what's going to happen on the economy. So, for sure, our phones are ringing, but we've been prepared for this for a while. And honestly, it's surprising to us that it's taken this long. We're counter-cyclical. As the economy slows, people have a harder time maintaining the level of debt that they may carry. And so, we've been waiting for it. And, ta-da, here it is. 

SM: So in spite of the fact that, as you said, it's been coming for a while, interest rates have been going up, there’s been inflation. Some people already have faced those mortgage renewal challenges, but it's really only starting to hit now. 

BS: It is really starting to hit. And the part that I should foreshadow is we've still got a pretty strong labour market. So, the people who are calling currently, they may well be unemployed or underemployed, but the big fear for us, like the one that's really in the back of our minds always is what happens as layoffs increase. And you see like the headlines, like anecdotally it's happening, but it's not showing up in the big economic indicators. But that's what will make everything so much more challenging for people. 

SM: In recessions of old, you'd see massive layoffs going on in factories and all that. A lot less of that this time around, so far, at least. You were mentioning, you know, many of your clients, maybe they're already unemployed or underemployed. Do you also have employed people coming to you as well? Because you see that even, say, in food banks are reporting more employed people using their services. 

BS: Yeah, 100%. 

SM: Right. Okay. You talked about some of those factors that are going into, you know, the increase in the needs for your services, increasing interest rates, they've now stayed still for a few months, which is great. Still pretty high, though. Inflation looks like it's starting to come under control, but certainly on groceries and some other things, still higher than it was. What do people tell you about the impacts that those things have had? 

BS: ‘I can't afford my life’ is what they say. They can't afford their life and they're not calling and saying, ‘I can't afford the condo in Cabo this year.’ They're calling and saying, ‘I can't afford to put gas in my car. And if I don't have gas, I can't go to work.’ And so, I think the fundamental driver is inflation, coupled with root causes that we see all the time, regardless of the economic situation. And those are things like mental health issues, addictions, physical health issues that prevent people from work, marital breakdown. There's just a whole bunch of what we call root causes in which the problem is something else and the issue with debt is just the symptom. It's just the symptom. And so often people say, ‘Oh, I've got a debt problem.’ Or that, you know, people have a debt problem. Maybe. But I would assert that that's the symptom. And we really need to get at the root cause for some people such that we can provide them with support that's going to enable sustained change. 

SM: Hmmm, I wanted to get to some of those tips that we talked about. You've given us that context. In terms of the advice, I mean, there are the people who are actually struggling with debt issues, but there's also just everybody. Everybody could use some financial advice. What’s the very first thing you tell people they should be thinking about as they're planning for 2024? 

BS: The first thing that I would have people consider is: ‘What is my number one priority?’ And the way into that is a model that we talk about called the priority pyramid. So, picture Maslow's hierarchy of needs from when you did psychology in your past at some point and at the base of that hierarchy was like food and shelter. At the top of that hierarchy was my purpose, my self-actualization, and that is unattainable for most, we can’t even think about that. And the same discipline can be applied to personal finance and the pyramid looks like this. It begins with the level of cash flow. Are you earning more than you're spending? If yes, if you are, you move up to debt and at that level of the pyramid, you're looking at eradicating consumer debt to zero and having it stay at zero forever and always. If you're doing that, then you move to savings. Then you move to tax vehicles like the first home buyers, the RRSP, the RESP, the TFSA, whatever. And then you move up to investing. And that pyramid is critical because people try and do too many things at once. And if someone is not earning more than their spending, the relevance of crypto or cannabis or the stock market is zero, it is completely irrelevant to them, because the guaranteed return is going to come from the eradication of credit card debt, which is somewhere between 25% and 30% for most of them. So that sort of framework is a really critical thing, both to provide focus and to reduce overwhelm, because you can't focus on everything. So when people get it, they go, ‘Are you telling me that the number one thing I have to focus on is just earning more money or cutting my expenses? Okay, look, I'll focus on that and then we'll deal with all those other 50,000 things when I move up to the next notch on that pyramid.’ 

SM: So the first thing is consumer debt. 

BS: Well, the first thing is cash flow, because if you're not cash flow positive, you can't do anything. So, for some people, that's increasing income. Maybe you can get an extra shift, maybe you can do a side hustle. For other people, it's a real and brutal and rigorous assessment of expenses. You know, all bets are off, how can I cut? Once you’re cash flow positive, then you can direct that cash, that surplus can go to a plan to eliminate that consumer debt. 

SM: So, a basic assessment of money in, money out. 

BS: Yeah. And that we use a model called sustainable spending, because what we know is that no one can live on a diet forever. And so, what we want to help people do is find a way to live sustainably so they don't have to track every single penny all the time. So this method is about analyze, brainstorm, change A, B, C, analyze what's coming in, what's going out, brainstorm some ways to significantly change the way that math works and then commit to two or three. We all have a limited number of units of willpower. Nobody has an unlimited amount of willpower, so don't use it on restricting yourself from buying the proverbial latte. Use it for you to say, ‘Jeez, my spending issue, it's takeout. It's takeout food. That's my issue.’ So, use your willpower there to take that down from four times a month to once a month or whatever the frequency is that's going to fit to have you be cash flow positive. 

SM: Right. And I guess that would apply equally to not just to somebody who's in sort of a crisis situation with their debt, but somebody who maybe over the course of the holidays accumulated a bunch credit card debt, buying gifts or whatever the things people do over the course of the holidays. So, the same thing would apply even over the short term just to get over the hump. 

BS: 100%.

SM: So once you’ve tackle that, you tackle the consumer debt or you're at least on the path to doing it, what's the next thing people should think about?

BS: It's saving. So you'd think about, ‘What do I want for my life?’ And this is a values-based question. Like, you know, I want to retire, maybe I want to support my kid's education. I own a house and I know there's going to be maintenance. Anything that you can think of you would have an opportunity to create a savings goal and then you would organize those priorities based on what you think is key to go first. I would argue, even as a parent, you save for retirement before you save for kid's education. Because worst case, there's no money for them, they can get a summer job earning tips at a restaurant and all that. But that is a better situation than hoping that my child is going to support me in retirement because I'm not betting on it. So, you would make some of those priority calls to say, ‘Okay, like I've only got 500 bucks to save or I've got a thousand bucks to save, Where is that going to go?’ And then once you get into the savings level of the pyramid, automate, automate, automate, automate. So if you've got the cash flow, if you've got the freedom to do that, automate your TFSA contribution, it just comes out on payday, it just disappears. Automate the maximum contribution on your RRSP. Gone, done. You love taking a vacation once a year. Automate the amount of money that that will equal on an annualized basis. Automate, automate, automate, automate all the things. 

SM: Hmmm. Okay. You mentioned some of the things that you might save for your retirement, I guess first and foremost. But should you also be saving just to have an emergency fund or should that even come before the longer-term thing? 

BS: Yeah, I think there's a fair amount of discussion around emergency funds. Here's the pitfall of the emergency fund, there are two. One is that people save for an emergency fund when they have credit card debt, which makes absolutely no sense. So don't have $3,000 sitting there when you've got $3,000 in credit card debt, pay that off immediately. Second, and this is going to sound super obnoxious, which will surprise you because I'm never obnoxious, don't have emergencies. Because when people think about an emergency fund, they put in a whole bunch of things that are not emergencies. A car repair is not an emergency. You own a car. Pro-tip: it's going to break down. You own a house. Pro tip: your furnace is going to fail. Those are not emergencies. They are lumpy expenses. So, they come periodically. They're not every month. But you need to build your financial life, your sustainable spending life such that it accounts for all things, even those things that are lumpy. We relate to it as an emergency. I will say, you know, the day my water heater failed and my basement flooded, that felt like an emergency. But the cost of it was consistent with being a homeowner. There are relatively few things that are true emergencies. So, I think what I would say more than an emergency fund, it's emergency preparedness. It's being thoughtful about having some buffer. 

SM: Right. But you still have to have the money.

BS: Yeah, you have to have the money. 

SM: Right. It still is sort of a fund in some way. You don't call it an emergency fund. It's your car maintenance fund, it’s your household expense fund.

BS. Yeah, 100%.  

SM: All right. So, we've taken care of our consumer debt. We've started to save selfishly for our own retirement ahead of our children's education. 

BS: And probably some of the aesthetic interventions as we age. There is a fund for the botox and the nips and the tucks and the personal trainer and the all the things. I'm kidding. Not really. 

SM: [laughs] 

BS: Yeah. Yeah.  

SM: So once you've done that, you set up that saving. What's next? 

BS: So, this is where you want to have some level of sophistication around the accounts that you use. And so, people will talk about the difference between TFSAs and RRSPs for retirement savings. The first home savings account’s a big idea, a really big idea. And then from there you move up to investing. And this is kind of rich coming for me given that I spent so much of my career at BNN Bloomberg. The investing part can be so very, very simple and people make it so very, very complicated. So, this level of the pyramid is having a low cost diversified portfolio that will bore you to tears. It is not interesting. It doesn't follow the news. It's super boring. The final level of the pyramid is what's called optimizing returns. And this is when you can go, ‘Woo, I'm doing puts and calls and derivatives. And I, I believe in this sector of that sector and I love that CEO and I saw them on BNN Bloomberg and they're so great.’ Do all that only after you have a portfolio that is meeting the performance of the benchmark index over time. 

SM: And so does that mean just invest it and stop looking at it? Don't be looking at what the market's doing everyday? 

BS: Yeah, uh huh. This is a question I get all the time. I will get, ‘Oh what are you thinking about the stock market and what's going to happen?’ I don't know. I don't pay attention, but I think we over obsess about things that are outside of our control. And what's within our control is our savings rate, our diversification and our fees. They are 100% inside of our control. And even just activating the relationship — so, if you're someone with a financial advisor — being like the best client they've ever had, and great financial advisors love clients who are engaged in the big picture and who think holistically, that's what great advisors love. So, I would do that. If you're going to work with an advisor, you ask them how much you're paying, they'll tell you how much you're paying, get value for what you're paying.  

SM: Okay. You talked in the very beginning about this sort of mortgage crunch that's coming up for a bunch of people as a result of renewing with a much higher interest rates. So that could be people who had fixed rates of 2% that they got into five years ago, I guess. Now facing much higher rates and different story for variable. What are the main stories you're hearing around mortgages from folks? Is that one of the big drivers of the challenges people are facing and what do you tell them?

BS: Well, it is a big challenge. And, you know, for those who've been on variable, they've been feeling the impact of this for a long time now. But for those who've been on these fixed rate mortgages, they know it probably in their mind that they're not going to renew at the same rate. But then when they get that number, it is going to be a shock and there will be a realignment of their spending because it's not like there's fat to cut for most families. They're going to be cutting on necessities. So, they're going to think about, ‘Oh, I need to take my food budget down. And I was used to having a meat protein four nights a week. Yeah, it's now two.’ Like those are the kinds of calls. So, I think the advice I would provide for people is going back to sustainable spending. ABC. Here's your new reality. Here's what your new mortgage payment is. Now, how are you going to find a way to balance that payment, which is now fixed, there’s nothing you can do about it, with those other things that you're trying to do and there's no right answer. Every family will do things differently. There are certain choices that one would make in the short term. You know, if you've got young kids or if you've been going through some sort of a health crisis, you may say, ‘Listen, okay, I'm pausing retirement savings for a year or a couple of years because I simply cannot do it all.’ 

SM: Right. All of these things put together sound like people really just should be thinking about their money. All the time and planning—  

BS: Yeah.  

SM: To try and limit the number of surprises that they're going to face along the way. 

BS: Yes. Here's the nuance I would provide. I don't think they need to be thinking about their money all the time. Because that makes it sound like a hobby. There are way better hobbies. I got to tell you. But I think you need to think about your money deeply, periodically. So, I'll tell you some of the practices that I follow on an annual basis. Number one, January 1st. Okay, maybe it's January 9th, but don't tell anybody. I do my net worth statement every single year. And it's a fascinating record because you start to see how you can build wealth over time. So, I would do that. It's not something that necessarily prompts change, but it does have you see, ‘Oh, okay, like I made some progress there. I didn't make some progress there.’ And then the second part that needs to be certainly more than annual, but maybe not quarterly, are conversations with the people who are closest with you in your life. Like, ‘All right, spouse. All right, parents. All right, children. What are the things that we're going to do in 2024 that will provide more of what we love? That will forward the things that are important to us?’ And for some people, it's home. For some people it's travel. For some people, it's experiences. I don't know what it is and there's no right answer. 

SM: Okay, that's some of the longer term. Are you a believer in very strict daily budgeting, keeping track of every time you buy that coffee or that latte?  

BS: No! That sounds like a total horror. 

SM: It does. 

BS: Yeah I wouldn’t do that. No. So I don't think it's sustainable and I don't think that it addresses the big things. Right, like you don't blow your budget with a latte. You blow your budget with having a second car when you really, really don't need one. Or living in a place that is bigger and more expensive than what your income will permit. Signing on to extracurricular activities for kids that you can't afford. Which, by the way, is a brutal decision for parents to make. Like the coach says, ‘Your kid has talent, they've got NHL potential. We want them in rep. And you're like, Yeah, but that's six grand. So how am I going to navigate that?’ So, I don't think that there is so much a daily practice. I think there is a let's take a step back. Let's look at our values, let's look at this analyze, brainstorm, change, and then make a couple of big changes that will enable you to not have to think about the details very, very frequently. I'll give you an example. I went and saw a nutritionist years ago and she did many great things. One was to show me what actual food portions look like. I was shocked. I was like, ‘That's not a portion. That's barely a snack. I need more than that.’ But she pointed that out and then she said, you know, here's how many calories are in a beer. I like a beer every once in a while, but I could never have another beer and be perfectly fine. If you said I can never have another butter tart, basically picked me up at the cemetery because it's over, I'm done like I cannot live without sweets. So, she said, ‘Make the choice.’ And so, for the most part I don't really drink, but man, give me a dessert table and I am in for the win. So, as you think about your money making those tough choices and saying, ‘What really, really matters to me?’ And if you're a streamer and you want all 17 streaming services, you should totally have them. But you're probably not going to see a Broadway musical. If on the other hand, you're like, ‘No, no, must see, (fill in the blank.)’ Go see that and slash the streaming services. 

SM: Okay, Lots of good, very specific tips. Maybe we'll end on something a little more philosophical? 

BS: Oh my gosh, I like that. Are we quoting Sylvia Plath or Socrates?

SM: No, we’re quoting Bruce Sellery. 

BS: Oh my God, he's good. Yeah. He's a little much though. Like he's a little over the top I think.  

SM: [laughs] In small doses, he’s fine.  

BS: In small doses, he's fine just don’t want to live with him. 

SM: [laughs] Is there some big picture overall advice that you people could use as they head into 2024, potentially another challenging year with high interest rates and inflation, who knows, maybe a recession? What's the Bruce Sellery mantra? 

BS: I have many, but I'll give you one. I'll finish on this one.  

SM: Okay.  

BS: Money is a tool. Learn to use it and use it wisely to build the life you want. We spend a lot of time as parents teaching our kids how to use, I remember teaching my kid how to use up carrot peeler when they were three and, you know, some parents are like, ‘You’re letting your three-year-old use a peeler?’ Yeah, and I'll tell you why. Because they'll cut their hand once and they'll never do it again. And it's true, our kid is great in the kitchen. They know how to use all the things. So, when we think about parents being citizens of this earth, what are the tools? Money is a really, really great, great tool. It's how so much of our world works and having a level of mastery in that area is going to make life easier for you. Whether you want the biggest house in the country or whether you want to make the biggest difference to some cause that is deeply, deeply important to you. Money is a tool, so learn to use it.  

SM: Great.  

BS: Oh my gosh, that was good. 

SM: Better than Socrates.

BS: Almost. Almost. 

SM: Bruce, thank you so much for joining us again. I really appreciate it. 

BS: It was my pleasure. Thanks for the invitation. 

SM: I’ve been speaking with Bruce Sellery, he is personal finance expert and CEO at Credit Canada Debt Solutions. He's also the host of Moolala, the weekly personal finance radio show on SiriusXM.