Do you have five credit cards, all maxed out? You might need to read Henry Choo Chong’s Finance 101 crash course below.

Q: I have been out of school for almost three years. I work full time but I am worse off than I was when attending college. Currently, I am delinquent on my student loan, my five credit cards are maxed out and I frequently use the services of a payday loans company. How do I get off this cycle and get on with my life?

A: It appears you missed Finance 101, “How to create a budget and stick to it.” You are spending much more than you are earning. Why someone needs five credit cards is beyond me. When one credit card is insufficient for one’s convenience, it generally means a person’s expenses may be getting out of control. Unfortunately, your financial problem stems back to college and before.

Many financial institutions are more than happy to extend you a credit card although you earn no money while in school. If used correctly, credit cards are great to have. On the other hand, the undisciplined will pay for many years to come.

Stop! You must be pro-active if you want to end this vicious cycle of dependency. It can only get worst. Not unlike alcoholism, you must admit that you are spending too much. The way to recovery requires you take steps necessary to get off this addiction.

Here is are the steps that I recommend for you to take:

• Return all your credit cards but one (the one that carries the lowest rate) to the issuers. This will eliminate any temptation to use any credit you have available.

• List all your monthly expenses and compare them to your take-home pay. This shortfall (or deficit) must be eliminated.

• Reduce and eliminate expenses that are not a necessity. Yes, this step requires a lot of sacrifices. Here are a few.

  • Have coffee at the office instead of a morning vanilla latté. You may even lose weight in the process.

  • Brown bag it to work — avoid costly lunches which add up quickly.

  • Question: Must you own a half-dozen alligator shirts or two-dozen pairs of shoes? Buy only what you truly need.

• Consolidate your debts. Find a creditor that offers a low rate for all of your debts. Speak to your bank manager.

A line of credit (LOC) may suffice to pay off your credit cards. This will reduce your monthly cash outflows.

• Cease to use payday loan companies. These loans attract high rates of interest on borrowed money. Recent findings indicate these companies target the working poor and financially desperate individuals.

• Borrow temporarily from a family member if you are unable to secure a LOC. Use all the money to pay off high paying debts. Have a signed agreement. Pay your relative regularly so the payments are part of your budget and you don’t leave a relative holding the bag.

• Set up forced savings. Have your employer automatically deduct from your paycheque a fixed amount to use to invest, such as RRSPs.

If all else fails, seek professional help. One such agency is the Credit Counselling Canada, a non-profit organization. Check their website at

Henry Choo Chong, CGA provides accounting and tax services to individuals and businesses in the GTA.

He can be reached at 416-590-1728, ext. 304. Questions to Money Matters should be e-mailed to

Indicators of financial problems:

  • You miss bill payments.

  • You are paying only the minimum payment on your credit cards.

  • Your credit cards are more of a necessity than a convenience. Using your cards until payday is not a good sign.

  • You are using your savings instead of your paycheques to pay for daily expenses.

  • Your credit card balances continue to increase every month.

  • You are juggling several cards by using one to pay another.

  • Credit collectors are knocking on your door.

  • A utility company has issued a shut-off notice.

  • The issuer has cancelled one of your credit cards.

  • The mortgage company/landlord’s lawyer has sent you a letter for non-payment.