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Most people with an addiction to spending do not realize the extent of their spending until their credit cards or lines of credit are maxed out and bill collectors start calling. A spending addiction can begin as early as childhood and may be caused by anxiety, depression, lack of hope or even loneliness. The “rush” that an individual receives from compulsive spending can be characterized similar to substance addictions or problem gambling. The Center for Addition and Mental Health (“CAMH”) defines addiction as “a term used to describe anything from a desire to have or do something that gives pleasure, to a medical issue, to an uncontrollable compulsion.”
The prevalence, impact and consequences of an addiction to spending can lead to a host of personal, financial and employment-related problems which impact family, relationships and career security. Excessive and compulsive spending is a real and serious addiction causing the life and finances of the spender to become chaotic and unpredictable as over time the spending creates a dysfunctional lifestyle. An addictive spender will typically conceal their spending addiction. In some cases, when all available credit is maxed out, at the height of their addiction, the spender will not hesitate to turn to shoplifting or employee theft to carry out their addiction.
How Much Is My Reckless Spending Costing Me?
Assume that you owe a combined $36,000 on your unsecured credit cards with an annual interest rate of 19% and you would like to pay off the entire $36,000 in five years (60 months).
Your monthly payment would be calculated as follows: $36,000 / 60 months = $600
Your monthly interest would be calculated as follows: $36,000 x 19% / 12 monthly = $570*
*Actual interest charges would be greater due to compounded interest
The monthly payment of $600 + the monthly interest of $570 = your total monthly payment of $1,170
Therefore, in order to pay the principal debt of $36,000 in 60 months, you will need to pay $1,170 per month for 60 months. This would mean that once you have made all the payments, you will have paid $70,200 to get rid of $36,000; of which $34,200 is all interest charges.
The Financial Consumer Agency of Canada has a helpful Credit Card Payment Calculator Tool on their website.
What Can I Do About My Spending Addiction?
There are many organizations throughout Canada including the CAMH, Debtors Anonymous and The Canadian Mental Health Association, which offer a wide variety of programs to Canadians battling spending addiction. Many help centres offer their programs free-of-charge.
How Can A Licensed Insolvency Trustee Or Administrator of Consumer Proposals Help Me With My Debt?
A Licesned Insolvency Trustee can help you discharge or release most, if not all, your unsecured debt through a bankruptcy filing if you are unable to pay your debt.
An Administrator of Consumer Proposals, which may be a Trustee or a person appointed by the Superintendent of Bankruptcy, can also help you consolidate most, if not all, of your unsecured debt through a proposal to your creditors. If you owe your creditors $250,000 or less, excluding a mortgage on your principal residence, you may make a Consumer Proposal to your creditors. A Consumer Proposal is an offer to your creditors to reduce the amount of your debt, extend the time to pay your debt or a combination of both. Pursuant to the Bankruptcy and Insolvency Act (the “BIA”), a Consumer Proposal cannot be for a period of more than five (5) years.
The Trustee or Administrator will assess your financial situation and explain the formal options available to you under the BIA, along with any informal options such as credit counselling or contacting your creditors on your own to arrange a settlement for reduction of the debt.
The Trustee or Administrator will work closely with you to formulate a budget based on your income and expenses and provide counselling on money management, shopping and spending habits and information on obtaining, and using credit responsibly. They will help you achieve financial solvency.
How Do I Locate A Licensed Insolvency Trustee Or Administrator of Consumer Proposals?
You can find a list of Licensed Insolvency Trustees in your area by searching the Trustee Registry of the Office of the Superintendent of Bankruptcy website.
You may also contact the MNP office in your region to schedule a free, confidential, no-obligation consultation by visiting www.MNPdebt.ca or calling MNP toll free at 310-DEBT (3328).
Rob Shier is a Licensed Insolvency Trustee is an Estate Manager at our Toronto and Markham location. To learn more about how MNP Debt can help you, contact our local offices at 416.515.3921.
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*310-DEBT doesn’t operate in MB, NW ON and QC.
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