It’s the first day of finance class, I am getting ready to deliver my first lesson. The message was always the same. The Banks are NOT your friend.
After delivering this message, many hands would go up, along with some puzzled faces. “But Miss, don’t we need the banks? Don’t they tell us how much money we can borrow? Aren’t they there to help us?”
I wanted them to be shocked, I wanted them to ask questions, I wanted them to be puzzled so that they would remember this lesson for the rest of their lives.
“Sorry guys, I stand by my statement, the banks are not your friend. They are a business, a business that thrives in Canada. And if they are thriving, it means one thing, they are making a tidy little profit off of us.”
Now, don’t get me wrong, we do need the banks. We need them to help the process of exchange, and we can definitely use them to our advantage when borrowing money for real estate and other things.
So what’s the problem?
In my opinion, the problem lies in the fact that most people allow the banks to lead their borrowing, investing, and other financial decisions. Many people do not take the time to really KNOW THEIR NUMBERS before heading into the bank.
A typical scenario that I see involves clients with large mortgage payments that are negatively impacting their cash flow and lifestyle. Upon discussing this I am often told “Well, the bank/mortgage lender told me how much we qualified for, so we bought a house with that amount in mind.”
I’m sure they did. The more you borrow, the more they make.
Unfortunately, the bank is not making your mortgage payment, and dealing with the repercussions of your tight cash flow- you are. So it is your responsibility to know your numbers and what you can comfortably afford to borrow. Quite honestly, it’s not their problem.
Knowledge is Power.
In order to become comfortable with being your own financial advocate, you are going to have to dig into your numbers. A solid assessment of where you spend, why you spend, and where you want to spend is integral in helping you make large purchases in a responsible way.
I never go into a borrowing situation without already knowing how much I am comfortable borrowing and the impact this will have on my monthly cash flow, and neither should you.
In addition, I don’t trust biased sources to provide me with financial information. If they are making money off of the decision they are providing “guidance” on, I look for a second opinion before jumping headfirst.
As a money coach, I do my best to provide unbiased financial information and education, and you can find additional useful money content in the free Reboot Your Money Facebook Group.
April Stroink, Money Coach, and I have been recording masterclasses every two weeks, and have one scheduled for this Thursday, July 6th at 8ET. Join us here!
And if you take away one thing from this post, remember, the banks ARE NOT your friends, but you should be your own!!!