Tips to Manage Rising Consumer Costs 

Increases in essential costs of living aren’t a new foe for British Columbians, with day-to-day expenses from rent to groceries to gas having noticeably risen in recent years. Although most people can’t substantially cut their living expenses, there are some things you can try to gain some financial breathing room.

Prioritize Your Household Budget

A monthly personal budget that’s balanced to your specific situation and goals is a cornerstone of having control of your finances. Whether you already have a budget, or you are putting one together for the first time, create a budget to plan:

• Anticipated regular income
  • If your income varies use your lower earnings as an estimate, and don’t bank on irregular cash injections such as tax refunds.
• Fixed expenses such as rent and vehicle payments
• Categorizing and managing monthly variable expenses like groceries and personal spending
  • Be sure to budget a monthly allowance to cover irregular expenses, such as annual insurance renewals.

Once your new budget is decided, track your actual income and spending to see whether adjustments should be made to get your budget plans and financial realities in-line. Also pay extra attention to your personal spending habits, and related emotional drivers. For example, you may want to unsubscribe from retailer emails that compel you to spend more simply because there’s a sale you don’t want to miss out on.

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Reconsider Your Non-Essential Costs 

Beyond your grocery cart, scrutinize expenses you have control over, and reconsider whether you will continue spending money on non-essentials you may decide no longer make the cut. Costs to evaluate might include:

• Tiers for services such as TV and digital streaming, shopping and app subscriptions
• Banking costs, including credit card fees, interest rates, and balance protection insurances
  • There are many options for free banking, and no-fee credit cards.
  • Depending on your circumstances, it may not be worth having balance protection insurance, as premiums are based on your balance and in many cases the coverage does little to reduce your balance.

Debunking Common Consumer Debt Myths – Learn More

It’s important to remember that budgeting is intended to be a tool used to your benefit, not a punishment – and deciding on your spending priorities, needs and wants, are important components that everyone should consider, regardless of income levels.

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Tips for Future and Emergency Financial Planning 

After weathering a global pandemic and aggressive inflation, many consumers are feeling weary about what they can do to future-plan. While we can’t control all the external influences, taking charge of what is within your power can help you mitigate unforeseen challenges that may come.

Keep Your Income Taxes Filed (and Paid) Up-To-Date

Even if you don’t expect to owe, it’s in your best interest to keep paperwork and personal tax filings up to date (and clear any balance payable as soon as possible). For example:

• Many government credits and benefits rely on Canada Revenue Agency (CRA) information
• Your Notice of Assessment from CRA is often the best way to easily prove your income for housing applications

Learn About Tax and Canada Revenue Agency Debt Forgiveness

Focus on Becoming Debt-Free

Paying down your personal debt is one of the most positive ways to improve your finances – and taking debt-stress out of the equation is doubly good for your wellbeing. Depending on your situation, you may consider strategies such as:

• Restructuring your debt, such as with a balance transfer or debt consolidation (consumers do also have options to consolidate without borrowing)
• If you’re stuck just making minimum payments on your debts each month, carefully review your account statements to understand if you are truly making progress. Sometimes as little as $10 from a $200 monthly payment actually goes to reduce the principal, the rest is eaten up by interest or fees
  • Making just minimum payments on even a $5,000 credit card debt can be a decades-long repayment plan.
• If you’re making only (or not much more than) minimum monthly payments on your debt and/or it will take you more than five years to pay off your non-mortgage debts, understand these are indicators that your personal debt situation is risky, and you may benefit from getting information and support from a Licensed Insolvency Trustee.

Do the “Rule of 60” Math

• Divide your total non-mortgage debts by 60 – does the number look like a monthly payment you could afford in order to pay your debts off in five years? If that five-year figure barely fits your budget (or doesn’t fit at all) then you can likely assume you will need a solution that will cut your debt.

Take 30 minutes to talk with a local Licensed Insolvency Trustee about your options and resources to help you get your debt paid off. Many consumers are surprised to learn about the solutions available to them, like a Consumer Proposal that both consolidates and reduces your debts, and it’s free to have a confidential consultation and get advice from a qualified professional.

Know that you are not alone – BC Licensed Insolvency Trustees are here to offer you resources and support. You can live free from debt and its overwhelming stress. Connect with a caring, non-judgmental Sands & Associates debt expert today to talk about your debt-free plan.

Book Your Free Consultation

The post How to Manage Personal Debt and Finances Through Economic Instability appeared first on Sands & Associates.

As consumers face tough financial demands, Sands & Associates, BC’s largest firm of Licensed Insolvency Trustees focused exclusively on providing debt help services to individuals, is seeing a substantial increase in the number of BC residents seeking professional debt advice and debt relief support. President of Sands & Associates, Licensed Insolvency Trustee Blair Mantin joined Global News to share more on consumers’ growing financial concerns, and what you should know if you’re a BC resident facing a debt problem.

Watch the clip here and read on to learn more about what to watch for across the province.

Carrying Consumer Debt? Here’s the Latest You Should Be Aware Of

Creditors Are Significantly Ramping Up Collection Tactics

In 2020 BC courts were closed and many creditors were extending payment deferrals to their customers.  It’s safe to say that this leniency has now passed and it’s back to ‘business as usual’. In 2023 so far, creditors seem to be taking a noticeably more aggressive approach to collections, with legal actions increasing even for relatively low account balances.

• Individuals owing as little as $5,000 are now finding themselves being sued for payments; in previous years this was generally a risk only where a debt exceeded $20,000.
• Local Sands & Associates Licensed Insolvency Trustees are noticing a trend of individuals seeking urgent debt help because creditors owed these smaller balances have taken them to court and obtained wage seizure orders which often make it impossible for an individual to cover their regular monthly costs of living.

What Consumers Should Know: If you are facing a wage garnishment (or the threat of one) by a creditor, a Licensed Insolvency Trustee can help you make a Consumer Proposal or alternatively file personal bankruptcy, both of which will immediately stop this creditor action. 

Learn more about Wage Garnishments and How to Stop a Creditor with a Garnishment Order

The Number of Consumers Turning to Consumer Proposals is Growing Substantially

A Consumer Proposal is a unique type of legal debt consolidation and an alternative to both personal bankruptcy and debt consolidation loans. Working with a Licensed Insolvency Trustee, an individual will make an offer to their creditors to repay the portion of their debt they can afford (often as little as 20-30 cents on the dollar), with no interest charges and no added administration costs.

The Office of the Superintendent of Bankruptcy (the Federal branch that oversees all insolvency filings) released recent statistics which illustrate how popular Consumer Proposals are becoming for cash-strapped consumers seeking to consolidate and cut their debt:

• The number of Consumer Proposals filed in BC in February 2023 compared to February 2022 increased by a whopping 38%. (And the number of bankruptcies filed over the same period declined by 8%.)
  • A Consumer Proposal is now the option chosen by 84% of people who file formal insolvency proceedings, which is a huge jump from 62% of customers choosing this option in February of 2020
• Overall, there was a year-over-year increase of 28% in the total number of BC residents filing formal insolvency proceedings to deal with their debts, which indicates that although many people are struggling, they are increasingly finding relief by restructuring their debts to offer partial repayment, instead of filing for bankruptcy.

What Consumers Should Know: You do not need to be delinquent on your payments to consider a debt restructuring solution like a Consumer Proposal – also, know that bankruptcy is not your only option for debt relief!

Learn more about Consumer Proposals and Whether a Consumer Proposal Could Be Right for You

Canada Revenue Agency (CRA) is Offering More Time to Pay Balances

Prior to 2020, CRA would typically accommodate a six-month payment plan for individuals to repay a balance owing in full, and it was rare for leniency to extend beyond that time, or in getting relief from penalties and interest charges. Now in 2023 CRA has extended this period to as long as 12 months in cases where they believe the six-month plan would create hardship for the individual.

• Despite this increased repayment timeline, however, for many individuals this is still not enough, especially as another trend contributes to the significant growth in Consumer Proposals – people being pursued for a CERB overpayment, with no means to afford to repay the debt within 12 months, even if the interest and penalties are waived.

What Consumers Should Know: If you have an unmanageable balance owing to CRA a Consumer Proposal is the only means of negotiating your debt to CRA (or having it forgiven with bankruptcy). Also, if CRA has begun collections against you, other than paying the debt in full, only a Licensed Insolvency Trustee can help you with options to get them to stop.

Learn more about What Happens if You Can’t Afford Your CERB Repayment

“Buyer Beware” – Impact of Unlicensed Debt Consultants Increasing in BC

Consumer warnings are being echoed by many Licensed Insolvency Trustees as a resurging presence of unlicensed ‘debt advisory’ firms have begun attracting BC consumers. These unlicensed and largely unregulated agents typically take advantage of vulnerable consumers, collecting money from people seeking debt help these agencies simply can’t provide. Here’s how it often works:

• An individual reaches out for help and is charged fees in the range of 1-2% of their total debt. The advisor explains how a Consumer Proposal can work to help them, and after they’ve collected their fee (often over two or three months) the consumer is eventually introduced to a Licensed Insolvency Trustee – the only professional who can actually file a Consumer Proposal.
  • This is completely unethical as every Licensed Insolvency Trustee in Canada offers a free, confidential consultation to review your financial options – and most, including Sands & Associates – will file a Consumer Proposal for you with no up-front payments whatsoever!

Despite advertising promises and even A+ BBB ratings and positive reviews, there is no such thing as ‘government debt grants’ or ‘programs’ beyond what is available to consumers by working with a Licensed Insolvency Trustee.

• When seeking debt advice, you should always ask “Are you a Licensed Insolvency Trustee?”
• If you’re not dealing with a Licensed Insolvency Trustee, it’s highly likely you are unnecessarily paying money that is providing no value, and you may be the victim of a growing scam in BC.

What Consumers Should Know: Licensed Insolvency Trustees are Canada’s ONLY regulated, endorsed, and qualified debt help professionals. You do not need a referral to get safe, free, and confidential advice from a Licensed Insolvency Trustee – simply contact a Licensed Insolvency Trustee local to your province. It should never cost you money to find out what your options are!

Learn about resources and options to help you become debt-free faster – book your free, confidential consultation with a non-judgmental debt expert today.

The post British Columbians Struggling with Unmanageable Debt as Personal Insolvencies Surge appeared first on Sands & Associates.

What Could Make a Debt ‘Good’ or ‘Bad’?

Although some people might argue that having any type of debt is bad and should be avoided, the reality is that credit is a tool and there are times when borrowing does make sense – usually this is when debt is taken on with the expectation of a significant future benefit, a way of investing for the long run. Here are a few common examples of when using credit might be considered helpful ‘good’ debt:

• Buying a Home: Since housing is a necessity and you are investing and building equity in a property that would be expected to increase in value over time, taking out a mortgage is often considered useful debt.
• Paying for Education Costs: Student loans to fund education that establishes or boosts your career is another type of potentially beneficial borrowing if you expect to get returns with increased future earnings.
• Starting Your Own Business: A loan to launch or expand your business can be a useful tool in pursuing profitable growth.

‘Bad’ debt isn’t necessarily bad, but this term usually refers to credit used either for fast consumption or for spending that provides only a brief benefit. Here are a few examples of this type of short-term benefit debt:

• Vehicle Financing: It’s difficult for most people to purchase a reliable vehicle outright, and taking advantage of credit isn’t always a bad thing, but borrowing to buy a car can have downsides:
• Vehicle values begin to depreciate immediately after purchase, so you often owe more than what the vehicle is worth for some time – especially if you don’t make a significant down payment when you buy.
• Car payments can take up a sizable amount of your household budget, and financing terms can regularly extend to over six years.
  • Be careful financing a vehicle with a co-signer. Many people fail to realize the full commitment of joint vehicle financing because the other party plans to be the primary insurer and driver.
• Consumables Bought on Credit: With high interest rates (especially on store cards), charging your credit cards for household goods and purchases you don’t have the cash for is seldom a good use of credit. These goods hardly ever have enduring value and if you don’t pay off your balance in full right away, the true cost climbs very quickly.

Ways to Deal with Credit Card Debt

Consider Your Personal Finances and Circumstances

Your personal situation and specific circumstances are also a key factor when evaluating your debt load or potential future debts. Consider the following:

Can you consistently afford the payments required to repay the debt on time, and in full? Even a useful debt can end up a ‘bad’ debt if you can’t afford the payments.

• Take a mortgage for example: This can be a huge problem if you borrow too much or experience an increased interest rate such that your regular monthly payment becomes unaffordable.
• Student loans can later be a problem if you borrowed heavily but don’t get the expected increase in earnings.
  • Always be careful not to borrow more than you need and take time to carefully research the career ladder realities of courses of study you are considering.

Why are you borrowing, and what emotions are you experiencing in relation?

• Always consider your needs VS wants and don’t emotionally justify your spending.
  • Are you using credit for a true ‘must-have’, or could this be a ‘want-to-have’ that you’re feeling emotionally caught up in?
• Avoid impulse purchases, especially if you are borrowing to acquire them.
• It can be difficult to get into a new habit of scrutinizing purchases you’re considering – don’t be pressured or swayed by advertising, whether sales or credit offers.

What’s the Best Way to Consolidate my Debt?

Pros and Cons of Using Credit – and Tips for Using Credit Well

No matter what debt you are taking on there can be pros and cons, many of which will be strongly influenced by how you use your credit. Some pros of credit may be:

• Not needing to wait to save up cash needed for major goals (like education or buying a home)
• Earning perks and rewards on day-to-day purchases you were going to make anyways
• Building a positive credit history that can help with future borrowing at ‘best rates’

Having credit as a resource to help with unexpected expenses may be a ‘pro’ but understand this can quickly turn into a ‘con’ if you struggle to pay the debt off – especially since the impacts of an emergency can disrupt your finances for some time. Other common cons to credit may include:

• It costs money to borrow because you pay interest. For example: Credit card interest increases the true cost of purchases if you don’t pay the charge off in full right away.
• Debt repayment takes money away from yourself now and in future, leaving you less for other needs and goals.

Good Habits for Using Your Credit

It’s a good idea to hit pause and take time to get grounded before moving forward with purchases made on credit. Detach from the excitement and feel-good rush of buying; check in with the realities of your budget and financial goals. Realizing that new debt repayment will set your finances back in other areas can be sobering. Using credit to your best advantage, you might also consider habits such as:

• Keeping borrowing limits low to avoid the temptation of using more than you need (or can afford).
• Not using credit for transactions that don’t have an interest-free grace period, such as cash advances or lottery ticket purchases.
• Always paying more than the minimum monthly payments required on your credit cards.

It’s also essential to ensure your budget is well-balanced and that you have a solid plan for paying off your debt. Without either of these you’re likely to struggle with virtually any type of debt, even the ‘good’ ones.

7 Signs You Should Deal with Your Personal Debt – Now

Where Can I Get Help With my Debt, or Advice on my Debt Situation?

Licensed Insolvency Trustees are the professionals in Canada who are fully government-qualified, empowered and endorsed to help people with debt. We can assist people with many different debt needs and circumstances, including (but not limited to):

• General information on all your formal and informal options to deal with debt
• Addressing urgent situations or creditor conflict (i.e. Wage garnishment, legal action, etc.)
• How you can restructure or consolidate debt to make payments lower
• You’re interested in some form of debt forgiveness or debt relief

Sands & Associates’ Licensed Insolvency Trustees work with people across BC, and we offer our services in-person from local offices throughout the province, as well as online or over the phone, so you don’t even have to leave the comfort of home to get support.

There is no cost to get confidential debt advice and insights about your situation; we believe everyone should have confidence in their personal financial planning and how they are managing their money.

Preparing for Your First Meeting with Sands & Associates? Learn More

You Owe it to Yourself to Get Debt Help

A lot of people who are struggling to manage their debt feel guilty about the debts they accumulated, and often have a lot of embarrassment and shame around being unable to pay them off.

The idea of discussing your situation with someone who is essentially a stranger, professional or not, can be uncomfortable – and taking the first step of reaching out for help is often the hardest part.

Having a debt problem does not make you a bad person. Financial challenges are not a reflection of your self worth. You deserve to live with dignity and without overwhelming stress.

You do not have to struggle alone with your debt. We understand that despite your best efforts and intentions it is not always possible to repay your debts as planned, and there are options to help you deal with your debt in a way that is manageable and affordable so you can move forward with your life.

Connect confidentially with a friendly local expert – your debt-free future could be closer than you think! Book your free, non-judgmental consultation with Sands & Associates today and get a debt-free plan that’s right for you.

The post What’s the Difference Between Good Debt and Bad Debt? appeared first on Sands & Associates.

Enter – the minimum payment trap. Only making your minimum monthly payments on credit card debt means you’re often stuck in a debt repayment cycle – never making meaningful progress towards being debt-free. Vancouver-based Licensed Insolvency Trustee Blair Mantin joined Breakfast Television to help viewers understand the minimum payment trap, and how to get out of it.

Watch the clip and read more below:

Understand Credit Card Minimum Payments

The amount of your required minimum payment will be calculated differently depending on the lender. Sometimes there are even differences between products and cards at the same bank.

Your credit score and history can be factors that influence the interest rates and credit cards you are offered.

Minimum payment requirements are generally somewhere between 1-2.5% of the total account balance – and this might barely cover the interest charges accumulating.

• As little as $10 of the minimum payment you make might be going towards your balance – the rest could all go towards paying off the interest and fees.

One Canada’s largest banks normally calculates their minimum payment based on the monthly interest and fees – plus $10.  

Minimum Payment Examples | These minimum payment traps can get scary, fast

A $1,000 balance on a credit card that charges 18% interest could take more than 10 years to pay off!

A $6,000 credit card balance with 29.99% interest rate (common for department store cards) could take over 53 years to pay off!

Try this handy Credit Card Payment Calculator from the Government of Canada.

Disclosure Rules for Credit Card Companies

Federal disclosure rules require credit card companies to display information on how long it will take the customer to pay off their credit card balance if only making minimum monthly payments.

Check your credit card bill – this is where you’ll find the required disclosure statement.

Tips for Using Credit Cards

• If you can’t pay the balance in full right away, think twice before using your credit card to make a purchase
• Not all rewards programs are worth the cost
  • Rewards program values are normally 1% of what you spend and you’ll get the reward once; your interest costs however will generally be much higher than 1% and will be charged month after month.
• Avoid taking cash advances, since interest charges start the day you withdraw them
  • Interest charged on a cash advance could be 10% higher, and come with a “one-time charge” of up to 3% of your withdrawal.
• Always make your payments on time
  • Missing a payment can result in your bank increasing your interest rate significantly, this can also happen when you’re over your credit/borrowing limit.

Strategies to Pay Off Credit Card Debt

• Pay more than the minimum monthly payments. Here’s how to start:
  • Make a list of all your debts and their minimum monthly payments, then sort them by interest rate – highest first.
  • Budget how much more you can afford to pay each month and pay this on the card with the highest interest rate. You’ll still need to make all your minimum payments each month, but you’ll use your extra payments on the debt with the highest interest!
  • Stick with this plan until you get the debts paid off, one at a time – working on the highest interest cards first.
• Budget realistically about how much you can (and will) put down on your debt repayments each month
• If you’re carrying a credit card balance and also putting money away in savings, consider whether this makes financial sense!
  • Every dollar you allow to sit on a credit card balance is the bank’s investment that you are expected to pay back with 20-30% in returns.
• Stop using the credit cards
  • Leave room in your budget for unexpected costs, these are just a part of life. Having a reasonable amount of savings will help you avoid relying on credit for unplanned expenses.
• Know when to ask for help
  • If your budget is stretched and you still can’t pay much more than the minimum monthly payments, talk to a Licensed Insolvency Trustee about your options for debt consolidation and reduction. A Consumer Proposal can be a great option!

What would your life look like debt-free? Book your free debt consultation with a knowledgeable debt expert and find out. Sands & Associates has been helping people get a financial fresh start since 1990 and we have local offices throughout BC to serve you.

The post Breakfast Television Vancouver: Tips to Avoid the Minimum Payment Trap appeared first on Sands & Associates.

Watch here:

Why is a budget important?

Less than half of Canadians operate with a budget on a month-to-month basis; it can be very difficult to make financial headway like this – it’s like “driving blind”, with no ability to course correct and know whether you are trending positively or negatively.

The biggest mistake people make in budgeting is to never track actual expenses against their estimates – if you don’t revisit your budget every month, you don’t really have a budget.

Key budget areas and percentages (percentage of after-tax income):

Housing – 35%

35% is the upper limit of what most experts would recommend in a monthly budget for housing costs (mortgage or rent plus all utilities).

The challenge is that living in Vancouver it can be difficult to meet even this target of 35%, with many people spending more on rent and mortgage than they would have to if they lived elsewhere.  Options such as hosting homestay students, or considering a roommate can help to reduce this cost.  Be careful if you consider moving that additional transportation costs do not offset any savings in housing costs.

Transportation – 15%

Consider all of the costs of owning a car: Gas, insurance, maintenance and repairs, depreciation, etc.  BCAA estimates that the average compact car costs about $9,500 per year. 

This is another area where overspending is common.  Most of us greatly underestimate how much it costs us to get from point A to point B.  If you’re able to use transit, you’re ahead of the game as it’s near impossible to spend more on public transit than you would spend if you owned a car.  Is 2015 the year to embrace car sharing?  Options abound in Vancouver for short trips, long trips and everything in between.  Consider Car2go, or Modo Car Coop as good, cost effective options.

Food and Other Living Expenses – 30%

Food costs can vary widely depending on your diet, shopping habits, affinity for couponing, and size of your household.  A good estimate is about $250-300 per household member for groceries each month.

We’ve all felt the increase in food prices lately; according to StatsCan, inflation in food in 2014 was dramatic, with meat, fish and vegetable prices all increasing in the range of 5-12% over last year.  While you can’t do much about the increased cost of ‘staple’ items, this category also includes some budget killers like eating out, lattes, taxi rides, nights out, etc.  The key is to track this category accurately – consider whether an app could be helpful, or even try ‘giving yourself an allowance’ by putting money in a separate account for food and other living expenses each month.

Savings – 10%

You must pay yourself first, by setting up automatic withdrawals into an account.  Otherwise, there will never be enough money left for savings.

Saving money is usually the first thing that goes to the wayside when money is tight.  It is also hands down the number one factor that will determine whether you will achieve financial success – can you save money each month?  RRSPs are the only funds that are safe no matter what, so even if you aren’t debt free, you should still be making contributions to your future.

Debt repayment – 10%

90% of Canadians say they have more debt today than five years ago.   Top priority for 2015 is to pay down debt according to a recent study by CIBC.

Many people fall into a trap of ‘financial tetris’ where they are using one card to pay another.  Though they might feel great about taking action on their debts, they may not be getting any further ahead if they are just shuffling money around between cards.  Consider how much money 10% of your income is, if you’re required debt payments are much higher than that amount, you should investigate whether professional debt help is required.

Make this the year of your financial freedom!  Contact us today to arrange a free, confidential consultation about your debt resolution options.

The post Blair Mantin shares Budget Basics with Vancouver’s Breakfast Television appeared first on Sands & Associates.

If you find yourself in any of the following situations or difficult budgeting habits, it may be time to seek a Licensed Insolvency Trustee for support and solutions that will help you get your debt under control – and paid off for good.

Budget Problem 1: You Don’t Stick to Your Budget

A budget is a spending plan to help you stay on top of your finances, meet your money goals, and get your debt paid off. Planning and tracking your income and expenses can also help you identify issues right away, so you can decide what to do about it.

• Budgets are a tool, not a restriction, and without one that is working well you’re almost certain to run into cash-flow problems and turn to credit to pay expenses and cover unexpected costs.

How Am I Overspending?

There’s a crucial difference between having a budget that doesn’t work because you give in to overspending that you have the cash to cover and overspending because your income can’t meet your regular costs of living.

If you aren’t going into debt by going over your budget, curbing overspending is still important to stay on track for things like savings and other financial goals. It’s important to take stock of why and how you’re spending – consider:

• Would you spend less by challenging yourself to only use cash?
• Are your purchases driven by mood?
• If you walk away from a purchase for an hour, would you still buy the item?

A 2023 BC Consumer Debt Study found the main cause of debt from 25% of insolvent consumers polled was using credit for essential costs of living income could not cover.

A cycle of using payday loans or a credit card or overdraft to fill the gaps in your budget is hard to break once it’s been started and even small charges that get added to a credit card balance can escalate significantly over time with accumulating interest.

• Are your monthly debt payments unaffordable or unsustainable? Talk with a Licensed Insolvency Trustee to assess your situation and explore options that can reduce your debt payments down to what you can afford.
  • Interest-free consolidation solutions like a Consumer Proposal can cut your debt up to 50-80% and get you to debt-free in less than five years.

Try this Calculator to see a Debt Options Payment Comparison

Budget Problem 2: You’re Not Saving, or Planning for the Future

Planning and tracking your income and expenses carefully can help prevent a cycle of reliance on credit, and a good budget should include allocations for your living expenses, debt repayments, and savings.

• Savings can make a crucial difference when financial emergencies arise. Having credit available as a safety net can be comforting, but this isn’t ideal, especially if a disruption in incoming funds becomes long-term.
• Looking to the future and retirement is another component of savings that tends to be overlooked or put on the back burner – but time can pass faster than our good intentions come to fruition.

Many people opt for only focusing on paying off their debt, with the thought that once that’s done, they will start saving. While this approach does add up mathematically, it can leave you vulnerable to unexpected expenses – ideally you want to have at least an emergency savings fund that you only use in the event of a true emergency.

• If you are making debt payments but don’t have any savings, consider adjusting your budget to enable you to build up enough savings to cover a months’ rent and groceries.
• If your budget is already stretched too thin with your regular costs and debt payments to manage diverting some funds for savings, this is an indicator your debt may be unaffordable and even a small disruption to your income or expenses may turn into a serious problem.

When Should I Focus Only on Paying My Debt?

If you have a comfortable amount of emergency savings and your retirement is still a long way off, it may make more sense to make paying off your debt the financial priority – especially if you have high-interest debts like credit cards.

• Consider connecting with a Licensed Insolvency Trustee to explore resources to help you get your debts paid down faster, and at less cost. The sooner you can get debt paid off, the sooner you can make the most of your income for your future self.

Learn More About How to Balance Your Budget to Pay Off Debt and Cut Money Stress

Budget Problem 3: You’re Uncertain About Account Balances

It’s important to have confidence in your finances and personal money matters, and if you’re not aware of your account balances and how much you owe, this can be the first place you begin to lose control. Without knowing what you’re working towards or must manage, it’s almost impossible to budget properly.

Not staying on top of your bank accounts and transactions can easily lead to bounced payments, a derailed budget, and even erroneous charges going unnoticed. Consider:

• Do you know how much is currently in your chequing account? What about the balances on credit cards?
• Keep track of your accounts and payments; make a point of reviewing your balances after every few purchases and after each payment is made – this also helps as you track your progress paying down your debt and meeting other financial goals.

As well as being aware of your account balances, read the fine print before taking on any type of credit and ask for clarification on any terms you’re unsure about before borrowing.

• Extra charges, annual fees and compounding interest are just a few things that can catch consumers off-guard and result in extra payments.
• Lenders extend credit to make money, not to do you a favour – always be sure the terms are manageable for you and that you’re fully aware of your rights and responsibilities.

My Spouse Handles Our Money Matters

While it may seem like a good idea to delegate all responsibilities for household financial management to one spouse, the reality is this can result in huge problems, such as:

• The managing spouse may feel stressed and eventually resentful about bearing the sole burden of juggling finances, and while the other spouse may be blissful in their ignorance, while debts for which both are liable may be mounting.
• Conversely, the hands-off spouse may feel worried, kept in the dark and be unaware of key money matters.

Have an open dialogue with your partner and make sure you both contribute to handling the family’s financial affairs.

Read More on Dealing with Debt and Financial Stress in Your Relationship

Budget Problem 4: You’re Not Budgeting Enough for Monthly Debt Payments

Making regular monthly payments is a good thing, but if the payments aren’t high enough, there are issues at even a basic level. Consider:

• Are you paying only near the minimum payments because that’s all you can afford?
  • Very little of these minimum monthly payments will go towards your principal balance and interest charges will snowball quickly.
• At that rate of repayment how long will it take you to become debt-free?
  • You can find a breakdown of this repayment disclosure on your credit card statement. Even relatively ‘small’ balances can take decades to clear if only minimum payments are made.

Especially where credit card debts are concerned, minimum payments may keep your account up to date but in the long run will result in years and years of debt repayment because of the continued interest charges. Always pay more than the minimum payment – if you can’t, talk with a Licensed Insolvency Trustee about alternative debt repayment plans.

If you’re only budgeting enough to pay your minimum monthly payments, or slightly more than – this is not enough to get your debts paid off in an efficient timeframe, period.

Paying Off Credit Card Debt – 3 Problems to Avoid

What’s My ‘Rule of 60’ Number? 

It is recommended that you have a plan that will allow you to have all your non-mortgage debts paid off in five years or less. Try the following quick calculation to test your current debt-free plan to this standard:

1. Add up your total non-mortgage debt and divide the number by 60.
2. Can you afford this as a consistent monthly payment to get your debts paid in 60 months?

Revisit your budget with this ‘Rule of 60’ in mind:

• One option might be to make your minimum monthly payments on all your debts and pay more on your highest-interest debt first.
  • Once it’s paid off you can move the extra payments to your next highest-interest debt until you eventually work your way through all your debts.
• If your ‘rule of 60’ payment isn’t manageable, consider a Consumer Proposal as a solution to stop ongoing interest charges and cut your debt balances down to what you can afford.

How Can a Licensed Insolvency Trustee Help Me? 

Licensed Insolvency Trustees are Canada’s only official debt help experts and our role is to provide consumers with information, advice, and guidance about how they can deal with problem debt. You may have questions such as:

• Are there options to consolidate my debt without borrowing from a bank?
• Can I negotiate an interest rate reduction with my creditors?
• What can I do if I can’t afford to pay a debt back?
• How can I stop a creditor from harassing me or my family?
• Is bankruptcy a suitable solution for my situation?

We are here to answer all your debt and debt solution questions and offer you non-judgmental advice. You can also decide to work with a Licensed Insolvency Trustee on a debt management plan such as a Consumer Proposal, or personal bankruptcy.

In a free, confidential debt consultation we will take the time to learn about your situation and goals, and together talk with you about all of your options. Once you understand the resources and solutions available to you, you’ll be fully informed and in a position to confidently move forward with the plan that’s best for you.

Get started with your debt-free plan now – book your free, confidential consultation with a non-judgmental local expert who cares.

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DO — Leave the dough at home.  Credit and debit cards can stay at home if you’re out and about — they’ll be fine without you.  Carrying a limited amount of money will make it a lot harder to spend.  If you find that even on an afternoon stroll you burn through the cash in your pocket (quick trip for an unnecessary coffee, grabbing an extra magazine, etc.), then start leaving your cash at home too.

DON’T — Be pressured by a sale.  Just because an item is on sale doesn’t mean you have to have it right then and there, even if it’s something you use.  If you’re unsure then walk away and give it 24 hours.

DO — Make shopping lists and stick to them.  Simple, right?  If you frequently shop without a list try using one and see how much less you bring home.

DON’T— Buy to make yourself feel better.  This one often lands people in a vicious cycle.  The initial pick-me-up is usually replaced by guilt when you realize that you didn’t need or couldn’t afford the purchase.

DO — Focus on needs instead of wants.  It can be difficult to stick to your guns when you see things you want that everyone else seems to have.  To break the cycle of emotional spending, keep your eye on the prize, and your budget.

DON’T — Get sucked in by store credit cards.  Yes, you may get an initial discount on your purchases but you’ll likely buy more than you intended.  And store cards often carry a very high interest rate so you’ll be paying more for your items for longer.

DO — Take a closer look.  Try to pinpoint where the desire to shop is coming from.  Is it something you do when you’re feeling sad or when you’re rewarding yourself?  If you can find the source and address it, you’ll have an easier time adjusting your routine.

DON’T — Be afraid to ask for help.  If you’re really struggling, confide in trusted friends or family members.  See if you can’t buddy-up to help keep on track when you’re out making planned purchases, like grocery shopping.  If past overspending has now overextended your credit to the point that you’re unable to meet your obligations, speak to a financial advisor or licensed trustee.

We’re shelling out an annual average of $3,720 on impulse buying that could be put to better, guilt-free use.  With Canadians’ savings at a worrying low and debt-to-income ratio at an all-time high, kicking the impulse shopping habit is definitely a step in the right direction.  We work hard for our money, after all!

If you would like to speak with one of our licensed trustees regarding your debt resolution options please contact us for a free, confidential consultation.

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