If you’re a BC consumer concerned about the effects of economic uncertainties on your personal finances, you’re not alone. For many people who are carrying debt, even a small change can upset a household budget and cause debt to become a serious problem. Read on to learn some tips to help you take control of your personal debt and mitigate the potential financial impacts while dealing with uncontrollable economic circumstances.
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.
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.
BC Licensed Insolvency Trustee and President of Sands & Associates Blair Mantin shares personal debt tips and insights with CTV Morning Live.
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.