Receive Debt Help With Realistic Solutions
Debts that at first appear manageable can creep up slowly and steadily before you realize you are in over your head.
Whatever your debt level, do not panic simply because you have recognized that your debt has become a problem. More times than not, a viable solution can be crafted to lift you out of debt slowly but surely.
In a recent article titled “How to Overcome a Debt Mountain”, creditcards.com notes that consumer debt loads and delinquency rates have been on the rise in Canada, citing the findings of late 2016 study by TransUnion. The article notes that this trend has been particularly pronounced in provinces where single-resource industries prevail — in particular, Alberta and Newfoundland, where the oil and gas industry has taken a hit.
The article quotes Harris and Partner’s very own Adam Fisher, who highlights some of the ways in which debt can be overcome. Strategies include making several small but effective changes in your lifestyle. Some of these ideas, and others, are summarized below.
1. Understand Where Your Money is Going
In order to get out of debt, you must understand how you came to be in debt in the first place. Review your bills and bank transactions. Gain a clear understanding of how much money you have been spending on food, entertainment, clothing and necessary expenses (hydro, cellphone bill) each month. Banks often offer an online service that helps you automatically track how you are spending your money, insofar as you are using your debit card to make purchases.
Fisher suggests that you look at what expenses are fixed vs. variable and how much income you have or you could have. Figure out which of these expenses are non-negotiable, and which are negotiable. Where can you afford to cut back? Is there a cheaper cellphone plan that can still meet your needs? Can you cut out a few coffees on the go and have the office coffee? Fisher sees it is important to recognize which of your habits can realistically be changed, and which will be unrealistically burdensome to change.
2. Figure Out What You Need, Versus What You Merely Want
In the same vein as assessing which of your habits can realistically be changed, Fisher suggests it is important to be honest with yourself about which things you need versus merely want.
This has become increasingly difficult in a consumer society that constantly creates new products and convinces us that we need them. Chances are, you can live without a $90 three-day juice detox, or with a daily drip coffee instead of a latté. You may honestly need a new computer or cellphone, but do not find ways to justify to yourself why the top-end model is the only choice. Be honest about how much you can budget for in the present, and find substitute options that fit your budget.
3. If You Don’t Have a Budget, Make One
Further to the above, figure out where your money is going, and how much you are spending each month. First, calculate your net income. Second, ask yourself how much of this necessarily goes toward rent or mortgage payments, unavoidable bills, and minimum debt payments. Third, subtract those expenses from your net income, and determine your disposable income.
Once you know your disposable income, budget specific amounts for food, entertainment, and other expenses. Follow Fisher’s suggestion that you separate the cash you spend for each variable expense. Allocate a sufficient amount of miscellaneous expenses that you may not have considered. Assess whether there is a way to put enough aside that allows you to make more than the minimum monthly payments on your debts.
4. Change Your Living Situation if Possible
If you have purchased a home, it may be both undesirable and unadvisable to sell your home, depending on the status of the real estate market. Find ways to make your living situation more affordable by taking effective steps, even by reducing the frequency that you shop as Fisher suggests.
If you rent, ask yourself if you can make do with a smaller or less luxurious rental unit. As much of a pain as it is to move, paying even $250 less per month means that you will have $3000 more per year to dedicate to reducing your debt.
5. Turn to a Licensed Insolvency Trustee If You See No Way to Increase Your Debt Payments
If your budget is not working and you cannot find a viable way to increase your monthly debt payments, consider contacting a licensed insolvency trustee. Adam Fisher and his associates can guide you and outline your options, including whether debt consolidation may be a viable solution for you. “Having $40,000 in credit cards at 20 percent verses $40,000 of line of credit at 8 percent – there’s a big difference in sustainability,” says Fisher.
If you have already been defaulting on your debt obligations and see no way out, our licensed insolvency trustees may suggest a consumer proposal as an alternative to filing for bankruptcy. At Harris & Partners Inc., we can find the best options to put you back in a position where you can start from a blank slate.