 By Linda Paul and Selina Jacobson
Starting a new business is a great adventure. The anticipation for what’s to come motivates you to get up and take on the next challenge each morning. Of course, you’ll also face days where you wonder why you even got out of bed – and maybe you’ll even ask what made you start this venture in the first place. Since you’re running the show, it’s on you to make multiple decisions every day, especially the challenging financial ones. When you’re first starting out, money decisions can have huge impacts on your business now and into the future. And if you’re not careful, you might find yourself falling into one of these pesky and potentially dangerous traps. The Dream Business In 1976, Steve Jobs was one half of a duo pioneering the personal computer revolution from his parents’ garage. He never could have imagined the smartphone revolution 30 years onward – let alone that his company would be the driving force behind it. Every business has small beginnings. If you’re opening a boutique clothing shop and your dream is to operate ten stores across the country, will you open all ten stores simultaneously? That may be your ultimate dream, but it will take time to achieve. Better to open one shop, build your reputation and perfect your operation than run yourself ragged trying to do it all at once. If your business is scalable and your dream is to grow it, have patience. Don’t get too big too soon without knowing you can support it both mentally and financially. Co-Mingling Money Co-mingling your business and personal finances is a trap masquerading as convenience. It makes it difficult to distinguish business from personal expenses, let alone track what’s coming in and what’s going out. Save yourself the confusion and open a separate business account. Deposit all business capital into and pay all business expenses from this account. If you plan on using credit, apply for a business credit card or line of credit account. To pay yourself – whether as an employee or a proprietor – transfer the appropriate amounts to your personal account and use these funds for personal expenses only. At first this will take more effort and forethought, but separating your finances will simplify your record keeping. Your bookkeeper or accountant will thank you. And you’ll appreciate how much easier it is to determine business expenses and allowable write offs come tax time. “It’s a Write Off” Speaking of write offs… Many owners risk their financial stability by spending on extras, in some cases even paying a premium, believing they can claim these expenses and increase their tax refund at the end of the year. But this is a risky gamble. Tax write-offs are complex and often highly specific. More importantly, not every business expense is a write-off. Potential write offs do not justify creating unnecessary business debt; especially because the tax benefits may not be as valuable as you expect. Consult with a tax professional to find out what you can and cannot write off and avoid spending too much money that you may never see again. Unless you’re absolutely certain you can claim it, avoid any non-essential purchases and expenses. You may also want to speak with your accountant about contributing to an RRSP to see how much you can potentially realize in tax savings. Multiple strategies to reduce taxes owing is a great plan. Plus, now that you work for yourself, you need to ensure you’re saving enough for retirement. Credit Too many new business owners gain access to large amounts of credit without a plan to keep it under control. This leads to the temptation to use more credit than planned or necessary. Relying on the next big job or using money already set aside for taxes to pay off credit debt is a shaky foundation to run a business on. Carrying too much debt on credit cards or across multiple financing plans may seem manageable in the short term, especially while business income is good. But what if the market takes a nosedive? Be pragmatic and prepare yourself for the worst-case scenario. Make a habit of contingency planning – asking what you would do if your costs went up dramatically, your revenue sharply decreased or market headwinds challenged your ability to operate. Imagine credit isn’t an option to cover these unexpected costs. You need to be honest with yourself about your spending. If you need credit to manage your costs, you must either cut expenses or bring in more income. Better yet, do both. Keep your credit use manageable so you can focus on growing your business, not playing catch up on months old debts. Putting off Paying Taxes As a former employee, you‘re probably used to someone else taking care of your tax deductions. But as a business owner or self-employed individual, you see all the money coming in. It’s up to you to make those deductions wholly, accurately and on time. Of course, this can be a challenge. How tempting to not deduct anything at all! Or, at the very least, delay it for a little while. But you must treat your income as gross income. Consult a tax professional to discuss what percentage – potentially up to 30 percent – is enough to set aside. Be diligent about this. Pretend the ‘extra’ money doesn’t exist and work within the limits of your after-tax income. In fact, protect yourself from temptation by arranging monthly installments with Canada Revenue Agency. That way the money leaves your account and goes into theirs, eliminating the temptation to use the funds for something else. If you have been setting aside money for taxes, leave it alone! Don’t fool yourself into thinking you will replace it next month if you just use some of it this month. Getting behind on taxes is stressful, can negatively impact your business operations and potentially put your assets at risk. It’s just not worth it. Debt Solutions Debt happens. And it can happen faster than you think when you’re running a business. But no matter your situation, there are always solutions – some can even eliminate your debt without having to close your hard-built operation. Contact a Licensed Insolvency Trustee for a Free Confidential Consultation today to learn your options. During this no-obligation initial meeting, a government licensed debt professional will review your entire financial situation, challenges and goals and uncover opportunities to defeat your debt for good. You may qualify for a Life-Changing Debt Solution, such as Bankruptcy or a Consumer Proposal, which would halt current collections action, prevent future collections action and help you become debt free in as little as nine months from your initial filing. But regardless of your preferred path toward a financial fresh start, they will always make sure you’re armed with the information you need to make the choice that’s best for you. Call us today and get on the path to becoming debt free. Based out of Surrey and the Fraser Valley, Linda Paul, LIT is a Licensed Insolvency Trustee and Senior Vice President at MNP LTD. To learn more about how MNP Debt can help, contact our local office at 310.DEBT (310.3328) or toll-free at 1.877.363.3437. Based out of Courtenay, Selina Jacobson is an Assistant Estate Manager and Registered Insolvency Counsellor at MNP LTD. To learn more about how MNP Debt can help, contact our local office at 1.877.363.3437 or toll-free at 310.DEBT (310.3328). This blog was written for and originally published by MNP Ltd. The original post can be viewed here.
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 By Lana Gilbertson & Selina Jacobson
The money relationship is often a turbulent one. When things are going well, money represents opportunity, freedom and comfort. When they’re not, it’s a massive source of stress, worry and frustration. This stomach-shaking roller-coaster ride often leads to numerous unhealthy, unproductive and sometimes destructive financial habits. The difference between effective money managers and everyone else is their ability to bring predictability to these up and down patterns and address them with effective, realistic and productive behaviours. While it’s not always possible to get off the ride completely, the following mental shifts are extremely effective at smoothing out the road ahead. Damaging Habit #1: Thinking Money is To Blame The cost of living is constantly rising, and incomes don’t always match inflation. We try to make sense of our stress and frustration by pointing the finger at money – the common denominator and apparent cause of all our problems… But not so fast. Everything you spend money on – from rent to food to vehicles – is your choice. You can’t dictate your rent, but you can choose where to live. You don’t determine the price of lettuce, but you do choose whether to buy it. Managing Tip #1: Create a Spending Plan Money may be a limiting factor in some of your decisions. But at the end of the day, you’re still the one making the decisions. Regardless of your situation or income level, you always have the choice to spend less. Take charge of your finances by setting clear monthly boundaries around how and when you spend it. With a budget, you gain a comprehensive view of how much money is coming in and where it all goes. And with a budget, you can plan around certain unavoidable expenses like rent, utilities and groceries – while also pinpointing what optional expenses (e.g. shopping, dining out, etc.) you can reduce or eliminate to create breathing room. Damaging Habit #2: Not Tracking Expenses It’s not fixed expenses like rent and automatic payments you need to track, although it’s advisable to review these periodically. It’s variable expenses that can make or break your budget. Do you know how much your car insurance payment is? What do you spend on rent, groceries and gas each month? Variable expenses, which also includes things like shopping, household maintenance and dining out, are where spending can quickly get out of hand. When you track these purchases, you may be shocked at just how much you spend each month. Managing Tip #2: Track for One Month, Diet the Next The only way to stop damaging your finances is to know what your true expenses are. It’s time to grab a notebook and an envelope and become the best receipt collector ever. Track everything you spend – from a $2 coffee to a $400 grocery trip – by either putting the receipts in the envelope or jotting it in your notebook. Spend like you normally do, then add everything up at the end of the month. Ask yourself:
Do the opposite next month and put yourself on a money diet. Stick to your plan and don’t spend anything extra at all; not for a pack of gum or a quick drive-through treat. Now compare the difference. Ask yourself:
Damaging Habit #3: Getting Too Much Credit Once you start relying on credit, it gets easier to accumulate more and more of it. Mainly because:
While any single credit expense (i.e. credit card payments, furniture financing, home repairs, etc.) can often seem affordable on its own, these all add up quickly. And several inexpensive minimum payments can quickly become one massive strain on your monthly budget. Managing Tip #3: Keep Your Limits Low and Your Balances Lower The more credit you have, the more you’re likely to use. Keep only the credit accounts you absolutely need and be strategic about your credit portfolio.
Set a limit for credit card spending each month and track all your spending. Never charge anything to your remaining credit cards or lines of credit that you can’t pay off right away – or at least until you’ve considered both the purchase price and potential interest costs. If you do carry a balance on your card, keep it below 35 percent of your limit. Not only does this help keep your minimum payments low, it won’t damage your credit – provided you always make your payments on time. Damaging Habit #4: Not Saving Money Not saving money is like not insuring your vehicle or home. In the event something unexpected happens, insurance offers peace of mind that you can repair or replace anything that becomes lost, damaged or destroyed. Savings serve the same purpose. The fear of not having money in case of emergencies causes stress and anxiety. It can force you to overuse credit and / or borrow money from a high interest lender. Escaping the debt hole can negatively impact your monthly spending plan and damage future savings goals. Managing Tip #4: Treat Savings Like a Bill Payment Treat your savings like your monthly insurance payments. Build saving into your spending plan and set up a regular (monthly / semi-monthly) automatic transfer into a specified account. Every little bit each month will protect your spending plan. It will reduce your credit card use. It can get you closer to a financial goal. It will give you a sense of stability. And it will reduce stress and prevent you from stealing from another area of your budget when the unexpected happens. Life-Changing Debt Solutions If you worry your finances are too damaged for any of these tips to change your course, reach out to a Licensed Insolvency Trustee for a Free Confidential Consultation today. During this no obligation meeting, they will review your entire financial history, listen to your challenges and seek to understand your goals. They can also identify opportunities for you to eliminate your debt for good. You may quality for a Life-Changing Debt Solution, such as Bankruptcy or a Consumer Proposal, which can halt collections action and help you become debt free in as little as nine months from your initial filing. They may also be able to connect you with other helpful resources to improve your financial management skills and change your relationship with money. No matter which direction you choose to go, a Licensed Insolvency Trustee can help you find the right back to a permanent financial fresh start. Lana Gilbertson is a Licensed Insolvency Trustee with MNP Ltd. in Vancouver. To learn more about how MNP can help, call Lana at 604-639-0001. This blog was written for and originally published by MNP Ltd. The original post can be viewed here. We are excited to announce that our downtown Victoria insolvency office has a new home! Effective March 1, 2019, MNP Ltd.'s Victoria office is located at 888 Fort Street, Suite 300. Appointments at this location are by appointment only, so please call us at 250-590-3034 to book. Chelsea Taylor, Licensed Insolvency Trustee, and Sandra Wolverton, Estate Manager, proudly continue to serve clients from our new downtown Victoria location. Services we offer include:
We offer a free, confidential, no-obligation consultation for anyone looking for help with debt. Whether you are struggling with credit cards, student loans or income tax, we can help! Appointments at this location are by appointment only, so please call us at 250-590-3034 to book, or click on the button below to use our online form.  MNP Ltd. - 888 Fort Street, Suite 300, Victoria, BC By Selina Jacobson, Registered Insolvency Counsellor  Every purchase we make is an attempt to solve a problem. When we’re hungry, we buy food. When our car breaks down, we look for a new one. When we feel burned out at work, we plan a vacation. It often seems like the only thing standing between our current tension and immediate release is whether we have enough money to connect the dots.
Of course, with a range of financing options at our fingertips, we can easily solve that problem, too. We use credit cards, loans and lines of credit to bridge the gap between what we have and what we need (or want) – and pay the difference over manageable monthly installments. It’s only when the bills begin piling up that we realize we never really fixed anything; we simply shifted our problems from one place to another. And now we’re paying interest on them to boot. It can feel tempting, even exciting to forge ahead with a big purchase – and imagine how much better our lives will be for it. But there’s value in stepping back and considering what we might be giving up – what unintended consequences may result and what alternatives we may be ignoring by financing our road to contentment. What Qualifies as a Big Purchase ? In short, it depends. A big purchase could be anything from a new pair of jeans to a renovation project, a business investment or going back to school. Essentially, it’s anything that you don’t have the cash on hand to pay for in full. In other words, if you require credit anywhere in the process, it’s a big purchase. Keep in mind that even if you do have the funds available, a high value transaction may still trigger unease and apprehension. While the long-term financial consequences will not be as significant, it may still be worth listening to your gut and taking a moment to reflect before moving ahead. The Benefits of Waiting Think back to your last big purchase. Do you remember feeling torn between two conflicting voices in the back of your head ? One was urgent, persuasive and demanding. It painted a convincing picture of how much happier and better your life would be after you signed on the dotted line. It didn’t want you to think – only act. The other was subtler, gentler, quieter. If you listened, you’d have heard it ask some important questions, like:
The first voice is all about now. It doesn’t care how you’ll feel in a week, a year or a decade. Nor does it care about the other problems you’ll inevitably encounter on the road ahead. The second voice plays long game. It wants you to be able to solve not just this problem, but each one that comes after it, with confidence and ease. It wants to help you build a sustainable life, not just pour water on a series of increasingly uncontrollable fires. What Kind of Shopper Are You? People tend to shop on a spectrum, with frugality at one extreme and impulsiveness on the other. If you’re still reading, it’s probably safe to assume you’re somewhere in the middle or lean more toward the latter. But there’s no judgement and it certainly doesn’t mean you can’t inject some more structure and intentionality into your shopping habits. The following techniques can help you make more strategic and financially sound purchase decisions: Set Your Price and Pre-Shop Set clear boundaries around what you’re willing to spend. If you need to make sacrifices, your monthly budget will tell you what they are. Avoid forcing the numbers by sacrificing either your savings or leisure allowance. Whatever you’re buying, don’t let it dictate your enjoyment of the present or future. Next, start pre-shopping online. Many websites allow you to narrow your search by price and features, so you can target only the items which fit your preferences. You can also compare the features and functions of several different options, so you can get a like to like understanding of what works best for you and why. Be Firm with the Salesperson (and Yourself)If you’re not careful, a skilled salesperson will find a way to sway you toward a more expensive and feature-laden option than you need. This is where research pays off. If you must deal with a salesperson, be clear on what you want and what you expect to pay. If you don’t trust yourself, bring along a friend or family member for moral support. Tell them about your research and your budget and ask them to intervene if it seems like you’re straying from your goal. You may even bring a copy of your budget along as a reminder. Lastly, only bring the cash you’re willing to spend and leave your credit cards at home. Predict the Future Of course, you really can’t predict the future – especially when it comes to finances – but that’s the reason unexpected expenses are unexpected. You never know when they’ll happen; all you can do is prepare. Have you considered all the irregular costs you have on the horizon?
And how’s your emergency fund? Most financial planners recommend setting aside between three and 12-months’ living expenses to get you through a worst-case scenario – such as a job loss, illness or caring for an ailing family member, major home or vehicle repair / replacement, divorce, etc. The truth is, even if you have the cash to make a purchase but don’t have an emergency fund – or if your purchase will get in the way of an irregular expense one or several months down the road – you can’t afford it right now. Own Your Life Convenience is more accessible than ever. You can use credit cards to buy things when you don’t have the cash. You can get free two-day shipping on most online purchases. Many services offer hassle-free one-click ordering. But it begs the question: who is really in control? Removing some immediacy and convenience from the process ensures whatever you do buy adds value to your life, now and over the long term. What this process lacks in spontaneity and thrills more than makes up for in long-term satisfaction, comfort and peace of mind. Ultimately, though, you need to decide which sounds more appealing. Life-Changing Debt Solutions If you’re struggling with unmanageable debt due to one or more big purchases, you don’t have to suffer alone. During a Free Confidential Consultation, your Licensed Insolvency Trustee will review your entire financial situation and explain your options. Whether you qualify for a Consumer Proposal, bankruptcy or one of several other debt solutions, your trustee will help you choose the best path toward a financial fresh start. This article was originally published by MNP. To view the original article, click here.  By Selina Jacobson, Registered Insolvency Counsellor
Of course, this is a trick question… Everyone needs an emergency fund. More importantly, you need an emergency fund. Financial emergencies don’t discriminate and the consequences of being ill-prepared can add up quickly. What is an emergency fund? An emergency fund is a readily accessible savings pool intended to help you through stressful and potentially costly life events – such as a vehicle breakdown, job loss, extended absence from work or a costly vet visit. Ideally, you will have between six and nine months of living expenses set aside in a designated account that you use only for these kinds of expenditures. Why have an emergency fund?The word ‘emergency’ doesn’t often inspire feelings of happiness and excitement, does it? These are typically some of the most traumatic and worrisome experiences you can imagine. And that’s before you realize the pressure they’ll put on your personal finances. An emergency fund helps alleviate the strain of an unexpected cost by ensuring you still have enough money to pay for your rent/mortgage, utilities, groceries and other regul ar expenses. It also guarantees you won’t have to make an unpleasant situation even worse by offsetting the cost with interest-accumulating debt. But isn’t that what credit is for?Contrary to what creditors and predatory lenders want you to believe, credit is not a sustainable way to get you through a financial emergency. In fact, credit cards, lines of credit and especially payday loans will likely add more problems than they remove. At the end of the day, the only thing debt does is postpone, prolong and – thanks to unsustainable interest costs – ultimately increase your financial, mental and emotional stress. Can’t I borrow from family and friends? Shakespeare hit the nail on the head when he wrote, “Neither a borrower or a lender be; For loan oft loses both itself and a friend…” Ultimately, it’s your choice whether to ask those closest to you for help. Certainly, most would be willing to do so. But you also need to consider the potential strain that might place on them and your relationship. First, you don’t know what their financial situation is. Wouldn’t it be heartbreaking to learn they fell into a crisis because their emergency fund is financing your unexpected expense? Moreover, you don’t want to have the black cloud of an outstanding debt hanging over your relationship until you’ve managed to repay it. And you don’t want to be that person who’s always asking for money, do you? What if I can’t resist the urge to spend my savings?First thing’s first: congratulations! Acknowledging this common challenge requires a great deal of self awareness – and it’s the first step in addressing the issue head on. It’s also why you need to draw a clear line between your emergency fund and regular savings account. In fact, rather than designating one blanket ‘savings’ line item in your budget, I recommend you create three. Bucket 1 – Emergency Savings: This is a designated amount that contributes towards your six to nine months of living expenses. Contribute to this bucket every pay period until you reach that threshold. If you need to withdraw money for a necessary but unexpected expense, resume contributing to this bucket until you have returned to that magic number. Also, consider creating this account at a different institution than you usually bank with and avoid having a debit card for it. That will force you to be more deliberate and intentional when deciding whether to transfer money out of this account. Bucket 2 – Retirement: This is a designated amount that contributes towards your retirement goals. You’ll be adding money here every month for the rest of your career. Ideally, you already have an RRSP or other investment portfolio established. If you don’t, consider meeting with a financial professional to get one started. Bucket 3 – Savings Goals: This is a designated amount that contributes towards things you want to buy but can’t currently afford – such as a new car, vacation, home purchase, computer, etc. Here’s where you can indulge your inner spender guilt-free. It may initially feel difficult to incorporate this three-bucket system into your budget. When starting out, consider contributing the majority (approximately 50%) to your emergency savings, the second largest portion (approximately 30%) to your retirement and whatever you have left over (20% or less) to your savings goals. Once you’ve reached your six- to nine-month goal, you can increase what you contribute to your retirement (60%) and savings goals (40%). Step 1: Review Your Budget Note the essential monthly expenses you cannot live without – such as rent or mortgage, utilities, groceries, car payments, fuel, insurance, medical costs, debt payments, etc. – add these up and multiply by six. Caution: this will be an enormous number (like tens of thousands, large) But don’t fret; it’s only your long-term goal. Step 2: Establish Your Checkpoints How do you eat an elephant? One bite at a time! Create a series of attainable mini savings goals you’re confident you can hit over the next six months, one year, five years and so on as you work your way to that big long-term savings goal. Start at $500, for example. Then $1,000. Then $5,000, $7,500 and so on. Make a game of it and challenge yourself. Step 3: Build Momentum By far the hardest part is getting started. But once you’ve turned saving into a habit it’s going to feel like the most natural thing in the world. Make that first transfer next payday and every pay period thereafter it will feel easier and easier. Pretty soon, you’ll notice the stress of everyday life fade away knowing whatever challenges come your way, at least you’re financially prepared to face them head on. Life Changing Debt Solutions Life happens and along with it comes the likelihood of unexpected financial blows. If you’ve found yourself in a situation you feel is beyond repair or you’re facing multiple financial difficulties and struggling with debt, MNP can help. During a Free Confidential Consultation , your Licensed Insolvency Trustee will review your situation and help uncover opportunities for a financial fresh start. Whether you qualify for a Life-Changing Debt Solution such as bankruptcy or a Consumer Proposal or would benefit from several other helpful services – they’ll help you choose the right option to defeat your debt for good. You don’t have to suffer alone, we can help you get back on your feet and on the road to a more secure and confident future. This article was originally published by MNP. To view the original article, click here.  By Selina Jacobson, Registered Insolvency Counsellor
Scheduling and attending a Free Confidential Consultation with an MNP Licensed Insolvency Trustee is the first step to changing your financial future. You may initially feel hesitant because you don't know what they're going to ask you, or you're unsure of what to bring with you. Perhaps everything you've heard about filing a bankruptcy or a Consumer Proposal is negative. If these are your fears, you're not alone. But the only way to get the right information is to speak with a qualified professional, specifically trained to get you out of debt. To set your mind at ease, attending a Free Confidential Consultation does not automatically mean you will be filing a bankruptcy. Your consultation is an information gathering opportunity where we will use our education and experience in solving debt issues to advise you of your best options. You can ask as many questions as you need to. Our role as consultants is to do the same; ask specific questions to gather all the information relevant to your situation. Think of it like a puzzle. First, we put the edge pieces together to frame the picture and gain perspective as to which pieces will go where. Next, we group pieces according to their color or pattern, fit those pieces together and join them to the frame. Then we move on to another set of pieces and so on. Soon all the pieces fit and the entire picture connects. This systematic approach helps save time compared to randomly grabbing pieces and attempting to put them together with no clear plan or strategy. Throughout the consultation, questions will be grouped together according to topic. Initially, some may not seem relevant. But each reflects a piece or section of the financial puzzle we are fitting together. Once we have a clear picture of your financial situation, we'll present you with options and help you make an informed decision regarding your next steps. The Frame What makes up the frame of your financial puzzle? A good starting point is to briefly explain the causes of your financial difficulties. When we understand where you are coming from, we can tailor the remainder of our questions to your unique situation. For instance, if you operate a business, we would ask what type of business it is. Depending on the answer, we'd proceed with specific follow up questions that contextualize how your business might inform your options for getting out of debt. Questions regarding your personal life are also part of the framework. Are you single or married? Do you have dependants or pay support to an ex-spouse? Do you own or rent? What is your total household income? Why does this matter? Well, if you're married with 10 children, we would carefully analyse your monthly income and expenses to evaluate what type of debt solution would be affordable for you and avoid further financial hardship to your household. On the other hand, if you're single with no dependants, you may have more freedom to pursue other debt solutions. Once we have the frame complete we can start grouping questions to gather specific sections of the puzzle. These sections include: your assets, debts, monthly income and expenses and a brief history of your financial transactions. Your Assets Many people avoid investigating debt solutions from fear of losing their home, car, household goods, etc. However, each province provides exemption amounts for certain assets to help ensure rehabilitating debtors are not left homeless, carless or couch-less. Full disclosure of your assets, including investments like RRSPs or TFSAs, insurance policies, recreational vehicles and potential future windfalls like an inheritance or settlement helps your Licensed Insolvency Trustee assemble a comprehensive list of what your assets are worth, along with what is exempt and not available to creditors. It's also the first big chunk of the puzzle to help determine whether you are insolvent and what MNP can do for you. Your Debts Knowing the total amount of your debts is the next large chunk of the puzzle required to determine whether you are insolvent and what solutions are available. Your Licensed Insolvency Trustee will benefit from any recent loan or credit card statements you have, collections notices and a simple list of any other personal debts you may owe to friends or family. It's important that you disclose all debts you owe – whether it's to a credit card company, an automotive lender, the Canada Revenue Agency or a family member. With few exceptions, all creditors rate the same under insolvency legislation. For your protection and to ensure all creditors are treated fairly throughout the process, this means you cannot decide to disclose one creditor and not the other. Whether it's a $100,000 tax debt or a $10 library fine, you want to include absolutely everything. Your Monthly Income and Expenses Your Licensed Insolvency Trustee will then look at the actual income coming into your household every month– including employment income, tax credits, pensions, social assistance, etc. They can also assist you with creating a comprehensive list of your expenses and will prompt you for the kinds of expenses you may not have thought of - like bank fees, pet food, and the weekly (or daily) coffee splurge. Bringing a recent bank statement with you will help with detailing specific payments like insurance and utility bills that may be automatically debited from your account. Being insolvent doesn't mean you have to forego living a normal life – you need to get haircuts, buy shoes, spend money on gifts, buy a bottle of wine. However, you need to be realistic and honest with us about your spending each month, so we can make sure your bases are covered. Now with this third chunk of the puzzle added, we are getting very close to seeing the whole picture. Recent Financial Transactions Questions about recent financial transactions help your Licensed Insolvency Trustee understand whether any personal property such as a home, vehicles, personal goods or investments have been sold, transferred or cashed out in the previous year, and what was done with the proceeds from those transactions. Among other things they will ask:
Your Options It is your Licensed Insolvency Trustee's duty to ensure you are informed of all debt relief options available to you. They will explain each of them to you in detail. These range from proceeding as you are with your current debt reduction strategy to consolidating debt with a personal loan through a financial institution, filing a consumer proposal or bankruptcy. When the picture of how to fix your financial troubles becomes clear, it's much easier to decide which solution seems best for you. Don't wait too long to schedule your Free Confidential Consultation with a Licensed Insolvency Trustee. The sooner you can assemble your financial puzzle, the quicker you will find relief from financial stress and the sooner you can start working toward a financial fresh start for yourself and your family. This article was originally published by MNP. To view the original article, click here.  By Chelsea Taylor, Licensed Insolvency Trustee
Logically, we know we can't buy everlasting happiness for 12 low payments of $59.99 – or less than the cost of one coffee a day. Yet, we all fall into a similar trap at least once (and usually several times) in our lives: We buy things we don't need with money we often don't have, hoping – but knowing deep down the purchase will never live up to its promise of endless joy and fulfillment. It's not because we're naïve or irresponsible, either. It's because good marketers know that striking the right emotional chord in just the right way can make us prioritize that which feels goodright nowover that which is in our best interest. In a world where the average person sees up to 10,000 marketing messages a day from three or four years old, eventually even the most frugal among us will hear a tune they can't resist dancing along to. There's a Solution for that Too Of course, it's easy to curb the impulse to spend too much in the feel-good category when cash is our only option. We're duty-bound to leave room in the budget for things like housing and heat and groceries. Obviously, those things aren't just in our best interest – not having them doesn't feel very good either. So, we easily refrain. But lenders have the perfect solution to our stoic restraint. They advertise debt tools like credit cards, loans and lines of credit as the best way to prepare for an emergency or reward ourselves by splitting the cost of a large purchase over several monthly payments. What they don't tell us about is the stress, emotional upheaval and long-term financial turmoil that often follows when the debt cycle spirals out of control. Debt and the Stages of Grief The feeling of uncontrollable debt can feel eerily similar to the feeling of losing a loved one. Which makes sense, because every dollar you give to your creditors is a dollar you can't invest in your future comfort, growth and prosperity – so in essence, you're mourning a life that you aren't able to live. Denial This is the period where your debt is slowly increasing, but you're sure you can still turn things around. Maybe you'll get a raise or a bonus at work. Hopefully you'll get a higher income tax refund than you expected… Anger Self blame starts to creep in. You start fixating on all the purchases you made on credit – especially the ones you don't use anymore – and can't stop asking yourself why. Bargaining You're determined to get out of debt and set to work creating a plan. You write out a budget and manipulate all the numbers to the bare minimum. But you feel discouraged every time an unexpected expense pops up. You renew your conviction to start fresh next month with a different approach, like consolidation. Though, it wouldn't hurt to reward your efforts so far with so much "needed" wardrobe additions, would it? Depression Nothing you're doing seems to be working. It feels like for every step forward you're falling two steps back. All your payments are going to interest while your outstanding balance just keeps on rising. You're ready to accept that you'll always be in debt and there's nothing you can do about it. You abandon your budget and decide there's no point even trying to curb your spending anymore since it won't make any difference to your situation. Acceptance You decide that no matter what, you need to find a resolution to your debt problem. Perhaps you open up to your trusted friends and family about your situation, begin researching debt assistance programs online and consider other solutions aside from going it alone. This is the point where most people usually reach out to a Licensed Insolvency Trustee to schedule a Free Confidential Consultation. Help is Available at Every Stage While most people wait for acceptance to contact a Licensed Insolvency Trustee, you don't have to. From the moment you begin struggling with debt, trust MNP to help you review your financial situation and understand your options. Whether you would benefit from a Life-Changing Debt Solution such as a Consumer Proposal or bankruptcy or another strategy, a Licensed Insolvency can help you find the financial fresh start you need. Based out of Victoria, Chelsea Taylor is a Licensed Insolvency Trustee and Vice President at MNP LTD. To learn more about how Chelsea can help, contact our local office at 250.590-3034 or toll-free at 310.DEBT (310.3328). This article was originally written for MNP. To view the original article, click here.  By Selina Jacobson, Registered Insolvency Counsellor
Everyone has financial dreams. Whether it's getting out of debt, building a nest egg for retirement, purchasing a home or going on vacation – visualizing any number of desired results comes naturally. It's easy to dream. Fun even. But it's rarely rewarding because dreams don't produce results. Goals do. Yet far fewer people have financial goals. And fewer still have effectively structured goals that maximize their chances of success. Dreams vs. Goals The difference between a dream and a goal is simple. Dreams fixate on an ideal outcome. Goals focus on the process, steps and sacrifices required along the way. Dreams are about achievement. Goals are about planning and execution. An Enduring Question At last reference, a Google search for "how to set financial goals" returns upwards of 11.7 million results. Could there possibly be 12 million different goal-setting methods? Not likely. But it's safe to say the supply of answers reflects the demand. We live in a world of hacks and apps and shortcuts. We usually know what we want, but often don't know how to get it. We're great at dreaming, but often struggle to find the consistency, persistence and discipline that goals require. No tool can help us find that. But there is a time-tested framework that has continuously proven effective. Be SMART The easiest way to tell if you're working with a financial goal or merely a financial dream is to test it using the acronym SMART. If you can define each of these elements within the framework of your goal, you know you're on the right track. S = Specific: Be as clear and precise as possible about what you want to achieve. M = Measurable: Structure your goal in a manner that allows you to track progress over time. A = Attainable: Be realistic about what you want to achieve given your resources (e.g. time, income). R = Relevant: Your goal must be enough of a priority that you'll make sacrifices to achieve it. T = Tentative: Life happens. Your goal needs to be flexible enough to weather unexpected challenges. Write it Down Have a goal in mind? Great! Write it down. A recent study on goal setting demonstrated people are 42 percent more likely to achieve your goals when they write them out. Once the idea is committed to paper, it's real, visible and concrete. You can also post it somewhere you'll frequently see it and reference it often to keep it fresh in your mind. Of course, writing it down isn't enough. That's where SMART can help bring your goals to life. Let's illustrate this using a trip to Las Vegas as an example. Specific Do a brain dump of all the available information you have about your goal. Some questions you'll want to answer include: Q: What do you want to achieve? A: Four-day trip to Las Vegas for two people Q: What are the costs involved? A: Grand total – $3,150.00 Includes: Flight and accommodations – $1,350 Meals/groceries – $800.00 ($200.00/day) Spending – $400.00 (100.00/day) Entertainment – $200.00 Miscellaneous – $400.00 Q: What is my timeline? A: Eight months Now, rather than saying "My goal is to go to Las Vegas," you can say something like, "I want to save $3,150 to take a four-day trip to Las Vegas with my spouse in eight months." Measurable Next you need to calculate your monthly or semi-monthly contributions and decide how you'll monitor your progress. For the first part, divide the cost of your vacation ($3,150.00) by the number of months to save (8). This tells you that you need to set aside $393.75 per month (or $196.88 every paycheque) between now and when you want to leave. Does this fit within your budget without sacrificing your needs and debt repayment? If so, great! Now you can create a spreadsheet, write a journal or download an app to provide a visual representation of how your vacation fund is growing over the next few months. If not, the next step may help. Attainable Anything you put your mind to is attainable, it just might not be attainable right this moment. Avoid setting a goal so far out of reach right now, it stops you from even trying to achieve it. Let's say your monthly budget won't accommodate the amount you came up with. How can you make this vacation goal attainable? Add time: If saving for your trip in eight months time is not realistic, what is? Add more time until the savings amount is attainable. For instance, an additional six months reduces your monthly contribution to only $225.00. Reduce Vacation Costs: You could still take an incredible vacation with a little compromise. Let's say you'd planned for a four-night stay at the Bellagio. Opting for a less expensive hotel could save you $100.00 per month. Relevant Any goal requires sacrifice. You could spend that $393.75 per month on a lot of things – emergency savings, a down payment on a house, debt repayment, new clothes. You're giving up a lot to take this trip to Las Vegas. You need to feel inspired or it's not going to work. This is especially true for any joint goals such as those between you and a spouse or your entire family. For example, you and your spouse want to experience the night life in Vegas, but your children want to go to Disneyland. It's safe to assume the kids won't respond favourably to cutting the monthly movie budget so Mom and Dad can have their vacation. However, if you frame the choice between seeing the new Cars movie or seeing the actual Cars in Radiator Springs at Disney, their outlook might change. Tentative Tentative doesn't mean you're unsure of the goal or you won't stick to it. It just means life happens and you'll need to be flexible. Unexpected expenses pop up. Your car might break down. You could lose a filling. Or your kids may get sick, requiring you to miss a day of work and pay. When these things happen, it's possible you'll need to use your monthly vacation savings to cover the costs. Contingency planning will help offset the effects of worst-case scenarios. Here are two strategies to help you stay on track: Increase your income or reduce your expenses: Could you work an extra shift or take on some overtime to make up the difference? Could you give up something this month (e.g. eating out) to offset the added cost? Could you negotiate a payment plan with your dentist or the mechanic? Adjust your travel date: If unexpected expenses have put you behind a month or two, push your trip back a few months. If you haven't booked it yet, you'll have the freedom to do so. Practice Makes Perfect Can you see yourself reaching your goals using this framework? No matter what you want to achieve, using the SMART principle will help you get there faster and more consistently. The more you use it, the more effective you will be in reaching your goals and achieving your dreams. And, frankly, it's a lot better than sifting through 12 million online resources to find the "perfect" tool for you. This article was originally published by MNP. To view the original article, click here.  By Selina Jacobson, BIA Insolvency Counsellor
Remember Simon and Molly? Last month they completed their first bankruptcy counselling session with Joan. They arrived extremely nervous and not knowing what to expect, but walked away with a greater sense of confidence about how to take control of their financial life. Today, they are about to begin their second counselling session. With a better idea of the process, Simon and Molly are looking forward to continuing their journey to a better financial situation and improved relationship with debt. "What are you going to teach us today?" Molly asks, reaching for a booklet on Joan's desk. "First, I'd like to review how your budget and money management processes are coming along," Joan replies. "I know you were struggling before our first meeting, so I'm interested to see how you've progressed over the last few weeks." The couple nod, looking noticeably more confident and self assured than the last time she saw them. "Then I have some new concepts to work through which I think will really benefit you both," she adds. "We'll look at some non-budgetary reasons that lead to insolvency. I'll share some helpful resources that can help you stay on track. And, as promised, I'll walk you through how to rebuild your credit once you receive your discharge from bankruptcy." "Sounds good," Simon replies as he looks over Molly's shoulder at the handout. Review and Savings Goals Joan asks Simon and Molly how their budgeting process has progressed over the past month. Molly explains they've not only set a time each payday to discuss their budget, but also a separate time to complete a monthly report. Simon offers that the guidelines and worksheets were a big help in establishing their routine and that they've already uncovered areas where their budget is leaking and how to fix it. "Best of all, we didn't argue too much!" Simon laughs. "Keeping receipts and tracking everything like you suggested was an eye opener," Molly adds. Pleased with their progress, Joan asks about any challenges they encountered along the way and whether they've set any financial goals. Though they seem eager, both appear hesitant to commit to any financial goals. "Right now, focusing on sticking to your budget and focusing on open communication is a good goal," Joan explains. Looking ahead to when the bankruptcy is completed, you could consider some other goals. Like allocating your current bankruptcy estate payment towards building an emergency fund or saving for something specific you can work towards once the bankruptcy is finished. Non-Budgetary Causes of Financial Difficulties Joan passes a worksheet to Simon and Molly and asks them to read it over. It's a list of common reasons people find themselves in financial distress. "You'll notice many of these are addictions related," Joan explains. "Gambling, drugs, alcohol, even shopping... I know none of those played a significant role in your bankruptcy. But they underscore how certain personal challenges are more financial in nature than they appear at first glance." She asks them to identify which items resonate. She's encouraged when Simon and Molly point to many of the same – with inadequate family role models, medical issues and chronic stress rounding out the top three. Joan asks how those factors have affected them and offers suggestions on how they can better prepare for and manage similar situations in the future. She reinforces the importance of communication. Especially when it comes to stress, which is a broad umbrella which blankets most (if not all) the other factors. She explains how understanding how one another is feeling and coping with challenges can be the key to get past them. "I've been guilty of holding it in," Simon concedes. "But regularly talking about our finances has shifted my perspective on many of our previous troubles." Resources to Prevent Future Financial Distress "I'm glad to see you two are so engaged with this process," Joan says. "Because, unfortunately, multiple bankruptcies are on the rise. And as much as I like you both, I really don't want to see you back here." She explains that anyone who files for bankruptcy faces two options: One is to continue down the same path – overspending, blaming others for poor financial decision making, not taking accountability and refusing to ask for help. The other is to make the necessary, and often difficult decision to change – to create a budget, curb spending, communicate openly and seek assistance when it's needed. "If you follow option one," her words hit bluntly, "I can all but guarantee we will meet again." Simon and Molly's eyes widen. Both are visibly distraught at the prospect of having to repeat this process. Joan softens her voice and assures them she's confident they're moving in the right direction. "There will still be bumps along the road," she cautions. "But navigating them is easier when you know when and where to ask for help." She instructs them to flip to a page in their counselling booklet, which includes contact information for everything from addictions counselling and support to consumer education websites. Joan asks Molly to write down several additional resources that she believes would be particularly helpful given their unique challenges. "These are your lifelines," she says. "If you ever feel like you're even at risk of drowning, use them!" Rebuilding Credit "Remember in the last session, you asked me whether you'd be able to buy a house someday, Molly?" Joan asks. "Or buy a car?" "It's definitely a long-term goal," Simon replies. "We realize it will take several years. But we're willing to be patient and do whatever it takes to rebuild our credit, so we can get what we really want – not just 'stuff'," Molly adds. Joan praises the couple for being realistic. She explains that rebuilding their credit will take time, but also that it's worth thinking about now so they can begin goal setting, planning and putting the pieces in place. She also cautions that not all credit vehicles are equal nor are all credit products suitable for them right now. Additionally, Joan offers different strategies Simon and Molly may want to consider that will help them build and maintain good credit – including applying for secured credit cards, discussing RRSP loans with their bank and how mortgage brokers can help them rebuild their credit for specific purposes. Finally, she emphasizes the importance of getting a requesting their credit report immediately after their bankruptcy is discharged and annually moving forward. "As a consumer, you are the only one who can bring up any issues on your credit report to the credit bureaus," she says. "They have to follow through and investigate any mistakes. Among other things, like preventing identity theft, correcting any misinformation that may hinder your credit rebuilding goals is vital for protecting your future financial stability." Nearing the Finish Line "You will receive your discharge certificate in the mail when you're officially done with your bankruptcy," Joan explains. "Make some copies and keep the original in a safe place – just in case anyone needs to see it." She smiles and slides a counselling certificate towards Simon and Molly. "I know this isn't the one you're really looking forward to, but trust me when I say it's still an accomplishment worth celebrating and one you've more than earned." "Thank you so much for everything," Simon says graciously as he reaches out to shake Joan's hand. "You've been so, so helpful," Molly adds as she reaches out to do the same. "For the first time in a long time we genuinely feel confident about our future." After walking Simon and Molly to their car, Joan returns to her office to make some final notes and file her copy of the counselling certificate. Confident they took the sessions to heart, she takes a moment to visualize how their post-bankruptcy life might look and feels grateful for the role she got to play. This article was originally written for, and published by, MNP. To view the original post, click here.  By Selina Jacobson, BIA Insolvency Counsellor
When an individual or couple files a consumer proposal or an assignment in bankruptcy, the Bankruptcy and Insolvency Act requires the completion of two financial counselling sessions with a Registered Insolvency Counsellor. Why Counselling? Many people are initially skeptical about financial counselling and wonder why they're obliged to participate. They may perceive it as a punishment for taking on too much debt or feel ashamed they need someone else to teach them about money management. This is absolutely not the case. As part of the financial rehabilitation of a bankrupt or consumer proposal debtor, financial counselling provides a safe non-judgemental forum to learn new ways to manage finances, recognize what changes are necessary to achieve financial goals and prevent falling back into the same cycle of unmanageable debt. The financial costs, measured both in dollars and impacts to one's credit report, are significantly higher for second and additional bankruptcies and consumer proposals. Financial counselling is a pre-emptive measure to help avoid these damages. Inside a Session: Simon and Molly Simon and Molly are a fictitious couple who recently filed for a joint bankruptcy. Their debt troubles began when Simon lost his job. With only one income stream in the household, the couple began using credit cards and lines of credit to cover many of their living expenses. Their story picks up immediately prior to their first financial counselling session. Simon and Molly are waiting nervously in the lobby. Neither of them know what to expect. They're both worried, stressed out and have been struggling to get their household budget back on track. When their counselor Joan enters the room, she offers a warm greeting and directs the couple to a meeting room where she provides them with a counselling booklet. "How are you both today? "Joan begins, smiling. The couple look at each other and then back at the counsellor. "We're so overwhelmed. And nervous," Molly confesses. "We have no idea what to expect today. We don't even have our budget in place. "I know we were supposed to fill in a budget form for you, but I lost track of our expenses and work's been all over the place for Simon. So even trying to budget with what little is coming in doesn't make sense." Joan's empathetic smile persists. "Don't worry," she replies. "You'll get there. That's what this process is all about. Let's begin with a quick review of your file." She spends a few minutes thumbing through some paperwork and offers to answer any questions Simon and Molly may have about their bankruptcy. After gaining a better idea of their situation and with the tension in the room noticeably eased, she shifts her focus to the day's materials. "There are four main topics I would like to discuss with you this afternoon," Joan explains. "We'll start with money management skills and knowledge. Then we'll look at your shopping and spending habits, identify the warning signs of financial difficulties and I'll give you a brief introduction on how to obtain and use credit moving forward. "First, let's talk about your budget." Money Management Joan returns to the budgeting worksheet that she'd requested Molly and Simon fill out prior to their first meeting. With the couple agreeing to redouble their efforts for the next meeting, Joan offers some tips and techniques to make the process less intimidating. She asks them about methods they have previously used to manage their expenses and offers suggestions for how to create a more structured and sustainable budgeting strategy moving forward. Joan then turns her focus to effective financial goal setting strategies – explaining how financial goals will strengthen their ability to manage money better, how to set clear and attainable short- and long-term goals and how to use their budget to measure their progress and achieve success. She offers examples of financial goals Simon and Molly may want to consider and hands them several worksheets to complete together before the next meeting. Shopping and Spending Habits Shifting to the next topic, Joan offers Simon and Molly a word of caution. "While budgeting and money management skills are the foundation for your financial success," she explains, "whether you achieve your goals or not will ultimately depend on how closely your actions align with your plan." Offering practical examples of how quickly unplanned expenses can add up to completely overshoot a budget, Joan reminds Simon and Molly about the dangers of impulse purchases. To drive the message home, she asks them both to discuss the areas where they have fallen prey to overspending and to consider how they could avoid those urges in the future. Not wanting it to be all bad news, however, she also reveals some valuable money saving insights she believes the couple might benefit from – including how to reduce their food and household expenses, cut down on monthly bills and even entertainment costs. Warning Signs of Financial Difficulty "Money troubles rarely ever happen overnight," Joan warns as she passes Simon and Molly a sheet of paper. It's a list of financial red flags. She asks them to read it over and identify anything they believe may have contributed to their bankruptcy. As they do, she encourages them to be honest about any poor habits and to consider what they could do to change them. She reminds the couple that changing their behaviours will be an ongoing process and they may have to try several strategies before they find something that works. She encourages them to review the list every month when they create their budget, to use it as a benchmark to review their progress and as a reminder of their priorities whenever they feel the urge to spend outside their plan. "It's not about beating yourself up," she reminds the couple. "It's about seeing where things could go off the rails and course correcting to prevent things from spiraling out of control." Obtaining and Using Credit "It's been a struggle to adjust to only using cash," Simon laments. "Without credit to fall back on, we constantly feel like we're on the verge of collapse." Thanking him for the transition to the final topic of the afternoon, Joan immediately sympathizes with Simon's point of view. She's watched dozens of clients go through a similar transition and is aware of how difficult it is to lose such a significant financial vehicle – especially so suddenly. But she's also quick to temper her compassion with a word of warning: "Credit is a financial tool designed for a specific purpose," she says. "And that purpose is never to offset an unbalanced budget." She then explains some of the more productive and healthy ways the couple could use credit in the future if they choose. She re-assures Simon and Molly that their dreams of someday owning a house or buying a new car are entirely within reach, though it will take some effort to rebuild their credit. She promises they will learn more about that process in the next session. Looking Ahead "Do either of you have any questions before we wrap up for the afternoon?" Joan asks. "I don't think so," Simon replies. "You've given us a lot to think about," Molly echoes. "I'm sure we will have several the next time we meet." "I'm sure you will," Joan says as she looks down at her calendar. "Our next appointment will be one month from today. Does the same time work for you?" The couple nod in agreement. "Perfect," she says as she hands them a card with the details for their next meeting. "How are you both feeling now?" Molly sighs. Both she and Simon look much more relaxed. "Much better, thank you. This was far less stressful than I think either us anticipated." Stay tuned for the second installment where we'll continue with Simon, Molly and Joan during their second counselling session. They'll learn contributing factors to insolvency beyond their budget, how to rebuild their credit and helpful resources that can prevent future financial difficulties. This article was originally written for, and published by, MNP. To view the original post, click here. |
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