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 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.
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…
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.
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?
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.
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.
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.
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
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."
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.
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.
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 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 Sandra Wolverton, BIA Insolvency Counsellor
People often come to me after months – sometimes even years - of struggling with debt. Often, the stress has brought on health issues, caused them to miss work and even contributed to family breakups and job losses. Even with a fulfilling career and steady income, unmanageable debt is a massive burden to bear.
Debt Stress is Exhausting
Perhaps we don't always think of our debt as a literal weight that is constantly holding us back and sapping our energy. But that is precisely what it is and does.
Imagine you're wearing a backpack. For every $1,000 you owe, that's five pounds added to the bag. So, if you owe $5,000 in debt, you'd be carrying an additional 25 pounds on your shoulders.
Most people can carry between 15 and 30 pounds around for a short while without too much trouble. But how tiresome would it be to lug that around all day, every day for months and sometimes years on end? How long could you manage before it started affecting your performance at work, energy at the gym and the quality of your relationships?
Here's the thing though: The average Canadian owes more than $20,000 in non-mortgage consumer debt. That's 100 pounds in their backpack – or the equivalent of giving a 13-year-old child a (seemingly) never-ending piggyback ride. Most people would feel run down after a couple of hours. It's no wonder we have a pandemic of exhaustion, depression and illness among long-term debtors.
Debt Stress is Contagious
If you're feeling overwhelmed by your own debt problems, also consider the effects it's having on your family. Do you feel like you're constantly saying no to the kids? Or feel guilted into saying yes, even though you can't afford it?
When was the last time you could have a meaningful experience with your loved ones – enjoying a night out at the bowling alley, going camping or attending a sporting event – without worrying how you'd pay for it or adding to your existing debt burden?
Your loved ones know you better than anyone. You can try to hide it and put on a brave face – but they know when you're worrying. They can feel your stress and overwhelm. You don't intend it to, but not their wanting to put any extra pressure on you simply adds to the weight in their own backpacks. And with that comes the same issues of despair and exhaustion you know all too well.
Debt Stress is Curable
The good news is you and your family don't have to carry that weight alone. There are several resources available to help you shed it for good.
During a Free Confidential Consultation, a Licensed Insolvency Trustee will review your financial situation and discuss your options. If you qualify for a Life-Changing Debt Solution, such as a Consumer Proposal or Bankruptcy, your trustee will help you weigh the costs and benefits of each, so you can consider the best path for you and your family. If you would rather pursue a different strategy, they can also help you develop effective budgeting techniques, connect you with other debt-relief resources to get you moving in the right direction toward a financial fresh start.
It's time to let go of that heavy burden you've been carrying. Put the spring back in your step and return to living a healthy, happy life by defeating your debt for good.
Where are you on the Debt Scale?
Do you know your position on the MNP Debt Scale? This helpful self-assessment will help you understand the severity of your debts and whether you may benefit from one of MNP's Life-Changing Debt Solutions. It only takes five minutes and may be the head start you need to achieve the debt-free future you deserve.
Based out of Victoria, Sandra Wolverton is an Estate Manager at MNP Ltd. To learn more about how MNP can help, contact our local office at 1.877.363.3437 or toll-free at 310.DEBT (310.3328).
This article was originally written for, and published by, MNP. To view the original post, click here.
By Leah Drewcock, Licensed Insolvency Trustee
Which word is more cringe-worthy to you, budget or diet? Sadly, for many of us, we view those words with the same disdain.
We all know how important budgeting is, so why do we keep failing at it? My take on budgeting is that we avoid it because we think it is too much work and we have enough work in our day already. What is the reward for budgeting? Much like exercise and diet, we tend to avoid the things that are best for us if we see them as work.
Think about how when starting a new exercise routine, you get yourself prepared by making sure you have the right tools and time set aside. You might feel excited about starting a new journey so the first few days or weeks you are motivated and pleased with yourself for finally committing to an exercise routine.
Then, after a few sessions you may start to feel less motivated; maybe you aren't seeing the results as quickly as you like, maybe it is starting to feel like work. Pretty soon, you are skipping workouts, making excuses and before you know it, you have quit altogether.
So, can the same things that help us stick to an exercise routine and healthy diet help us to succeed at budgeting?
Build a Solid Budget Routine
The same characteristics of a successful exercise or healthy eating plan should be present in the tools we use for budgeting:
For as many different exercise plans out there, you will find as many budgeting tools. It is important to find the one that works best for you or you won't stick to it.
There are paid and free apps or mobile phones and tablets that work with both iOS and Android platforms. Some of the more popular and free apps include:
Additional on-line tools
If you prefer to put pen to paper, you can print any of the downloadable expense trackers and budget forms and fill them out manually. If you struggle to remember to keep receipts for small purchases, try keeping a small notebook in your purse or pocket and whenever you make a purchase write it down. Then you can transfer these expenses to your worksheet when you get home. Cross check your spreadsheet with your monthly bank statement to account for expenses you may have missed and for automatic withdrawals and bank fees.
What else do I need to know about successful budgeting?
Finally, you are bound to experience budgeting ups and downs. Remember, budgeting requires long-term dedication. Don't give up – like diet and exercise you must keep trying; you don't usually achieve your goal weight in a month and you don't master your budget in a month either. But with perseverance you can achieve your financial goals and live debt-free!
Leah Drewcock is a Licensed Insolvency Trustee at our Prince George location. To learn more how Leah can help, contact her at email@example.com or 250-596.4901.
This article was written for MNP Ltd. and was originally published here.
by Nora Edwards, Licensed Insolvency Trustee
Every parent knows just how busy – dare I say hectic – family life can be. Between work, school, extra-curricular activities, making sure everyone is fed and clothed and still trying find the time to sleep – you're probably wondering who in the world has time to budget.
But the truth is as dynamic and time consuming as family life can be, it's also pretty expensive. Without a plan to get or stay out of debt, many households may inadvertently be setting themselves up for failure.
That's the bad news. The good news is that budgeting doesn't have to be a complicated or drawn out affair. By following a few simple steps, any family can get themselves confidently on the road to financial well-being and prosperity – regardless of what expenses they have or how much time they are able to dedicate to the task.
Step 1: Setting Priorities
The first and most important step of any budget is to understand what matters most for your family.
It could be as simple as just keeping a roof over your head and putting food on the table without relying on debt to make ends meet. It could also be as complicated as affording for all your children to take part in the sports, clubs and activities they're passionate about and the peripheral costs that go along with them.
Every family will be different, and that's okay. Odds are there will be several financial goals you're trying to balance. What's important is that everyone is clear on what your priorities are and their order of importance. That way everyone is working toward the same shared goal and are mutually contributing to your family's long-term financial success.
Step 2: Income
The next step is to figure out how much money is coming in each month. This includes all employment income, government subsidies (childcare benefit, GST/HST refunds, etc.), investment income and any other money that can be consistently relied upon to support your family. Whatever this amounts to will be the upper limit of what you can afford to spend, so it is important to know it intimately and immediately off-hand.
Also, if there are any sudden changes to your family income – such as a job loss or illness – knowing what that reduction will be is helpful for quickly making the necessary adjustments to weather that storm.
Step 3: Expenses
Just like you want to know just how much money is coming in each month, you'll also want to know exactly how much money is flowing back out. For your budget to work properly, this number needs to be the lower of the two.
Begin by documenting your fixed expenses – such as rent or mortgage, property taxes, car payment(s), cable and internet, mobile plans and insurance; all the costs that stay consistent from month to month.
Next, estimate your variable monthly expenses by calculating the average of what you've spent on each over the past six months. These might include utilities, groceries and fuel costs. Finally, decide how much you would like to set aside for savings. Remember, many irregular expenses such as birthday or Christmas gifts may not fit neatly in any of the above categories. Be sure to include them in your savings plans to avoid being caught off guard when they come up.
And, of course, if you have any outstanding debts, you will also need to factor those into your expenses as well. Ideally, paying these off will have been listed as one of your top priorities.
Step 4: Tracking and Maintaining
This is the tricky part. You know how much money you're able to spend each month and you're aware of how much money you need to spend each month. Now you must do the hard work of staying within that limit – which is usually easier said than done.
Everyone has been there. You rush home from work, drive one child to dance class and quickly dart across the city to drop the other one off at hockey practice. Without time to make dinner, you find it easier to just stop by the closest fast food drive through on the way home. After two weeks of constantly telling yourself it's "just this once", you realize you've spent your entire food budget for the month.
Sticking to your budget requires continually planning and tracking your spending. It means sitting down at the beginning of the month and looking at your family's schedule, so you can plan out grocery trips, set time aside to prepare meals in advance, anticipate any irregular costs and solve any potential challenges before they arise. It also means meticulously documenting every dime you spend. Whether you use an app, a spreadsheet or good old-fashioned pen and paper – having a running record of what you've purchased, and your available budget remaining is the best way to keep your mind clear and reduce the stress and anxiety in your already busy lifestyle. It has also proven, time and again, to be he most effective way to reach your financial goals.
Step 5: Review and Re-evaluate:
Finally, remember that your family is dynamic and constantly changing. So too are your needs, wants, finances and priorities. Set aside time –quarterly, every six months or annually – to review your budget and goals. Make adjustments as required and keep the lines of communication open. That way everyone will feel like they're contributing to the same result. By working together, your chances of getting wherever you want to go will be much improved and you'll find a lot more joy and cooperation on your journey.
If you and your family are struggling to balance your budget due to overwhelming debt, a Licensed Insolvency Trustee can help. During a Free Confidential Consultation, we will review your financial situation and all your options to determine which Life Changing Debt Solution might best fit your unique needs. Together we can get you on track to the financial fresh start you deserve.
Nora Edwards is a Licensed Insolvency Trustee with MNP Ltd., serving clients in Burnaby, Port Coquitlam and Port Moody. To learn more about how Nora can help, contact her directly at firstname.lastname@example.org or 778-374-1850.
Birthdays tend to be a time of celebration and reflection and Canada’s 150th birthday is no exception.
When I think of Canada today, particularly our economy, I am reminded of part of Charles Dickens’s famous quote from a Tale of Two Cities: “it was the best of times, it was the worst of times.” While many Canadian homeowners have seen a record increase in their property values, many more are seeing the walls of unaffordability close around them. On a national level, employment has been strong, yet the cost of living is increasing faster than wages. The Canadian economy overall has been relatively stable, yet certain areas of the country have been pummelled by the price of oil. And while the Bank of Canada has maintained a low interest rate environment, Canadians have piled on unprecedented levels of household and consumer debt, leaving many vulnerable to a future rise in rates.
Indeed, Canada is part of a big, complicated world and there are things happening out there that are hard for us to comprehend and even harder to explain to our children. Our problems, as Canadians, seem relatively small by comparison to some of the events happening on a global level. With that being said, when your personal situation has become a cycle of living paycheque to paycheque and struggling to pay creditors, your personal financial problems tend to overshadow everything else and it becomes difficult to recognize the freedoms, privileges and opportunities we enjoy.
If you are stuck on the treadmill of debt and feel like you can’t get ahead, the good news is Canada has a robust and fair insolvency system that offers options and protection for those who need it. Licensed Insolvency Trustees (LITs), such as MNP Debt, are federally regulated, highly trained professionals who provide free assessment and advice as to the various options available to struggling Canadians. LITs are the only professionals legally able to administer Consumer Proposals and bankruptcies. Moreover, LITs provide financial counselling and resources for rebuilding a more stable financial future.
Resolving financial stressors such as debt will make you feel like partying any day of the year. But no matter how you are doing this Canada Day, be sure to take a moment to appreciate and celebrate all that our incredible country has to offer!
This article was originally published by MNP Debt. You can access the original article here.
With the holidays around the corner, financially strapped Canadian families are wondering how to make it through without breaking the bank. With over half of Canadians living paycheque to paycheque and average consumer debt levels over $21,000, the 2016 holiday season may be particularly burdensome on Canadian households. According to the Chartered Professional Accountants of Canada (CPA), Canada’s Holiday Spending Monitor (released December 2015), only 29 per cent of Canadians polled planned to put aside savings for the 2016 holiday season. This leaves the majority of Canadians financially unprepared for the holidays and vulnerable to spending on credit.
With seasonal pressure to spend money on gifts, décor, party clothes, activities, food and drink, how can families ease the financial burden of the holiday season? Here are five tips to enjoy the spirit of the holidays without breaking the bank:
Lana Gilbertson is a Licensed Insolvency Trustee with MNP Debt in Greater Vancouver and on Vancouver Island. This article was originally published on www.mnpdebt.ca. Click here to access the original article.
With consumer debt at an all-time high in Canada, debt reduction is a priority for many. That being said, no debt reduction plan can be successful if one’s credit card use is not carefully managed. If your credit cards have gotten you into financial trouble, try these five tips for controlling your credit card use:
1. Have a spending plan and stick to it
Controlling credit card use – and staying out of debt – requires a realistic spending plan (or budget). But having a spending plan isn’t enough – expenses need to be reviewed on a regular basis so you can track where you are at and how much you have left to spend in a particular budget category. If you don’t track your progress, you are vulnerable to overspending and ending up needing to use credit cards to make up the shortfall.
Don’t forget to include irregular and annual expenses in your spending plan. These expenses, if not carefully planned out and saved, are often paid for with a credit card.
Having a realistic spending plan that addresses both regular and irregular expenses is crucial when controlling credit card use.
2. Have a cash reserve for emergencies
One of the common reasons for credit card debt, is unexpected or irregular expenses. As a general rule, you should have savings equal to three to six months’ income in the event of job loss, illness, a major home repair or other unexpected events. These savings should be separate from longer term savings accounts and plans and should be readily accessible should an emergency arise.
Having an appropriate cash reserve for emergencies will ensure that credit cards are not the go-to solution when the unexpected happens.
For tips on building a cash reserve see my blog "Build an Emergency Savings Plan in 5 Simple Steps."
3. Don’t have more than one major credit card
No one really needs more than one major credit card that is accepted worldwide. Having multiple major credit cards and department store cards not only makes you vulnerable to having multiple debts, it makes financial management that much more difficult when most or all of the cards have balances. Generally speaking, the total minimum monthly payment on multiple credit cards will be higher than the minimum monthly payment on one credit card, even if the total debt owed is the same. Simply put, any debt management plan is simpler and more efficient with fewer creditors.
4. Don’t carry your cards with you
Carrying a credit card only makes you more vulnerable to impulse spending and / or spending money that you do not actually have. When you use a credit card, it’s too easy to minimize or even ignore the immediate cost of goods and services because you don’t have to pay the bill for 30 days.
Leaving credit cards at home will mitigate impulse purchases and protect you from spending money that you do not have to your name.
One special situation is online shopping, which you can do in the comfort of your own home. If credit card use is a problem, cease online purchases altogether.
5. Don’t give your credit card to your spouse, kids or anyone else
Allowing others to use your credit card, or providing a supplemental credit card, makes you vulnerable to other peoples’ impulse spending or potential over-spending. Moreover, if others do not repay you for purchases they make, you are still legally liable to the credit card company.
When used responsibly, credit cards offer many benefits and conveniences, but they can cause a financial disaster when their use is not carefully controlled. Whether you are a seasoned credit card owner or new credit card user, the above tips will help you control your credit card use and the risk of new or additional credit card debt.
For more information or help with credit card debt contact me at 604 637 1599 or email@example.com.
This article was written for MNP Debt and the original post can be viewed here.