Debt consolidation is one of the options you may choose to investigate if your debt payments have become overwhelming. Though there are numerous ways to consolidate your debt, the practice generally involves lumping most or all your balances together into a single affordable payment.

Consolidation options are varied and come with their own benefits and potential risks. Let’s consider pros and cons for some of the options available to consolidate debt.

Balance Transfers

Your bank or credit card provider may offer the opportunity to transfer the balance of one or more debts to a credit card or line of credit at a reduced rate over a set timeframe ­— usually between six months and a year.

Qualifying for a balance transfer typically requires a decent credit score and good borrowing history with the lender. It will also typically involve paying an up-front fee, usually in the neighborhood of three percent of the total balance you’re transferring over.

Pros:

• Great introductory rates:  Most balance transfer offers feature an ultra-low or zero percent introductory interest rate.  This maximizes the efficiency of every payment and can help you pay down the debt much faster - provided you don't add to it over that timeframe.
• Maintains your credit:  There's a twofold benefit here:
  • Paying off  your old debts will boost your credit rating.
  • Paying down your balance transfer debt will maintain your positive credit history.

Cons:

• High rates after introductory period:  Once the introductory period ends, any remaining balance will be subject to the normal interest rate (usually around 19.99%).  Before committing to a balance transfer, ensure you know all the rates and terms you are agreeing to for the lifetime of the debt.
• Temptation to spend:  Instantly freeing up space on credit accounts can be dangerous if you don't have a plan to prevent future debt.  Consider reducing your credit limits, cancelling existing accounts or other techniques to prevent overspending.

Consolidation Loan

Generally obtained through a bank or private lender, a consolidation loan ­­enables you to combine most or all of your outstanding debts into one affordable monthly payment. It will ideally have a much lower interest rate than you’re currently paying on average between your credit cards, lines of credit and other loans ­— reducing both the number and total cost of your monthly debt payments.

Pros:

• Simplifies monthly budgeting:  Instead of juggling multiple debt payments every month, you have just one.   This significantly cuts down on your stress and makes it easier to keep track of your finances.
• Increases your cash flow:  A consolidation loan with a favorable interest rate could potentially free up hundreds of dollars in your monthly budget.  You can direct these surplus funds toward paying your debt down even faster or necessities you couldn't afford previously.

Cons:

• Potential for high payments:  To avoid paying more than you are right now, it's critical to ensure your consolidation interest rate is lower than the average of all your outstanding debts.  Don't get so swept away by the promise of making fewer payments that you end up putting yourself in a more difficult financial position.
• Temptation to spend:  If your old credit accounts remain active, you may be tempted to use them.  Consider cancelling or reducing your credit limits to prevent adding new debt and repeating the debt cycle. 

Debt Management Programs

Depending where you live, credit counsellors and other service providers may offer a handful of options which allow you to pay back debt at a reduced amount over a certain timeframe. Usually this involves entering either a Debt Management Plan or otherwise negotiating an informal debt settlement with your creditors.

Pros:

• Pay off debts:  These programs can be effective at reducing both the timeframe and total cost of your debts - provided you have the income to sustain relatively large payments through the duration of the program.
• Good advice and support:  Many credit counsellors can offer insight and feedback about your financial situation and relationship with credit - and help you avoid falling back into the cycle of debt.

Cons:

• High payments:  Some debt management compani9es charge large administrative fees which result in a high monthly payment that can strain your budget.  What may at first seem like an effective solution can quickly become a new financial hardship.
• No legal protection:  Creditors are not required to agree to the terms of your program and may terminate your agreement at any time.  Moreover, creditors may still pursue collection action - including wage garnishments and court judgments for unpaid debts - even while they participate in the debt management program. 

Consumer Proposal or Bankruptcy

Bankruptcies and Consumer Proposals are the only two federally legislated options to ‘consolidate’ your debt. They are also the only two options which, provided you meet your responsibilities, offer both legal protection and a clear path to debt freedom. Most debts may be included in a Bankruptcy or Consumer Proposal and these options tend to be the most cost effective for debtors.  

Pros:

• Legal protection:  Both Consumer Proposals and Bankruptcies place a stay of proceedings on all current and future collection action, wage garnishments and court judgments.  This eliminates the stress of dealing with your creditors and allows you to focus on rebuilding your finances and your life.
• Clear path to debt freedom:   Bankruptcies and consumer proposals give you a transparent, legally binding cost structure, process and timeline to eliminate your debt.  You will never be caught off guard by unexpected administration fees or creditors withdrawing their participation.
• Financial counselling:  Every person who files a Consumer Proposal or Bankruptcy must participate in two financial counselling sessions.  By discussing everything from budgeting strategies to savings goals and understanding the causes of debt — these sessions will give you the confidence to create a stable financial future.   

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Cons:  

• Effect on credit:  Bankruptcies will negatively impact your credit rating for at least six years after their completion.  Consumer Proposals will negatively impact your credit rating for at least three years after their completion.  However, they also offer the opportunity to begin rebuilding your credit almost immediately —certainly sooner and more effectively than if you were to continue the cycle of debt.
• Stigma:  Many people avoid Bankruptcy and Consumer Proposals because of outdated attitudes toward insolvency.  Just remember, these programs exist to give honest, unfortunate debtors like you a second chance and the opportunity for a financial fresh start. 

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The Right Solution

When you’re trapped in the cycle of debt and faced with a range of options, it can be difficult to know which choice is the right one for you and your financial future. Thankfully, you don’t have to make that decision alone. Licensed Insolvency Trustees will always offer a no obligation Free Confidential Consultation to review your financial history, discuss your goals and help you find the best path forward.

Licensed Insolvency Trustees are the only debt professionals in Canada who can administer Life-Changing Debt Solutions such as Consumer Proposals and Bankruptcies. However, they also have a legal and ethical duty to explain all your debt reduction option and provide an unbiased opinion about which options you’d benefit from most. From the moment you walk in their door and through every decision you make, you can feel comfortable knowing you’re getting the best, most informed and most trustworthy advice possible.
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You’re only one call away from defeating your debt for good. Call MNP today to begin your financial fresh start today.

This article was originally written for MNP Ltd.  View the original post here.

That’s a good question, and one that might produce some surprising answers. There’s no one size fits all solution to debt. You need to consider all your options before you take out a consolidation loan or max out your line of credit to pay off your debts. You also need to be clear on your short- and long-term financial goals.

What’s prompting the question?

If you’re considering using your line of credit to pay off your debts, it’s likely you’re facing one or both of the following scenarios: 

• You currently owe a balance on a higher interest credit account (e.g. credit cards, loans, etc.) than your line of credit would charge;
• You currently owe a balance on several different credit accounts (e.g. multiple credit cards, loans, etc.) and are having trouble managing your monthly debt payments;

If that’s the case, using your line of credit to consolidate your debts can potentially:

• Reduce the amount of interest you pay on your debts (the typical line of credit charges about four times less than the typical credit card)
• Reduce stress by simplifying your finances (one monthly payment)
• Reduce the time it will take to pay off your debts

But don’t make that transfer just yet. There are some potential pitfalls you need to be aware of. And if you’re not careful, they can negatively impact your debt situation. 

Secured Line of Credit

Secured lines of credit like a home equity line of credit (HELOC) often provide flexible repayment terms and high credit limits. They are fast becoming the borrowing tool of choice for debt consolidation. HELOCs can be useful, but they can also be risky — especially in unstable real estate markets.

Interest rates are usually lower for secured lines of credit because you are providing collateral to the lender. The lower interest rate comes with a catch, though, because you aren’t bound to set monthly payments and your lender could foreclose on your home if you fall too far behind.

Remember, if you cannot make payments toward your HELOC, or you make interest only payments, you will not reduce your debt. So, you may find yourself in the same situation as before you used your HELOC — or even further in debt.

You must be disciplined and consistent with your repayments if you’re going to use this option.

Unsecured Line of Credit

An unsecured line of credit typically commands higher interest rates than their secured cousins because you are not guaranteeing the loan via title to your real property. But like an unsecured line of credit, you will typically only have to make interest only payments every month.

This repayment flexibility is convenient. But it can also be troublesome if you’re not disciplined with your payments. Failing to repay the principle balance on your line of credit could prolong your timeline to becoming debt free — and it could also end up costing you the same in interest as a higher interest credit card.

If you’re going to use an unsecured line of credit to consolidate your debt, you need to have a clear repayment plan in place first.

What Are My Other Options?

Consolidating your debt can make your payments easier, but it does not reduce the overall amount you have to repay. Depending on your financial situation, it may also be difficult to obtain a line of credit or consolidation loan if you don’t currently have one.

There may be other options available to both reduce the number of payments and the total amount you to repay. Schedule a Free Confidential Consultation with a Licensed Insolvency Trustee today to learn whether these are appropriate for your unique situation.

Compared to March, far fewer feel confident they can cover living expenses for the year without going further into debt

VANCOUVER, BC – July 20, 2020 – The financial picture for many British Columbian households looked bleak last quarter. And even with the current raft of pandemic-related support programs, many are struggling. The latest MNP Consumer Debt Index, conducted quarterly by Ipsos, found British Columbians feel less confident about being able to cover their living expenses for the next 12 months without going further into debt (56%, -5), the lowest proportion of any province.

“While our results show the rest of Canada becoming more optimistic or even hopeful about their personal finances, British Columbians are not having the same experience,” says Lana Gilbertson, a Vancouver-based Licensed Insolvency Trustee with MNP LTD. “That could stem from the lack of wiggle room in household budgets prior to the pandemic. Those who were finding it difficult to get by before are really struggling now.”

The number of British Columbians who say they are $200 or less away from financial insolvency at month-end increased three points since early March (43%). This includes 22 percent who are already insolvent and unable to cover their bills and debt payments, a decrease of three points this wave.

“It wouldn’t take much to push many B.C. households into dangerous territory. Just $200. That’s a small car repair or a loss in overtime pay,” says Gilbertson. “We also expect to see a range of efforts from creditors to help people catch up as the economy begins to re-open. This could include increased monthly payments or extended loan terms. For those who are already overstretched, the net result will see them falling further behind and deeper in debt.”

Gilbertson says one financial upside of the pandemic is widespread store closures left fewer opportunities for spending and that many realized savings on gas and commuting costs while working from home.

The poll found British Columbians have more wiggle room in their household budgets each month compared to March. On average, after paying their bills and debt obligations, they report having $128 more at month-end than in early March.

“With altered consumer spending during COVID-19 due to the closure of restaurants, theatres, malls, and other bastions of discretionary spending, some reported savings — even with a marginal increase in groceries, utilities, and online shopping,” explains Gilbertson.

The poll found some optimism in the province as slightly fewer regret the amount of debt they have taken on in life (44%, -2). But four in 10 (44%, +1) are still concerned about their current level of debt.
So far, support from the government, mortgage deferrals, and the flexibility of creditors have all contributed to a significant decline in insolvency filings since the pandemic began. In May alone, consumer filings declined 37 percent in British Columbia compared to the same month last year.

Given the already shaky ground British Columbians were standing on before the COVID-19 crisis — not to mention the magnitude of the virus, its economic impacts, and the government response — Gilbertson says it won’t be at all surprising to see insolvencies jump.

“Even in the best-case scenario, we will likely see the number of insolvency filings quickly return to the pre-COVID baseline as federal subsidies and stimulus dollars run out, deferred payments become due, and consumer spending returns to pre-pandemic levels,” says Gilbertson.

For those who are struggling with debt, Gilbertson notes Bankruptcy is not the first nor is it always the best option. Licensed Insolvency Trustees are the only federally regulated debt professionals empowered to provide a full range of debt relief options including Consumer Proposals, informal debt settlements and bankruptcies. They take a customized approach and provide an unbiased opinion to help severely indebted individuals understand their rights and determine the right path forward.

About MNP LTD
MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 230 offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. 

In light of the social distancing measures currently in place, MNP LTD is currently offering free consultations via videoconferencing (Skype, Messenger, Zoom, FaceTime, etc.) and by phone. Their team of Licensed Insolvency Trustees are empowered to help those struggling financially to make the most informed choices to deal with their debt during this time. Visit MNPdebt.ca to book an appointment or to start a live chat.

About the Survey
These are some of the findings of an Ipsos poll conducted between June 1-2, 2020, on behalf of MNP LTD. For this survey, a sample of 2,001 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.

A summary of the provincial data is available by request.

This article was originally published by MNP Ltd.  To view the original post, click here.

​Financial scams have been around for decades. But they have never been as common, insidious and invasive as they are today. The internet, smartphones, social media, online banking and countless other technologies have enabled fraudsters to invade people’s lives at an unprecedented rate — and trick them into handing over money, personal information and access to their personal electronic devices.

It’s easy to assume you’ll never fall for a scam. But we’re all vulnerable, and we can all become victims if we don’t know what to be aware of.

Let’s look at three common scams to understand what criminals are after, why they’re effective and how you can protect yourself or a family member from being a victim.

Tech Support Scams

It usually begins with a phone call. A scammer will claim you have a software issue on your computer and they have been alerted to provide technical support. First, they will request payment. Then they will ask you to install applications which will give them access to your computer so they can “fix” the issue.

However, what they’re really doing is accessing any personal data stored on your computer — and capturing any data you enter in the future, such as your login credentials for online banking and other websites.

A common variation of this scheme uses digital ads or pop-up windows online to lure you in. These will include error messages saying your computer isn’t functioning properly and to click through for a quick fix. This will lead you to a malicious website or chat form that requests payment, steals your information and installs the spyware on your computer.

Why it works

This scam preys on the victim’s lack of technology literacy. Computers display error messages all the time and many people struggle to determine which ones are real and which ones are not. The scammer amps up the pressure by warning there could be dire consequences for not addressing the issue immediately.

What to do

First, understand that your hardware, software or internet provider will never contact you to initiate a service conversation. If you have a computer issue, you must contact them.

Don’t give any personal or payment information over the phone. And never click any website links or advertisements displaying error messages or promises to ‘clean up’ your computer.

If you’re concerned your computer has already been compromised, inform your banks and credit card companies immediately. Follow their instructions to avoid any account or credit card hacking. Most major banks also have an in-app option to lock your credit or client cards, so you can immediately secure your accounts.

You may also have to consult with a legitimate tech support firm to remove the spyware and restore your computer to its original settings.

Email and Texting Scams

There are numerous text and email scams, but phishing is by far the most common and the most successful. Generally, this involves a scammer sending you a fraudulent communication disguised to look like it’s from a reputable source such as your bank or credit card company.

The communication will either say there’s a problem with your account or that you’ve received a payment and direct you to click a fraudulent link for more information. When you arrive at the fraudulent landing page, you’ll be prompted to enter your login credentials — which the scammers will then use to steal your personal and financial information.

Why it works

These communications are usually very simple, brief and professional looking. If they’re ‘from’ a business you deal with regularly, you may not notice anything’s amiss. Phishing schemes can easily fly under the radar with all the other digital messages and notifications you receive every day.

Scammers are also highly skilled at using your emotions against you. Be it the fear of losing money or excitement of potential windfall, they’re counting on you clicking now and thinking about it later.

What to do

Treat every unexpected communication like a potential phishing scheme until proven otherwise. Do not open attachments or click links contained in these texts or emails. If you are unsure if an email or text is legitimate, take the time to contact the purported sender through their primary contact channels to verify its validity.

If you’ve clicked on any links or provided your information, phone your bank or credit card company immediately to report the issue. They will cancel your cards and issue a new one as well as provide direction to secure your accounts.

Canada Revenue Agency Scams

There has been an ongoing surge in automated phone calls claiming to be from the Canada Revenue Agency (CRA). The messages usually claim you owe unpaid taxes and there is a warrant out for your arrest — or other intimidating phrasing to that effect. They will direct you to speak with a live agent who can take your credit card information to pay off the supposed tax debt.

Of course, this is not Canada Revenue Agency. There is no tax debt. And you’re not at risk of going to jail. But there are potentially thousands of dollars at stake if you’re not vigilant.

Why it works

It can be intimidating for anyone to get a message from the government — especially if you have outstanding taxes or don’t know where you stand with your tax filings or don’t know the general process for dealing with these types of matters. Serious threats frighten people into acting quickly and irrationally.

What to do

Hang up immediately. The Canada Revenue Agency rarely phones anyone. If they do, it will be always be about an established ongoing matter. And they will never use automated messaging or threatening tactics — nor will they ever request payment over the phone.

The same goes for email. The Canada Revenue Agency will only ever contact you by email to inform you of a new message on your MyCRA profile. They will not direct you to click any links, provide any personal information or request payment.

If you are concerned about your tax status, log in to your MyCRA profile to view all your notices of assessments, tax forms and legitimate communications from the Canada Revenue Agency.

Life-Changing Debt Solutions

Major financial scams can damage your credit, drain your lifelong savings and affect your future financial stability. If you have been a victim of a financial scam which you haven’t been able to recover from, there may be a solution to your debt problems.

Set up a Free Confidential Consultation with a Licensed Insolvency Trustee to find out your options today. You may qualify for a Life-Changing Debt Solution such as Bankruptcy or a Consumer Proposal, which can help you become debt free within as little as nine months of your initial filing.

Don’t let shame and embarrassment prevent you from getting the help you need to move forward. Get on the road to the financial fresh start you deserve.

This article was originally written for MNP Ltd.  View the original post here.

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.
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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.

​​This blog was written for and originally published by MNP Ltd.   The original post can be viewed here.

​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:

• Did my actual spending match my spending plan?
• Did I spend more in one area than another?

Once you know what you’re truly spending, you can adjust your boundaries to better fit your life.
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:

• How much did I save?
• Have I spent thoughtlessly on unimportant items?
• Can I carve out savings opportunities I didn’t see before?

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:

1. The more you use credit cards, the less likely you are to pay with cash. If a store you frequent offers you a new card (potentially with points or cashback incentives), the apparent ‘opportunity’ can difficult to resist.
2. Regular credit card use and a consistent payment history will qualify you higher limits and additional cards. As your credit score grows, so will the temptation to increase your limit.
3. Retailers often offer financing incentives. It’s hard to say no to discounts or ‘pay no interest for six months’ offers. Stores purposely design these to seem like the financially responsible option.

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.

1. Get rid of high interest cards
2. Pay off (or at least significantly reduce) your current balances – then lower your limits to prevent spending more than you can afford
3. Decline all new credit cards and turn down all credit limit increases

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.

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:

• What is motivating me to make this purchase at this moment ?

• What are the potential benefits or drawbacks of waiting ?
• Have I done my research and considered all the options ? 
• Have I worked the monthly payments into my budget ?
• Am I depending on known or unknown future income (e.g. raise, bonus, tax refund) to pay the bill ?
• Will another monthly payment create stress, anxiety and conflict within our household?
• Have I considered the total cost of ownership (e.g. maintenance, storage, insurance, etc.) ?
• Will the usefulness of this purchase outlast the time it takes to pay it off ?

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?

• Vacations
• Medical appointments
• Car repairs
• Gifts or special occasions
• Children’s sports fees
• Etc.

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.

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.