Consumer Proposals are the leading alternative to bankruptcy in Canada for individuals who wish to negotiate a more favourable debt repayment plan with their unsecured creditors.
Under a Consumer Proposal, most consumers are able to reduce their unsecured debt by up to 80%, freeing up their cash flow to better manage basic living expenses. While a Consumer Proposal can free up cash flow, it doesn’t solve a spending problem. Now that you’re back on track for a strong financial future, consider these tips to cool off your spending after filing a Consumer Proposal.
1. Take advantage of insolvency counselling. Individuals who file a consumer proposal must complete two mandatory financial counselling sessions with a qualified insolvency counsellor. The cost of the two sessions is already included in the proposal administration fee so there is no extra cost to you. The insolvency counsellor will cover things like budgeting, shopping and spending habits, use of credit in the future among other things. Take this opportunity to address any spending issues and to set up a realistic budget with the help of your counsellor.
2. Set a financial goal, whether it is saving for an emergency fund, contributing to an RRSP, or paying off your Consumer Proposal early. It will be much easier to cool your spending if you have created a good reason to do so, as this will help keep you motivated to change your spending habits.
3. Use cold hard cash for variable expenses such as food, clothing, transportation and gifts. Using cash (as opposed to a debit or credit card) reduces overspending because it is a concrete reminder that money is a limited resource – i.e., you cannot spend what you do not have.
4. Remind yourself that you control your finances and not the other way around. Too many individuals in debt feel that they had no choice but to use credit to get by. The simple fact is that we have a myriad of choices – granted, not all of them are pretty. Take a step back. Think about what you have, what you need and what you must do differently. The earlier you do this in any situation, the more choices you will have.
If you’ve found debt relief through a Consumer Proposal, enjoy the feeling of freedom from crushing debt! But remember that dealing with your debt is only one part of the equation – take control of your spending now so you never feel the burden of debt again.
Lana Gilbertson, Licensed Insolvency Trustee
BC Bankruptcy & Consumer Proposal Blog