Why You Need to Know About Budgets and Debt Relief ProgramsMar 01, 2016
A new Ipsos Reid poll conducted on behalf of BDO found that Canadians believe that, on balance, 2016 will be a good year for them financially. Half believe that their debt will decrease, and 44 per cent think that their net worth will increase. Furthermore, almost one quarter of Canadians have made a New Year’s resolution related to their finances. While it’s encouraging to see optimism are these Canadians seeing reality? Even optimistic Canadians should take the time for a financial health checkup: review your budget, stress test your finances, and research viable debt relief programs.
Many individuals and families in Canada are currently saddled with record debt loads and a record debt to income ratio. While interest rates are at historically low levels, when they move up (and I agree with economic experts who say that they inevitably will), Canadians will face great difficulty in servicing their debts. According to poll results, 46 per cent of Canadians admitted that they would experience financial difficulty if their debt payments went up by just $200 per month. There are currently many challenges to financial health such as job loss, retirement, family changes or illness. We need to be prepared for these challenges. The best way to prepare yourself for any financial challenge is to proactively take charge of your financial situation. The sooner you start this process the better.
Step one: assess your financial situation
Start by putting together a budget to help you take stock of your finances. Either create a budget if you do not have one, or review your current budget. The Financial Consumer Agency of Canada (FCAC) has excellent budget advice as well as an online budget calculator to help with this process. It’s important to determine what level of debt repayment you can afford and make paying down your debt an integral part of your budget. This debt calculator can tell you how the size of your monthly credit card or loan payment can affect the amount of interest you pay and length of your loan. Having this information will help you determine how to get out of debt.
Next, create a net worth statement. Many banks offer online net worth calculators like this one. In your net worth statement you should list all your assets and your debts. Are there any assets that you may be able to sell to pay down your debt?
Step two: seek debt advice
There is an unprecedented amount of information available to all Canadians on the internet – our parents did not have access to this tremendous resource. While a wealth of information at our fingertips may seem like a good thing, conflicting advice about how to get out of debt can also be confusing. If that is the case, it’s best to seek out advice from a professional about what debt relief program will work for your situation. A Licensed Insolvency Trustee is licensed by the Office of the Superintendent of Bankruptcy, a department of the Government of Canada. A Trustee will provide you with unbiased information to help you understand and resolve any financial problems that you may have. While you may be optimistic about 2016, also make sure you’re prepared for unexpected challenges. Don’t get caught in a downward financial spiral. Take concrete steps to face your own financial realities.
Are you optimistic about 2016? What steps will you take to pay down your debt? Share your ideas on Twitter by visiting #LetsTalkDebt and #BDOdebtrelief