Anytime money’s tight, you start to obsess over it. Money problems can keep you up at night with anxiety. They can stop you from getting a loan you need to start a business or buy a house. It doesn’t just affect your financial well-being, it affects your happiness and your relationships. When you have money problems, something needs to change. The first three steps are simple as long as you can face the facts and identify the source of your money problems honestly.
Track Your Expenses
Before you can create a budget, first you need to know where your money is going. Use an app or even just a notebook to keep track of every purchase you make. Only once you know where your money goes can you start to find ways to cut down on unnecessary expenses or trim back lifestyle costs.
Replace One Major Expense
Once you’ve made a budget that accounts for all of your expenses, find one expensive habit or routine that you can replace. It may be buying a coffee on your way to work every day. Start making coffee at home and taking it with you. While driving may be a necessity for some, if you live in a neighbourhood with good transit, you may be able to live car-free. If that sounds daunting, start small: leave the car in your driveway and save on both gas and parking by taking transit to work. Even that can make a big difference in your weekly budget.
Get Financial Help
You’ve crunched the numbers a dozen ways, you’ve cut down your expenses as far as you can, but you still can’t figure out how you’re going to pay your debts. This is a sign that you’re insolvent and the point at which you should get an assessment from a Licensed Insolvency Trustee. In Toronto, you can get help from LITs such as David Sklar& Associates, which provide a free assessment and can advise you on how to proceed.
Insolvency means that you owe more than you can pay back and there are two paths out of insolvency: bankruptcy and a Consumer Proposal. Once you know that there are options when you are in money trouble, you can stop panicking and start planning.
Bankruptcy – For a long time, declaring bankruptcy was the only way to settle debts you couldn’t pay. While many assets are exempt, the bankruptcy process involves settling your debts with money from selling many of your assets, including property (besides your home), RRSP contributions from the last 12 months before bankruptcy, and even equity in your home (if it’s over $10,000).
Consumer Proposal – A Consumer Proposal in Ontario can only be filed by Licensed Insolvency Trustees like David Sklar& Associates, but with their help, you can stop interest payments and legal actions from creditors, and pay your debts back in a single monthly payment. Note that with a debt consolidation loan, you still have to pay interest back on that loan, not with a Consumer Proposal.
Before you take out a debt consolidation loan out of desperation, get financial help from professionals who are there to help you.