Financial trouble may be just around the corner. Lay-offs, job loss, illnesses, and accidents happen. Major expenses will come up from time to time in your life. The good news is you can take steps today that will help you avoid financial trouble in the future.
Prepare for a debt crisis, so it doesn’t happen
With a few simple steps, you can manage your debt and organize your finances. When you are prepared, a difficult financial situation is more likely to be a temporary setback rather than a full-blown crisis. Our Vancouver insolvency trustees recommend these steps to avoid debt crisis:
1. Grow your savings and liquid assets
Maximize your chequing and savings accounts and invest in guaranteed investment certificates (“GICs”) and/or short-term government investments. These liquid savings will be the first you turn to as your “emergency fund” if a crisis arises. You are usually able to take your money out of these accounts without early withdrawal penalties or tax implications (unlike RRSPs), and their value typically does not fluctuate as much with market conditions (unlike stocks).
Saving even a small amount each month can make a big difference over time. A great option is to set up an automatic withdrawal of a set amount that coincides with each payday. Before you know it, you will have a nest egg to fall back on in case of emergency.
2. Prepare a budget…and stick to it
Take a realistic look at your monthly income and expenses. When you know how much is coming in and going out each month, you will be able to determine if you are living within your means or setting yourself up for a financial crisis. Another significant benefit of a realistic budget? It will help you determine the amount of money you should have in your emergency fund to get you through if financial trouble arises.
Once you have a budget in place, stick to it as closely as possible. It is also a good idea to revisit your budget every so often to make sure it is accurate and captures seasonal or significant one-off expenses throughout the year.
3. Cut down or eliminate expenses
Scrutinize your budget for unnecessary expenses or “luxuries” that you can easily eliminate. There are always ways to cut back or minimize expenditures while still having fun! It may be as simple as switching to a no-fee bank account, getting rid of your landline, dining out a bit less, finding a credit card that charges a lower interest rate, or paying bills on time to avoid interest and extra charges. These seemingly small changes can help you avoid a major debt crisis in two ways: first, you can save more each month as you are spending less; and second, if financial trouble strikes, your monthly expenses will already be streamlined and more manageable.
4. Pay down credit cards and other higher interest debts
If you carry a balance on your credit card, look closely at the interest charges you pay each month. A month’s worth of interest may not seem like much on a small credit card balance, but if you don’t pay the balance off in a month or two, your total interest will start to add up fast. Prioritize paying off your credit card debt and other higher interest debts or loans to avoid ballooning interest payments. If you can’t pay off your balance all at once, consider making multiple small payments until your balance is paid in full. You may also want to ask your credit card issuer to lower your monthly interest rate. Another option to consider is transferring your outstanding balance to a credit card that offers 0.00% intro APR on balance transfers.
5. Keep your assets well maintained
It may seem counterintuitive to spend money to save money, but it’s true when it comes to taking care of your vehicles, your home, your appliances—and your health. Your health and well-being are also “assets” – invaluable ones at that. Medical and dental treatments can be extremely expensive, and health problems can lead to lost wages or disability. Home and vehicle repairs or replacements cause major financial disruption. It can save you money in the long run if you spend a bit of time and money to keep your major assets in good condition. Routine maintenance will uncover potential issues, allowing you to address them before they become major and give you the time to budget and save before catastrophe strikes.
6. Talk to a financial professional
Asking for help is not a sign of weakness when it comes to financial matters. The wealthiest and most successful people in the world have financial advisors to help them avoid a debt crisis—why shouldn’t you? A good financial advisor can introduce you to strategies you may not be aware of and provide customized options and advice for managing your finances. Experienced financial professionals can assist you with planning for and surviving financial challenges.
Vancouver and Richmond debt help
If you would like to discuss insolvency options or need urgent debt help, Richmond and Vancouver-based insolvency trustees at Campbell Saunders Ltd are here for you. Please contact us to book a free consultation with one of our debt help advisors in Vancouver or Richmond. Virtual appointments are also available and encouraged.