There’s no single cause that leads individuals to seek relief from debt. Honest people can fall on difficult times and find themselves unable to pay their debts and maintain their standard of living. Anything from health issues that prohibit someone from working, to divorce, death, a home disaster, or unemployment can completely change a person’s financial standing.
If you feel like your life has been flipped upside down by debt and want to get back on your feet, you’re not alone. Many Canadians end up seeking financial help from qualified professionals when they don’t know what to do
You Need Help with Your Debt
Sometimes an individual who is at the end of their rope might feel like bankruptcy is the only option, but there are other ways to recover from insolvency. They might have all sorts of questions like how does a consumer proposal work in Canada or how long a bankruptcy can last. Luckily there are people with the answers.
A Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) is the best credit professional to guide you through debt recovery. They’re also the only ones authorized to administer a bankruptcy or credit proposal, and they are committed to helping their clients bounce back from debt and start planning for the future.
Budgeting with Debt
Living with debt is a full-time job. You can’t ignore the reality of your debt and you might even receive constant calls from creditors or collections agencies asking you to pay what you owe. Budgeting with debt repayment as your main priority is possible, so you should make coming up with the right budget your top concern.
Determine Your Annual Expense Amounts
To come up with a budget you need to have a sense of what you’re already spending. Take a look back at all of your bank account statements from the last year or two. Determine your annual and seasonal expenses and tally up your total yearly amount. Then divide that sum by the number of paycheques you will receive in the year. This is how much you must put aside from each paycheque.
If you are keen to pay off your debt quickly, then you’re in the right frame of mind. You know that those interest fees add up and it’s best to accelerate your debt payments in the same way you would accelerate your mortgage payments.
Credit cards will offer you a minimum payment amount with your statement, but you should always be paying more than that when trying to get rid of debt as quickly as possible. Check with your lender to see if you can make extra payments (creditors are very unlikely to say no to this) and establish the best way to make them. You’ll pay less interest and you also won’t be tempted to use any extra cash on something that isn’t debt repayment.
Don’t Neglect Your Savings
A healthy savings account is a must-have for every person, though it’s not always a reality. It can feel like you’re making huge strides in paying off large amounts of debt when you accelerate your payments, but don’t get carried away. You still need to have enough cash for emergencies. When you’re focused on getting out of debt, your savings account can be a valuable tool if something unexpected comes up.