Budget Advice for Facing the Reality of DebtFeb 26, 2016
With the falling value of the loonie, a sluggish economy, and increased costs on produce, it can be challenging to understand how these all affect your debt plan. Despite the economic reality in Canada, Canadians still remain optimistic about their finances according to a recent poll conducted by Ipsos Reid on behalf of BDO Canada. It is important not to lose sight of the reality that debt has on your financial situation and using budget tips and advice can help you stay in control of your personal finances.
In addition to consumer optimism, the poll provided some key insights about the opinion respondents have of their current finances:
- 46 per cent would face financial difficulty if their monthly debt payments were to rise by $200 a month, almost half of those indicating it would be extremely difficult (22 per cent).
- The number of respondents that would face financial difficulty jumps to 62 per cent if monthly debt payments went up by $300 a month.
- Major life events occurring would also have a significant impact on the ability to manage finances; long-term injury or illness (70 per cent), job loss (63 per cent), retirement (53 per cent), separation/divorce (46 per cent), and paying for post-secondary education (44 per cent).
In light of the optimism surrounding personal finances, it is still important to understand the financial reality of your debt. Doing a financial health-check and stress testing your debt is important in determining the state of your finances and what will happen if interest rates rise.
Some questions to consider when conducting a personal audit are:
- Have I factored in how the rising cost of vegetables impacts my debt plans?
- Do I have a savings plan in place to prepare for major life events like those mentioned in the poll results?
- How will I handle a $100 or even $200 increase in my monthly debt payments?
Preparing and sticking to a monthly budget could be one of the most effective tools for managing your debt. If you’ve never created a budget, the Financial Consumer Agency of Canada (FCAC) has information on how to make a budget and stick to it. After familiarizing yourself with making a budget, you’ll be ready to use the FCAC’s budgeting tool. Having your finances in front of you on paper or a spreadsheet can help you identify debt warning signs, see opportunities for saving or increased debt payments, and offer ways to cut costs on non-essential spending.
The reality of debt is that it needs to be a priority and there is help available. Focus your efforts on managing your personal debt. A Trustee in Barrie can provide you with budget advice and information regarding professional debt help options that can help you start paying down your debts effectively. Looking for more advice on budgeting and managing debt? Join the conversation on Twitter using #LetsTalkDebt and #BDODebtRelief.