Here’s why you need to get off the debt roller coaster

Last October, Canadians told us that affordability is a major issue for them, affecting their lives in so many ways. In fact, BDO’s Inaugural Affordability Index report revealed that one-in-four Canadians struggles to feed their families, 38 per cent struggle to pay for clothing and essentials and more than half say their income isn’t enough to let them life debt-free.

Since 2017, interest rates have risen five times and they’re expected to keep rising in 2019. That means it will take Canadians longer and cost them more to repay any variable interest personal debt. In addition to affordability challenges, higher debt balances may be a recipe for financial disaster.

Five ways to lighten your debt load

It might seem like a daunting task which is why it’s easier to break your debt repayment into smaller steps. Follow these steps to lighten the load and get back on track.

1. Calculate your debt. The first thing you need to do is figure out just how much consumer debt you have. You can use a debt calculator to plug in your numbers including their interest rates.
2. Make a plan. How much money can you dedicate toward debt repayment each month? Once you know your debt totals, you need to calculate your monthly disposable income. That means every bit of money that isn’t assigned to living expenses, bills, food, etc. With your disposable income, plan to put 90 per cent toward debt repayment and 10 per cent into a savings account for emergencies.
3. Go on a spending fast. After the holidays, January is a good time to decompress and evaluate your goals. Reducing spending is one goal that can keep you from adding to debt while saving you money. Read how this woman paid off $24,000 in debt by regularly freezing her spending. This is a great challenge for the whole family. Try it for a week and work towards longer periods of time.
4. Increase your income. Earning an extra bit of income can fast track your debt relief as long as you’re committed to using it for that purpose. Use your skills and turn a hobby into a lucrative endeavor, sell off unwanted items in your home on Kijiji or find a part-time side hustle.
5. Deal with your debt. To free up more cash each month, you might need to shift your debt balances. You can try DIY consolidation by adding your high interest debts onto a low-interest line of credit or credit card.

You can also try paying as much money as possible toward your debt balance with the highest interest, while maintaining minimum payments on the rest of your debts. Once that debt is paid off, work your way through the rest of your debts. This is the debt avalanche method.

Alternatively, you can compare your debt relief options using this online calculator or book an appointment with a Licensed Insolvency Trustee to go over your options.

Where do you want your debt load to be in a year from now? Don’t let another year of minimum payments pass. Deal with debt now so your hard-earned money stays in your pocket.

Need more money motivation? Follow Kerry Taylor from Squawkfox for frugal living and debt relief tips. You can also join our Twitter community by searching the hashtags #LeaveDebtBehind #NewYearsResolution #DebtSolutions

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In honour of Financial Literacy Month, here’s some straight talk on why you deserve to have someone on your side who can help you get out from the burden of debt.

1. It’s not your fault if you never learned financial literacy. Financial literacy isn’t commonly taught in school (though Ontario has recently made a commitment to doing so), so many Canadians don’t have strong skills in this area. Honing your financial literacy skills is wise — they can help you improve money management and get out of debt.

It’s also important to recognize that people need different financial knowledge at different times in their lives. For example, you may not need to know much about investments when you’re in your 20s, but you might need to learn more later in life.

Take some time this November to explore the various tools that are out there, like online debt calculators.

2. You’re not a professional at dealing with debt. If you’ve boned up on your financial literacy and are still unsure what to do to get out of debt, it’s understandable. It takes time to become financially literate. Sometimes all you need is professional guidance to come up with a plan.

There are people who know debt relief inside and out who are happy to consult you with at no cost. A Licensed Insolvency Trustee (LIT) is a professional licensed by the government to provide services to people who are having difficulties with their debt.

You don’t need to be in overwhelming personal debt to get the help of an LIT right here in Peterborough. If personal debt is causing you stress, talking to a professional who is experienced in this area can help.

In the initial consultation, the LIT will listen to your story and explain all options available to you. You’ll discuss DIY or informal strategies and tools that might work to help you with debt. You’ll also find out the process of filing for bankruptcy or a consumer proposal.

3. Being in debt is stressful and you don’t need the extra stress. Sometimes people carry the burden of debt longer than is good for them. While everyone wants to pay off their debts, if it just isn’t going to be possible in your current financial situation, it’s time to make a change.

LITs are uniquely qualified to assist with consumer proposals and bankruptcy. They can deal directly with your creditors so you don’t have to and help you manage the complex process as efficiently as possible.

Having a Licensed Insolvency Trustee means you’ll have all the information you need throughout the process — before you file and beyond. This helps ensure you are successful at achieving your goal of eventually becoming debt-free.

You deserve to get help with debt today, whether that’s by learning more to improve your money management skills or by talking to a professional.

What are your reasons for getting help with debt? Tell us on Twitter. #LeaveDebtBehind #FLM2018 #DebtSolutions

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How do other Canadians compare?

Our recent Affordability Index poll questioned Canadians about their financial readiness. Here are some highlights:

• Only 2 in 10 Canadians agree that they have enough money to cover all their expenses.

• 34 per cent of Canadians with children say their debt is so overwhelming, they don’t know what to do about it.

• Three-quarters of Canadians have delayed expenses such as paying off credit card debt, buying a home or retirement due to lack of affordability.

• Those struggling with affordability the most are homeowners with kids who earn under $100k and have no retirement savings.

Raising a family seems to be the biggest affordability challenge for Canadians. 42 per cent of parents say they find it hard to afford essentials such as groceries, utilities and clothing due to a lack of affordability. Parents are also the most likely to carry the heaviest debt load, making it that much harder to afford those essentials.

How do I know my financial readiness?

To get a picture of your own affordability strengths and challenges, ask yourself these questions:

1. Do I spend within my means? Using a credit card to finance a big purchase is one thing, but turning to debt to pay for everyday costs can spell trouble over time. If you’re consistently using credit over cash, it might be time to deal with your debt.
2. Do I carefully track my money and how it’s spent each month? Following a budget is the best way to stay on top of your spending and predict your upcoming expenses. Use an app or a worksheet to help you track your money.
3. Do I have an emergency fund that will cover me if I need it? Putting extra money into a savings account each month will give you a buffer in the event of unexpected expenses or any type of emergency. Aim to save 3-6 months worth of expenses.
4. Am I satisfied with my retirement contributions? 69 per cent of Canadians find it challenging to save for retirement. For parents, it may be even harder to delegate funds for your future when they are focusing on their children and their future. Speaking to a financial advisor may help.
5. Am I managing my debt load? Average non-mortgage debt in Canada is just below $20,000. Depending on your other expenses, you may be managing your debt well or feeling overwhelmed. It’s a good idea to check in with yourself every six months to see how you’re coping. Know the signs of financial trouble so you can protect yourself or take action.

How can I get my debt under control?

Half of Canadians polled said they simply don’t have enough income to live debt free and cover all their costs. This is why it’s important to know your debt relief options. Dealing with debt will not only free up extra money each month, but it will allow you to reach more goals and plan for your future. Compare your options online using this debt repayment options tool or speak to a Licensed Insolvency Trustee who can go over your specific needs and make a tailored debt relief plan with you.

How financially ready are you? Is debt holding you back from covering your expenses? To see more debt relief tips, connect with us on Twitter #DebtSolutions #PaychequeToPaycheque #FinancialEducation

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The cost of parenting and grandparenting

According to a US study conducted by TD bank, grandparents spend an average of $2,383 on their grandchildren each year. This includes RESP contributions, gifts, outings and extra-curricular activities. However, more than half of millennial parents report that their parents provide at least an hour of support each week through childcare or household chores in their home. Here’s some more shocking stats:

• The average grandparent spends 48 hours per week helping with primary childcare, homework help and transporting kids to after-school activities.
• Millennial parents estimate this work to be worth $300 per week or $15,000 per year.
• ¼ of Millennials who receive financial support say they couldn’t afford their current lifestyle without the help of their parents.

How to keep yourself from going broke

The good news is that the TD study found that 40 per cent of grandparents offered their support without being asked by their children and 43 per cent said it was because “it makes me happy”. So, how can you continue to support your kids and grandkids while remaining financially stable?

1. Keep an eye on your budget

Adhering to a budget will help you meet your financial responsibilities and predict upcoming expenses.

2. Don’t forfeit your goals

Whether you’re retired or approaching retirement, you want your money to stretch. That means you are not ignoring or risking your own financial goals in order to help your kids and grandkids.

3. Don’t add to debt

Spoiling your grandchildren comes naturally, now that you have the time to enjoy it! However, overspending can lead to a heavy consumer debt load if you’re not careful. If you’re already carrying debt, look into your debt relief options or talk to a professional about repayment. Otherwise, avoid using those credit cards.

Do you spoil your kids and grandkids? Have you added to your debt in order to offer financial support? Tune into our podcast to learn more or follow us on Twitter #Boomers #PersonalFinance #Grandparents

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Stretch your money, not your budget

Last year, Canadian families spent an average of $883 on their kids’ back-to-school “necessities” – a number that doubled from the previous year. Now that kids are getting cell phones as early as Grade 4, we expect this number will be even higher this year. Here’s what you can do to keep costs low and avoid adding to your consumer debt:

1. Add a school expense line to your budget now – The kids have only been out of school for a short time, but now is the time to save up money for those upcoming expenses and any other school related costs over the year. Put aside some money each month so you’re able to cover clothing, back-packs, field trips, tech and grad expenses all year round without needing to rely on credit when those expenses come.
2. Shop smart – Shop clearance deals all year round so you’re prepared for all seasons. Carve out a closet or any space in your home where you can store these bargains until they’re needed. Late September and early October are the best time to find clearance school supplies. The same is true for end-of-season clothing. You’ll score some amazing deals and you won’t break the bank.
3. Avoid adding to your debt – Even when you’re finding rock-bottom prices, it’s important to weigh out whether those items are necessary or not. A sale is only a sale if you’re saving money and not going into further debt to afford it. Keep your budget handy when you shop and if you’re prone to using plastic, keep it at home and withdraw your budgeted amount in cash.

Finding it hard to come up with extra money to put away for those back-to-school expenses? It may be worth your time to check out your debt relief options or speak to a professional who can go over your options with you.

And, if you want to learn more about saving money during the upcoming school year, follow Kerry Taylor’s finance blog, Squawkfox for some amazing tips.

 Tune into our monthly podcast. You can also find us on Twitter, using the hashtags #BacktoSchool #DebtSolutions #ParentingTips

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Tackling student debt was the focus of our recent podcast in which several of our LITs (Licensed Insolvency Trustees) shared their thoughts on dealing with student debt the right way.

Here are some of their tips and tricks for tackling your student debt load:

1. Make your debt a priority

As a new grad, you have a lot on your to-do list. From finding employment in your field to deciding where to live, it’s tempting to let your student debt slide on your list of priorities. As Craig Fryzuk from our Calgary office suggests, it’s a good idea to prioritize your debt as much as possible. At the very least, you’ll want to ensure that you’re paying the minimum amount each month as this is the time you’ll begin to build your credit history.

2. Create a plan to find debt relief

In order to create a plan that will work for you, you’ll need to first consider your circumstances. If you’re lucky enough to have the option to live with your parents or you’ve found a great job right away, you might be able to focus on aggressively paying down your debt now. If this isn’t the case, don’t worry! Remember that every little bit counts and your best bet is to create a plan that works well with your current budget and situation.

Personal finance expert Bridget Casey explains how to use “tiny cash windfalls” to pay off your debt.

3. Avoid adding to your debt load if you can

Although you may be focused on reducing your student debt, it’s also a good idea for new grads to be mindful when it comes to adding other types of debt to their current debt load. While something like a car loan might be unavoidable, consumer debt (especially high-interest credit card debt) is something you will definitely want to steer clear of. One of the easiest ways to avoid debt and stay on track with your spending is by using a budget.

Check out personal finance writer Stephen Weyman’s recommendations for budgeting and spending tracking apps in this blog on his website HowToSaveMoney.ca.

4. Know where to turn to for debt help

It’s not easy to deal with student debt. That’s why it’s important that you understand your options and the resources that are available in order to help you manage. Start with the government of Canada’s online resources. This website is a great option for helping you understand the repayment process. You can learn about ways to pay down your student debt more quickly and efficiently, and find out how to get relief if find yourself struggling to make your student loan payments.

How do you feel about your ability to deal with your student debt loans? Join the conversation and share your thoughts with us using the hashtags #StudentDebt and #Debt Solutions.

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With the extra costs of child care, day camp and travel, summer can be an expensive time of year for many families. Unfortunately, these extra expenses can sometimes lead to overspending and even adding more to your current debt load.

Given the fact that the average amount of consumer debt in Canada is already pretty high, not to mention the fact that interest rates are expected to increase again this year, it’s important that families in Peterborough try their best to steer clear of summertime debt. Here are a few tips that will help:

Make a plan

Now is a great time to consider the extra costs that you may encounter during the warmer months and make a plan that will help you manage these costs without increasing the amount of debt you owe.

A 2015 summer spending survey revealed that families spend a lot more in the summer — as much as 75 per cent more on groceries and more than twice as much on gas. There’s a good chance that a lot of families will try to rein in their summer spending this year — still, there’s no doubt that summer expenses can challenge the family budget.

Although you may already use a budget to plan your spending during the rest of year, it’s a good idea to create a special summer budget that accounts for the extra expenses that will likely come your way such as  child care and travel.

If you are travelling, Practical Money Skills Canada a has a great online travel budget calculator that can help you plan for your travel related expenses and avoid spending more than you can afford. You can check out this handy tool here.

Start saving now

In order to avoid and reduce summertime debt, it’s a good idea to start saving now in preparation. Although summer is almost here, cutting back in a few key areas now and putting that money aside might help lessen your summer spending burden.

For great ideas on how you can save a little extra, check out this article from the Simple Dollar.

Choose simple and low cost

One final way to avoid debt this summer is to keep it simple. Instead of an extravagant family vacation, opt for a campout in your backyard. It’s more than likely that the fun you will have be just as memorable.

As Anna from the personal finance blog And Then We Saved points out, free activities are also a great way to spend less and avoid adding to your consumer debt this summer. Luckily, there are tons of great free activities and events in and around Peterborough. Check out all the free things you can do with your family this summer by visiting the City of Peterborough website.

How do you plan to avoid debt this summer? Share your tips and tricks using the hashtags #Budgeting #DebtSolutions.

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How can my credit card debt affect my credit score?

TransUnion, a credit reporting agency, reports that only four in 10 Canadians understand the importance of making more than a minimum payment toward their debts. Our LITs make some excellent points in this podcast about what you may be doing to sabotage your credit score, and how you can fix it.

You’re using too much of your available credit. Your overall credit score is made up of five components:

1. Payment history
2. Debt load
3. Age of credit
4. Mix of credit (the types of credit you’re carrying)
5. Credit utilization, which is the amount you actually use on your credit card in proportion to your limit.

To maintain a good credit score, you should use 30 per cent or less of your available credit. For example, you may have a $5,000 credit limit, but if you only use $1,500 and pay it off every month, your score will not be impacted.

You’re only making minimum monthly payments. Having multiple credit cards near their maximum limit, even if you make minimum monthly payments, can lower your credit score. This can signal to lenders that you are a risky borrower and more likely to default on your loan. Look for ways to pay more then the minimum monthly payment to decrease your credit utilization. Use this tool to see how much credit you’re using.

Your payment history isn’t the best.  As stated above, those five main factors work together to provide your credit score, but the biggest factor is your payment history, which accounts for 35 per cent of your overall score. Canada’s credit reporting agencies, TransUnion and Equifax keep your records on file for up to seven years, which gives lenders an overview of your payment reliability. To improve your score over time, the best thing you can do is:

• Pay your bills on time and in full each month.
• Pay off your debts to free up more money. Use this debt repayment calculator to see your options.
• Create a budget and consider using a money management app com so each bill is accounted for.
• Find a way to earn more income.

Does missing a credit card payment immediately affect your credit score? Check out our podcast to more about credit reports and credit scores.

Join the conversation and look for more #FinLit and #CreditControl tips on Twitter.

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Save now to avoid debt

According to a poll we conducted last year, 20 per cent of Canadian families were planning to take on debt to pay for spring break. With Canadian household debt at $1.71 for each $1.00 of disposable income, taking on more consumer debt isn’t in the best interest of most families.

Spring break is a good time to open up to your kids about money and explain how you make decisions to purchase things or participate in activities all year round. Avoiding debt and discussing how to keep expenses down can benefit both your kids and your budget.

That’s why it’s a good time to get serious about your summer planning. With several months to save, your family could avoid taking on summer debt by starting to save now.

For young children, Sesame Street has a series of videos where Elmo introduces kids to money.

Talk With Our Kids About Money has a variety of articles, games, and activities that introduce kids and teens to concepts like saving, budgeting, and spending.

Practical Money Skills talks about budgeting, and offers financial literacy tools for kids, including games and comics.

Make summer planning a family activity

Planning for the fun of summer can give your kids something to look forward to all year.

Get the whole family involved in brainstorming ideas for summer activities. Then start pricing them out. Here are some common expenses to consider:

• cost of the activity itself (tickets, admission, etc.)
• Travel and lodging costs
• Clothing or gear (swim clothes, equipment, etc.)
• Food and drinks (packing as much as possible at home can decrease costs)
• Souvenirs or other on-site purchases

Once you’ve brainstormed activities and costs, start planning to see how much you’ll need to save each week or month to buy most things ahead of time and avoid debt. You can also let your child contribute a portion of their allowance or savings toward their activities, so they can see where their money goes.

Use The Financial Consumer Agency of Canada’s financial goal calculator.

Look for free activities

The easiest way to avoid debt is to avoid spending money. Most communities have calendars and lists of local activities, and some are free. Here’s a list of events for Peterborough and the Kawarthas.

Checking out different types of local activities can help expand your kids’ creative horizons and inspire their interests. It’s also an important financial literacy lesson—fun doesn’t have to cost much (or anything).

Focus on the benefits of saving

Budgeting can sometimes feel like a chore, and a sacrifice. But it doesn’t have to be. Teaching kids to focus on the benefits can instil good financial habits.

Make a commitment to sit down as a family every week or two, talk about your financial plan and see how your savings are growing. Show them that your ongoing commitment is getting you closer to your goal—the big reward of summer fun (and added bonus of no added debt).

Don’t forget to talk about the choices you’re making. Saving money doesn’t happen automatically because you write a plan. There will be times that you have to put something else off, but this can help teach your kids how to prioritize.

Choosing to cook at home, wash your own car instead of a car wash, giving kids hand-me-down clothes from siblings, or buying used hockey equipment are all choices that can benefit your budget and get you closer to your goal.

Each time you or your child makes a choice that helps the family budget, sit down together and show them how you can put those savings into your summer activity account. It can be exciting, and provide some more immediate gratification, rather than waiting until summer to reap the benefits of their hard work.

Using an app like Mint.com can help keep your budget and your progress at hand.

How are you planning for your summer vacation? Tell us on Twitter. #DebtSolutions #ParentingTips #KidsAndMoney

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Talk about your priorities

The majority of those surveyed in our poll said that they’d like to be able to change one or more of their partner’s habits–like overspending or not using a budget. However, as seen in this other poll, about 30 per cent of couples said they went over budget on their weddings. Before saying “I Do”, you may want to discuss financial goals and priorities with your future spouse in order to avoid any financial surprises or frustrations. Be clear with your partner as to what is most important to the both of you, and discuss and set a budget for your nuptials, and your future lives together.

Expect the unexpected

There are many surprises with wedding planning just like financially setting up your lives and the disappointments or challenges can be frustrating.

Make a commitment to sit down, go over your budget, and adjust your plan regularly to avoid surprises. Discuss with your partner what your goals are and how you plan to accomplish them. For example, if you’re planning a wedding, brainstorm alternatives that will help keep your wedding dream on track but help you avoid debt.

Read about Christine’s experience with wedding planning at The Wallet Diet financial blog. She and her partner kept a detailed budget and this may help you set your own goals as well.

Set the stage for the long term

It’s no secret that wedding planning is a stressful experience, full of jubilations and stress, both on a personal and financial level.

If you and your partner can commit to open financial communication about your goals and plans before the big day, you’ll have set the stage for your financial relationship.

The more you can talk about finances, the more likely you are to avoid debt and financial problems in the future.

Have you had THE debt talk with your future spouse yet? Tell us on Twitter. #DebtSolutions #LoveAndMoney #DebtConfessions

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