Are you tired of always being in the hole? To be constantly looking for sufficient funds to make ends meet or to be constantly harassed by unhappy creditors? You may be victims of unfortunate circumstances that condemn you to these financial difficulties, but experience indicates that financial mismanagement is often the source of such problems.
Uncontrolled spending, poor credit management, or simply lack of financial planning can all be the cause of financial trouble. Whatever the reasons, the important thing is to find a solution to put an end to such debt and establish strategies that will ensure your financial security in the long run. Here are our 13 pro tips to get your wallet back on your feet and prevent the worst from happening – bankruptcy!
Put a financial plan in place!
It’s far too easy to get caught in the trap of squandering your pay check every two weeks without putting a dime aside. When money comes quickly, it often comes out just as fast! This is what a personal financial plan seeks to avoid! By establishing a short, medium and long term investment method, you are sure that all your needs will be met not only today, but also when your situation evolves.
For example, by meeting with a financial planner, he or she will be able to put together a plan that will grow your assets while putting a stop to your excessive expenses. It will make you think long term and will advise you on the best way to clear all those debts lying around.
A financial plan can be used to pay debts, but it can also help with the completion of several projects, such as your retirement or the education of your children. These projects are all the more difficult to accomplish if you are buried in debt.
Respect this same plan!
Unfortunately, it is not enough to have good intentions and to set up a financial plan, but it must be respected! It is here that you will have to do your will by implementing the mechanisms you have given yourself or that a financial planner has put in place for you because even the best of plans is worthless without proper execution.
This is all the more important if your debt is large and requires an honest effort on your part to get rid of it. Failure to comply with your financial plan will delay repayment and even worsen your situation in many cases.
Keep an inventory of your credit
If you’re in hot water financially, it’s probably because you owe money to more than one person. That’s why it’s important to keep an inventory of the debts you have incurred, especially those that are on credit and high interest.
Without a clear inventory of your credit, you risk losing control of your finances, forgetting to pay bills and thus making your situation worse.
Your method does not have to be complicated or even detailed, just find an effective way that suits you to keep a list of everything you need.
Sell property to pay your creditors
It can be painful to dispose of some valuable property to another person simply to pay off debts, but be aware that this option is always better than having the trustee seize the same property during a bankruptcy! Indeed, before thinking about setting up a debt settlement mechanism such as a consolidation or a consumer proposal, consider leaving luxury goods or that you do not need!
By paying your creditors instead of negotiating an agreement or reduction with them, you are saving your credit report from the negative impacts that debt settlement can incur. For example, the consumer proposal negatively affects your borrowing capacity and will be displayed in your file. However, the payment of your debts following the sale of your property leaves no trace!
Establish the priority debts
All your debts are not as urgent as each other! Even if the ultimate goal is to get rid of all your debts, the starting point is to put in place a repayment strategy that identifies which debts should leave first or how you decide to pay them.
Which of your auto, credit card, line of credit or student loan loans charge the highest interest rate? The answer to this question will certainly dictate the order of repayment of your debts. For example, student loans are generally granted at low interest rates, while your credit card is not as generous.
It is therefore advisable to pay high interest rate debts first in order to pay less in the long run because of the accumulation, although it is also ideal to make the minimum payment on all your debts, small and fat.
However, these are tips that apply generally. Your personal circumstances may require a different approach, such as paying the smallest debts first. It depends essentially on the extent of your debt and the strategy adopted by you or your planner. However, this strategy carries the risk of paying more interest, but you will still have the advantage of getting rid of some of your debts completely.
Opt for authorized payments
When the option comes your way, opt for automatic payment methods. This will prevent you from having to ask yourself each month whether you should pay a particular bill because the payment will be made on its own.
Automatic or pre-authorized payment options are available in the vast majority of financial institutions and allow you to transfer funds to a creditor automatically. In addition, this avenue is available for free or low cost in most financial institutions, so there is no excuse not to use it.
Automatic payments are especially advantageous for paying credit card bills, as this is where ordinary mortals accumulate the majority of their debts. By automating payments on your Visa or MasterCard, you avoid the high interest rates that accompany the non-payment of your balance.
Be wary of interest rates
When you decide to borrow on credit, even in a debt situation, beware of the interest rate attached to the loan. Make sure you have no option but to take out such a loan and if so, check that the rate is in line with market standards and is not abusive.
It is not because you are indebted that you must accept any loan conditions. This is especially true, among other things, when a debt consolidation. The idea behind such a strategy is to benefit from a favorable interest rate, but this is not always the case, so it is important to shop around and find out from financial professionals!
Plan an emergency fund!
Easier to say than to say, and you’re right! But that’s no reason to ignore this proven strategy. In fact, an emergency fund will help you get rid of your debts if an unforeseen event disturbs your financial stability. This strategy is all the more relevant if you hold risky stocks that are highly affected by market fluctuations.
Creating a fund avoids the use of lines of credit and interest rates that accompany credit in general. These options only perpetuate the repayment of your debts, while a short-term, liquid emergency fund will prevent you from falling into such a vicious circle. The amount can be placed in savings accounts such as a TFSA or any other stable investment vehicle. We would not want to see the emergency fund disappear even before we need it!
Increase your income
This may seem obvious, but an effective method of getting yourself out of debt is to increase your income. This is certainly not the easiest, because you will have to put extra effort, but in front of the accumulating debts at high speed, you will have no other choice but to face the music.
To make more money, you can find a second job or volunteer to work overtime at work you already have. If you live in an apartment, it might be beneficial for your wallet to think about taking a roommate to lower housing costs.
Even better, if you own a house and have too many rooms, consider renting them! Students coming from outside are always looking for low-priced rooms to stay in while studying, so why not take advantage of them?
It is also possible, by consulting a financial planner, to rethink your investment strategy to ensure that the return is optimal and that you do not miss opportunities to make money. In any case, consulting a financial planner is also a good first step to find the best way to increase your income according to your personal situation.
Consolidate your debts
At a certain point, your over-indebtedness might seem insurmountable and chaotic. The list of dissatisfied creditors is growing, the debt is growing at the rate of high interest rates and the hope of one day being freed from this burden evaporating quietly. To avoid such a scenario and accelerate the repayment of your debts, consider consolidating them!
Debt consolidation is the method by which you get a loan from a financial institution to pay your creditors. A payment plan will be put in place on a monthly basis and you will only have to pay the bank as a single creditor instead of the many creditors you were trying to pay off. This has the advantage of paying your debts at an interest rate that will be set by the bank and much lower than the debt you currently have.
In addition, by consolidating your debts, you avoid a lot of damage to your file and your credit rating, which is negatively affected by the payments you make late each month. The important thing is to respect the agreement put in place by the bank, otherwise the benefits of debt consolidation may go up in smoke!
Make a consumer proposal
If you’re going to make a consumer proposal, it’s because the bankruptcy process is beginning to be felt more and more. To avoid this disaster, the consumer proposal may be the option of choice. It consists of presenting an offer of payment to your creditors in order to reduce the amount to be refunded or to extend the payment period. You can submit an offer at any repayment percentage and it will be up to your creditors to accept or reject this offer.
By taking advantage of the consumer proposal, you avoid having to face bankruptcy and have you seize your property to pay your creditors. In addition, your credit rating will not fall as low with a consumer proposal as in the case of a bankruptcy, which will help you get back on track and get you out of debt faster.
The payment period of a consumer proposal is for a maximum of 5 years, which establishes a fixed term to your repayment period and sends the process of repayment of your debts. If your proposal is rejected by your creditors, you will still have the option to submit a new one on different terms, but in the event that no agreement is reached, bankruptcy will become almost inevitable if your situation is serious. .
Make a budget!
It is said that the best defense is attack! The man who said such a maxim must know how to manage his wallet, because the same thing applies to the management of your finances! We must not wait to be in debt to the neck to put a plan in place, we must take the lead.
Budgeting also means taking into account the size of your income in relation to the money you owe and setting up a payment plan before you have no choice but to resort to to debt consolidation or the consumer proposal.
Stop making the same mistakes!
This is where you get a bit of morals and show you all our wisdom grandfather! Whether you are dealing with the best financial recovery experts in Quebec, or you manage to consolidate your debts at a favorable rate, it does not matter if you keep repeating the same mistakes.
Stop using credit to pay for things you can not afford with the funds in your account. This will avoid putting up an invoice that you are not able to pay every month. This is all the more true if you are the type to make only the minimum monthly payment and you let the interest rates take hold of you.
Unless there are uncontrollable circumstances, indebtedness is mainly due to bad buying and consuming habits, such as a lifestyle that is excessive in relation to perceived income. The only solution for such a situation is to put in place a financial discipline, and what better than to hire experts to put you back on track?