Solving your debt is an important endeavour that everyone who has debt should undertake. Being debt free can provide for peace of mind, healthy relationships and an enjoyable quality of life.
How Much Debt Is Too Much Debt?
This question is a question of relevancy. How much debt is too much really depends on your circumstances. For some people, $10,000 is too much to handle, while other people are able to manage $60,000. Your circumstances will play a big role in determining your ability to repay debt. Things like: the number of people that live in the household; the number of people in the household earning income; child or spousal support obligations being paid by a member of the household; if a member of the household is supposed to be receiving spousal or child support but the payer of the obligation isn’t meeting their obligations; costly medical/health issues; or even consistency of employment (seasonal worker, someone who counts on overtime). These are just some of the circumstances that can help determine someone’s ability to pay their debt.
Regardless of your circumstances, if you find that you are struggling to pay your bills on time, not setting aside 5-10% of your income into savings and find that there isn’t enough money for you to do the things that you enjoy, you probably have too much debt or need to find a way to increase your income.
Take Control of Solving Your Debt Plan
Your first consideration towards solving your debt should be: Can you improve your situation with better budgeting? You need to understand where you spend your money; why you spend the money that you do; and how much are you actually spending!
Where Are You Spending Your Money?
If you find that you are always short on cash and tend to frequent coffee shops and fast-food joints, you really should consider some changes. Wake up ten minutes earlier and brew some coffee at home and pour it into a travel mug or thermos. Skip the fast food (your body will thank you later) and plan a nice home cooked meal. Got too much on the go like taking kids to their extra curricular activities? Cook more food the night before so that you can have leftovers and still get kids where they need to be.
Why Are You Spending Money?
Outside of providing for your family and the occasional activity to keep life interesting, you should ask yourself why, at any particular moment, are you spending your money. Are you staying within your budget and buying something that fits into the ‘need’ category or are you buying something that fits into the ‘want but can’t really afford’ category? Also, for some people, shopping can be therapeutic, which can actually be disastrous for trying to stay within your budget. Make sure you are aware of your emotional state of mind before going on a shopping spree.
Do You Know How Much You Are Spending?
It is important to keep track of how you are spending your money, especially if you are struggling to keep up with the bill collectors. Keeping track of how much you spend on various types of purchases can help you identify what you need to cut back in order to have a good budget and continue making payments to your creditors.
When Your Budget Is Great But You Are Still Not Solving Your Debt!
Okay, so you have mastered the art of budgeting but you still need help with solving your debt. It is time to start looking at alternatives to dealing with your debt. You may have to consider the following: consolidation, taping into house equity, non-profit credit counselling or seeing a Licensed Insolvency Trustee
Consolidate Your Debt
It doesn’t hurt to talk to your bank. If your debt load is low and your credit score is still pretty good, the bank may be able to help out. Sometimes just reducing the number of creditors that you have to pay is enough.
Non-profit Credit Counselling
We attached a link for non-profit credit counselling in southwest Ontario (above). With the help of one of these agencies, you may be able to refine your budget even more or get help with paying your creditors. They have a program which is called a Debt Management Program (DMP). The idea is that they have the creditors reduce their interest rates, stop collection activity and in return you make monthly payments to the credit counselor until your debt is paid in full. It is a voluntary program which means creditors can elect to not participate however, if they do agree to the DMP you will be able to pay your debt off. The program is ideal for people with low debt loads or with the ability to make high payments. For example, if you owe $12,000, you might expect to pay ($12,000/60 months) $200 a month plus 10% fee ($20) to the counselling agency.
Licensed Insolvency Trustee
When all else fails, there is still hope. A Licensed Insolvency Trustee (LIT) is the only person that can accept engagements under the Bankruptcy and Insolvency Act (BIA). With the BIA at the LIT’s disposal, a person who is struggling with their debt can get the relief that they need and have you solving your debt problem. This can come in the form of a proposal or bankruptcy.
Contact us to Learn More About Solving Your Debt.
You can find out more by contacting us. You can email me at firstname.lastname@example.org, call our office at 519-601-9793 or you can check out our website at http://www.jcampbellandassociates.ca