5 steps for getting your financial house in order this year

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Now that we are well into January, you’ve probably had many possible new year’s resolutions running through your head…lose weight, quit smoking, exercise more, spend more time with family…the list goes on. Where do you start?! My belief is that “getting my financial house in order” should be on, if not at the top of, most Canadian’s new year’s resolutions lists for 2017, and here is why.

As Canadians find themselves dealing with ever-increasing debt levels, a greater and greater portion of their monthly paycheck goes towards servicing this debt.  With grocery and gas bills on the rise, it’s predicted that the average Canadian family could spend $1,600 more in 2017 than 2016. So, now is the perfect time to review your financial health and set a plan for the coming days, weeks and months.


Step 1: Determine your personal net worth.

Review your current financial situation by creating a personal net worth statement. This should be done annually so you can see if you are gaining ground or not. List all your assets (e.g., home, car, investments) and give a realistic value for each. Then list all your debts (e.g.,mortgage, car loan, credit cards, lines of credit, etc.). File this away for next year so you can review your progress year over year

Step 2: Plan to pay down debt.

Review your list of debts from your personal net worth statement and create a debt reduction strategy.

Higher interest unsecured debt should be attacked first.
By reducing this debt first, you will free up more of your monthly income to be used to reduce other debt, or create savings. Paying down high interest, unsecured debt is a two-pronged approach:

  1. Stop (or limit) the future use of the unsecured debt.
  2. Pay more than the minimum the lender requires.

This seems simple in theory but can be difficult in practice because “life happens”. The budget you create should have some provision for unexpected expenses which can help with reducing the tendency to use the debt for such unexpected expenses.

Use cash on a go forward basis
Plastic (credit and debit cards) is very convenient and can lead to unanticipated or overspending. Leave the cards at home (in a safe place) to limit your access. Get receipts for everything you spend. Remember you are now using cash and without the receipts you have less ability to track where the cash went.

Step 3: Create a budget.

A budget is not a four letter word and it is not something to fear. A budget is merely a plan for how you want to spend your money. There is the old adage: If you fail to plan, you plan to fail. Nothing could be more true!  A budget is key to improving your financial health. If you already have a budget, pat yourself on the back. If you don’t, the beginning of the year is a good time.

The best way to create a budget is to review your spending patterns over the previous months because where your money has been going is probably a good indication of where it will go in the future.

  • As a starting point, look at your bank statements, credit card statements, etc.
  • It doesn’t matter what form your budget takes (pen and paper, Microsoft Excel, software, online), as long as it done in a method that you are comfortable using regularly.
  • It doesn’t matter what form your budget takes (pen and paper, Microsoft Excel, software, online), as long as it done in a method that you are comfortable using regularly.
  • Some resources to check out include the online budget calculator offered by the Federal Consumer Agency of Canada, and the budget tool and free mobile apps at Mint.com. Software for purchase such as Quicken can be useful, however, they come with a cost to purchase.
  • Look to online tutorials to help you create the best budget for your situation.
  • For your budget to be most effective and to be most successful achieving it, be sure to involve your spouse and your children (they will need to learn this as they get older) in the process .

Step 4: Create savings.

Pay yourself first.
Your budget should also have a monthly savings amount built into it. An effective way to do this is through payroll deduction. This way you aren’t tempted to dip into any savings you planned for at the end of the month.

Piggy bank_lavendarAutomatic Money Transfer
Another method of “forced” savings is to have your money automatically transferred from your checking account to your savings account according to your pay schedule. Start small and after a few months if you can handle slowly increase the amount. Out of sight is out of mind – over time you won’t even miss it!

Use a piggy bank
Collect your loose change. Loonies and Toonies can add up quite quickly!.

Step 5: Track spending.

An often overlooked step, you need to track your actual spending and compare it to your budgeted amounts. Review your budget at least monthly to see if your spending compares to your budget. If you find you are spending more in a category then the budgeted amount, you either need to increase the budgeted amount or decrease the amount you are spending.


Getting your financial house in order an important resolution. Create a plan and work towards achieving your plan. Don’t try to change everything overnight as you are more likely to give up and return to your old ways. If you find you are in over your head reach out to a professional such as a Licensed Insolvency Trustee for help.

RobM_HS
Rob McLernon is a Licensed Insolvency Trustee (LIT) and a Chartered Insolvency and Restructuring Professional (CIRP)  with our Nova Scotia Grant Thornton team. He’s been working primarily in the consumer insolvency area since 2003. In addition to being a LIT, he is a Certified Insolvency Administrator and Counsellor. Rob has extensive background knowledge on debt restructuring and brings this to his current role.

 

 

8 ideas for a fun & frugal festive season

christmas-cookies

The holiday season can be a time of friendship, laughter, and holiday cheer… and a time when you feel the expectation to spend a lot of money that you may not have. This is why it can be an especially difficult time for many people: the pressure to keep up with those around us, the fear of disappointing those we typically buy presents for, the stress of not being sure how you will afford food for the table let alone presents for under the tree.

Our debt solutions counselors at Grant Thornton Limited have shared some of their tips for trying to refocus this holiday season so you can make it more about enjoying the time with the people around you. Hopefully using some of these tips will help you feel refreshed in the New Year, as opposed to wondering how you will recover from the spends made in December.

  1. Talk to family / friends about the cost of gifts. Sit down and make decisions about a dollar limit for gifts. If money is tight then consider doing a secret Santa with the family. Remind everyone that thoughtfully chosen gifts are more important than expensive ones.
  2. Take advantage of the sales. Shop the sales throughout the year by making a “Christmas closet” that you can add items for people that you find throughout the year , or after Christmas and by discounted Christmas decorations. This is also useful if you have a drop in guest who brought you a gift and if you wanted to give them something in return.
  3. Have the kids make a list.  Ask them to pick 3 items that they want: 1. One that is a real want, 2. One that is a need, and 3. One that is a small / inexpensive.item.  Let them know that they will likely only get one item off of the list – this helps teach children that Christmas is about more than presents, they put real thought into what they want, and your pocket book gets to save by not buying them gifts they don’t really want or need.
  4. Cut out unnecessary items.  This could include ribbons, bows, and fancy tape. Use brown paper bags as a fun alternative with colorful marker to write the “To” and “From”.
  5. Sell old toys / clothing.  Find a local consignment store and get extra cash for new gifts.
  6. Do Christmas baking instead of gifts.  This helps cut costs, and has the added benefit of spending time with family to make the bake goods.
  7. Take advantage of the free events to get into the spirit. Santa Claus parade, craft fairs, outdoor concerts and tree lighting ceremonies are usually offered at no-charge.
  8. Hold a “Catch up Christmas”.  This one is great if you overspent last Christmas and your budget is super stretched. Consider not spending for one Christmas. Instead, focus on a nice family meal, taking in the Christmas parade, driving around seeing the Christmas lights, and really devoting your holiday to your family by giving your time. It enables you to spend quality time with your family and no one will be stressed because the focus is on time and making memories, not spending.

Other fun free activities include: a hot chocolate and Christmas movie night, ice skating at the river, or sliding in a park, take a drive around / walk around the neighborhood for Christmas lights. Center this Christmas on family activities instead of gifts and goodies.

We put a lot of pressure on ourselves to spend money at this time of year. Let’s try to take some steps to break that cycle, enabling us to end the year and start a new year with a fresh, positive, less stressful approach. Enjoy the loved ones in your life and the memories you can make rather than worrying about the debt we can incur.

If you have money-saving gift-ideas, we’d love to hear them.  If you are finding this holiday season particularly stressful because you feel your debt load is overwhelming, please reach out to us and let us present you with some options for your situation during a confidential, no obligation consultation.  Sometimes just knowing you have options can help relieve the stress you are feeling.

krististuart
Kristi Stuart is a  Licensed Insolvency Trustee (LIT) on the New Brunswick Grant Thornton team. In becoming a trustee, she won the 2015 Jack Biddell Gold Medal for finishing the Canadian Association of Insolvency and Restructuring Professional’s 2015 National Insolvency Exams with the highest standing in the country.

 

 

 

Black Friday & Cyber Monday: How to get past the hype and shop smart

pexels-photo-230544_72Door crasher deals. Limited quantities available. Lowest prices of the year – 4 days only!

With the holidays right around the corner and discounted deals constantly advertised to you, Black Friday and Cyber Monday is a time when you can get wrapped up in spending. Online shopping has become more prevalent and more convenient than ever before but can quickly send you into a spiral of debt if you’re not careful.

There is a psychology behind all the advertising and promotions surrounding Black Friday and Cyber Monday. It’s important to be aware that retail “events” like these are really just marketing tactics meant to over-hype discounts and deals that could promote and result in overspending. The advertising feeds on our emotions and plays into the fear many of us have of missing out on something big. There is a lot of buzz and excitement created as marketers aim to whip shoppers into a frenzy by putting high demand items on at seemingly deeply discounted prices — available only for a short period of time.

If you aren’t careful, you will end up buying more than you had intended – and spending more than you have by using credit and buying impulsively. If you are planning to participate in big retail days like Black Friday/Cyber Monday, be smart about it.

Tips for Smart Shopping

  • Don’t shop because you fear “missing out on something big”. The reality is that deals or discounts come in waves and will be available at multiple times throughout the year. Do the math to determine if it’s really a “deal” not to be missed.
  • Give yourself a financial reality check before shopping. It’s important for you to quickly pull out a statement of your largest debt (credit card or loan statement) to see the dollar amount owing on that account. You need to think about how you will feel tomorrow if you add on more debt today. Decide if it’s worth it.
  • Make a list. With discounts available on so many products, it can be easy to lose track of what you are looking for and make impulse purchases you will regret later. Making a list of exactly what is needed allows you to be in control of where your money is going.
  • Set a budget and stick to it. In addition to planning which items are on your list, set a strict budget of how much you are able and willing to spend. As you are shopping, keep a tab of how much you are spending and cut yourself off once you reach that limit. Despite the discounts being offered, some items may simply be beyond a reasonable budget.
  • Be aware that online shopping can result in overspending. These days, people don’t have to leave their homes to participate in Black Friday/Cyber Monday shopping. The problems with the ease of shopping via your home computer or cell phone is that you will likely use a credit card for the purchase and you’ll end up purchasing multiple items within a short time frame since it’s very easy to submit a payment and move on to the next item.
  • Is it really a “deal” if I buy it on credit? If you buy that great deal on credit, are paying only the minimum monthly payments on your credit card balance and it takes you more than 6 months to pay off your purchases, your overall cost with interest will end up voiding any original deal or discount you are getting.

Overall, just be honest with yourself about your financial situation. With the weakened economy and the unfavorable US exchange rate, many consumers do not have the financial means to participate in holiday shopping. If you are living pay cheque to pay cheque, assess if holiday shopping is a smart financial decision or if there are more economical gift options you can explore, like giving the gift of your time or making home-made gifts.

Do you have some great tips you use to avoid overspending? We’d love to hear them.

I’ve overspent! Now what?!

If you’ve already shopped and fear you overspent, don’t remove the tags. Leave the items in the bag and look at them the next day to decide if you still feel the same excitement. You might discover that an item in the bag was more a want than a need and you can still return it.

What are some warning signs that you are spending more than you should?
• You’ve maxed out your credit card (and are already only making the minimum payments).
• You feel guilty about your purchases – knowing you’ve bought ‘wants’ and not ‘needs’.
• You’re regularly spending more than you make.
• You’re dipping into your savings.

If you recognize some of these warning signs and are feeling the pressure of carrying an overwhelming amount of consumer debt, book a free consultation with one of our Licensed Insolvency Trustees. They can look at your personal financial situation during a confidential, no obligation meeting and make recommendations on what options are available to you.

freida_hs
Freida Richer is a Licensed Insolvency Trustee with our Edmonton, Alberta practice. You can watch her Money Smarts segment on the third Monday of every month on Global Morning News Edmonton.

 

 

How much is it really costing you? Credit cards and smart shopping.

When was the last time you put a purchase on your credit card? For most people making purchases on their credit cards is a daily, if not weekly, occurrence. So when was the last time you looked at the interest rate on your credit card? Or calculated how long it would take for you to pay off that purchase?

We often ask what makes a person choose when to call a Trustee for help with their debt. As Angela Lock, CIRP a Trustee in our Calgary office mentioned, “People tell me they are seeing these notes on their credit card statements of how long it will take them to pay the balance, and for most its shocking”.

Can you imagine buying an iPhone and having it take 2 years to pay it off? Assuming you put this purchase on your credit card, at 17% interest, that $859.00 iPhone would cost you an additional $300.

Most of us don’t think of these things when we are making purchases. Here are some tips to help keep you paying less in interest fees and keeping more in your pocket:

  • Do your homework. Find the best possible deals and make a list of the items you intend to purchase. Don’t purchase anything outside of this list.
  • Determine your budget before embarking on a shopping trip. Once you spend your budgeted amount, do not purchase anything else.
  • Whenever possible, spend using debit or cash – or if shopping online, set up a PayPal account where offered and make purchases using that instead of your credit card.

We have become a generation less accustomed to making purchases with cash and feeling the transaction of money leaving our hands, we have become reliant on the ease of ‘paying with plastic’ so being aware of our finances can get away from our immediate attention.

Putting off dealing with debt – missing payments, living paycheck to paycheck, transferring money around to deal with debts – can lead the problem to get worse and worse and get out of control. Taking the first step to seek out help can be the hardest step towards a fresh financial start. But by calling a licensed trustee you can get free financial advice or help with filing a consumer proposal which can reduce consumer debt by up to 75 percent.

Contact us to talk to a Trustee in Canada.

Visit us online:

AB: www.GT.Alger.ca                   
BC: www.GTdebt.ca   
ON: www.ThunderBayBankruptcy.com
NS: www.wedlakeinc.com