How to Prepare for the end of Debt Holiday

The pandemic made it tough for thousands of Canadians to keep up with their bills, especially the high-interest consumer debt. A debt holiday was put in place on consumer debt and mortgages helping Canadians handle the daily cost of living without worrying about excessive debts.

Now that the country and even the world are coming back together and things are opening up, the debt holiday is nearing its ends. This means many bills will be due again – but how do you prepare for such a change in your finances?

Check out the tips below.

Negotiate a Payment Plan

Before your deferment plans end, contact your creditors. Don’t wait until the plan expires and then try to work something out. At that point it’s too late, your payments will be due and if you don’t pay them, it will hurt your credit.

Call your creditors long before it ends and ask about your options. Let them know your financial situation, whether you’re furloughed, not working, or working but trying to catch up. Most creditors will work with you, helping you figure out an affordable plan. Creditors would rather make a plan and receive the full payment than put you at risk of defaulting altogether.

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Stores are Open – Reign in your Spending

Life is trying to get back to normal. As the COVID-19 numbers drop, more retail stores are reopening, which is a great sign for our economy, but may not be as good for your pocketbook. Try to avoid getting caught up in the excitement of things getting back to ‘normal,’ and be mindful of your spending.

Before you shop, ask yourself the following questions.

Is this an Impulse Buy?

Are you shopping with a list? If you are, is the item you’re holding or that you ‘need to buy’ on your list? If not, it’s an impulse buy. Even if you don’t have a list, but you look at things you don’t need or didn’t intend to buy; it’s an impulse buy.

Rather than buying without thinking, give yourself 48 hours. Leave the store or close your web browser without buying the product. After 48 hours, if you’re still thinking about the item, maybe it’s something worth buying. Chances are though, if it was an impulse buy, you won’t even think about it again.

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Financial Literacy; It’s Never Too Early To Learn

With increasing debt loads affecting youth, and unemployment rates double the national average, understanding how money and credit ratings work is paramount and a part of their educational needs.

kids_money_little_girl_piggy_bankStarting with their allowance, children can learn about how to manage their finances. The key is thinking about how much money you have and where you want to spend it. Children and adults alike are often driven by impulse and don’t think before acting. An environment where youth are responsible for identifying only their wants and not their essential needs is a dangerous precedent that can affect them throughout their lives. It’s simply too easy to spend freely and then find out you don’t have enough left, forcing you into debt.

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Tell Your Money Where to Go

Most people avoid developing a spending plan. It’s just no fun hearing the same things over and over – “be frugal, be thrifty, save every penny you can for a rainy day.”

Unfortunately, failure to develop a spending plan usually results in our money waving goodbye every payday, and when bumps in the road occur and they will, (life being, well, life) you find yourself with very difficult financial challenges.

There’s got to be a happy medium – something between the regimented, enforced frugality that is so often presented as the solution to your life’s financial future and the carefree spending that’s going to land you in trouble. Taking control means that you take back full control and “tell your money where to go”!! No more letting it simply wave good-bye!

Save Money with a budget planEnter the Save-to-Spend concept, a system of budgeting that will have you future-proofing your money, while still allowing you to achieve the things you want, and even giving you some “mad money” for the things you didn’t know you wanted. It is really all about pre-planning by putting your short, medium and long term goals on paper. Once you have them, put down what the costs are for each of them. Then prioritize them and determine the length of time it will take you to save for each of them. A simple example is buying a new big screen television. If the cost is $1200 and you want to have it in one year, start putting $100 away each month for it. This is far different then the buy now pay later program where you forget to pay off the interest free loan and end up paying 30% interest back to the day it was delivered. This is an example of a change from that path of instant gratification to one of delayed gratification!

The concept goes one step further and includes the most important part of any plan and that is building your emergency savings account. These are just a few simple examples of a very old concept that we need to return to.

Of course, you can’t make money from nothing, so there are going to be some sacrifices. They will, however, seem unimportant as you quickly see your bank balances grow with all the individual financial goals you have set.

Just remember you need to keep happy while you work within your Save-to-Spend plan! Like dieting, if you tell yourself you can never enjoy one of the foods you love, you’ll likely cheat. If you allow yourself the occasional treat, you’ll be happier overall and are more likely to get the result you want. Save-to-Spend has been proven to be effective.

If you have questions about Save-to-Spend, budgeting, or any other topic related to debt or personal finance, contact Creditaid anytime online or by telephone at (204) 987-6890.

Has Society Become Desensitized to Spending?

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Good question. Certainly, not everyone has, but spiraling levels of consumer debt have risen to record levels, indicating that Canadians are spending more money that they don’t have at an alarming rate.

Statistics Canada has released figures for the third quarter of 2014 indicating that Canadian household total credit-market debt, which consists of mortgages, consumer credit (mostly credit cards) and non-mortgage loans rose to 162.6 percent of disposable income. The Bank of Canada has stated that “high consumer debt loads and imbalances in the housing market” are a concern.

In short, people are using credit more today than ever before.

Two generations ago, very few people used credit. Society was based on a “cash on the barrelhead” philosophy that encouraged living within one’s means. This standpoint has been slowly eroded by rising home ownership costs (it is virtually impossible to purchase a home without a mortgage, and the length of time that the average family spends paying for their home gets steadily longer), the availability of consumer credit, and the replacement of “hard” currency with cheques, credit cards, and digital wallets.

It’s easier to access credit today than ever before, and advertising inundates us with constant messages promoting consumption of high-value items, usually on payments. It’s no wonder that people wind up in trouble with credit cards, loans, and lines of credit.

Creditaid exists to help people who have used credit improperly, or have been faced with unforeseen circumstances, and are having trouble dealing with their debt. We offer a free initial credit counselling review with professionals who can advise you on how to best manage and repay your debts. We’ll work with you in a judgment-free manner to develop solutions for your specific situation. We have a number of tools available to help you deal with your creditors, including debt consolidation and debt management solutions. If you’re feeling the pressure of collections, call Creditaid for help today.

Paper or Plastic or Cloud? The Evolving Concept of Money

dollar-signYou need only to look at the recent demise of the penny, or see the “wave your card here” payment option at the supermarket to know that the way that we think of and use money is changing.

In ancient times, humans would barter objects or labour directly. A farmer might give his neighbour two chickens in exchange for a bag of flour, or might help build a fence and be rewarded with a sack of carrots.

At its core level, money is a substitute for human labour or resources, traded to someone in exchange for “payment”. This payment can then be used to obtain the things you need or want from a third party, not related to the first.

In the past we used gold and other precious metals to represent the value of our labour and goods, but switched to a system of currency consisting of minted coins and printed paper. In the 20th century, cheques and bank drafts simplified purchasing, and in the 1950s, credit cards were invented, to allow us to access money we hadn’t yet earned, in exchange for a “borrowing fee”.

Today, money exists in a number of forms. We still have “hard currency”, or cash, but its use is on the decline. The digital revolution has brought us more options. As more and more purchases are being made at a distance, instant transfer of money via credit cards and money transfer services have become part of the landscape.

At the end of the day, no matter how you spend your money, simple rules of budgeting must apply to keep your finances in balance. With so many ways to spend money that don’t involve any kind of currency, it’s easy to forget to budget. This is one of the ways that people wind up in financial trouble.

If you find your credit card and loan payments are making it hard to budget your money, contact Creditaid for a confidential assessment of your financial situation. We have tools that can help!

Boomer Exodus Interrupted

The topic in this great article by Barbara Bowes is something that is sure to have already affected many lives, with many more affected parties to come!

What are your thoughts, do you anticipate the opportunities, or dread the skills gap that’s sure to result?

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No matter your stage in life, it’s important to keep the stats in mind: many are living from pay cheque to pay cheque now, when they could be taking action and planning accurately to avoid having to work through the retirement years.

Is it time for you to take action?