Are you broke? Are you seeing red? What should you do when your spending exceeds your income?
Recent reports say that 24% of Canadians say they have eliminated their non-mortgage debt in 2013, and among Canadians who still have personal debt, the average has jumped to $16,000- up $3,000 from 2012. So before you resolve yourself to debt defeat, know that you are not alone and there is a way out.
1) Monetary snapshot:
Make a list of everything coming in and everything going out. You cannot assess the situation until you take a snapshot of where you are right now. Track and write down everything you have spent. Use exact numbers – look at your bank statements, credit cards and find out where your money is going. If you use cash, track that too! You need to see what you are indulging in, what you can cut and what are fixed costs.
2) Create a budget:
Divide all your weekly and monthly costs into fixed costs (shelter, utilities, food, etc.) and into ‘wants’ based expenditures. Are you spending excessive amounts of coffee, dinners out, clothing? If so, you will be able to see the bottom line for yourself. You need to divide your expenses into wants and needs. Remember that needs are things you NEED to survive, we’re not talking about hair highlights or a brand new purse. It’s about sorting out your
3) Change your spending habits:
Now that you have a better idea of how much money you are spending it’s time to work out a system. Reduce your expenses, increase your income or do both. Depending on what you’re spending on, there are lots of ways to spend less. For example- skip the latte, cut down on eating out, save on transportation when you can, and budget a line item for saving!
4) Make more money:
Look to earning more money to help even the scales. Think about all the things you can do to line your pockets with some cash to pay down your debts. There are seasonal jobs, freelance work, and weekend gigs that you can do to earn a few dollars here and there. Just remember that everything ads up. Even if it seems like $100 won’t get you far, you should never under estimate how quickly things add up.
5) Get professional help:
If things are really bad, it’s time to ask for help. Seek professional help and ask trained financial planners to help you explore options. Professionals are often accredited by the Council on Accreditation and affiliated with the National Foundation for Credit Counseling.
No matter how bad your debt is, remember that you cannot improve the situation until you address the issues at hand. If you are unable to solve the problem on your own, seek outside help and do it right now.