Personal Debt: How to Reduce the Affordability RoadblockOct 23, 2018
Is your personal debt standing in the way of your ability to afford the day-to-day necessities?
Our inaugural Affordability Index suggests that debt can be a real factor in the affordability of everyday life for a significant number of people in Canada. An alarming three-in-10 Canadians don’t have enough money for their basic needs, and one-in-four are so overwhelmed by their debt they don’t know what to do.
According to Index results, women and millennials are especially affected by lack of affordability. Gen Xers are also affected. And so are Canadians with children. One or all of these groups not only struggle to cover basic costs, they find it difficult to buy a home, cover unexpected costs, pay off credit card debt and/or prepare for retirement.
If your personal debt has become a major roadblock, there are steps can you take to begin making your way around it.
Work on solutions that work with what you have
Many people might say that life would be more affordable if they only made more money. If you’re able to take a second job or earn extra income by freelancing, that’s a great option. It will certainly help you reduce your debt. But that’s not always possible. If you cannot increase your income, focus your efforts on reducing your debt.
Build your budget around the money you know you have coming in each month. If you realize that the amount you’re spending is greater than what’s coming in, there’s a problem. Figure out what’s pushing your budget over the threshold.
If you’re going over budget just to meet your basic needs, there may be other issues you need to address. Are monthly debt payments eating up a significant chunk of your budget, making it difficult to afford the day-to-day essentials? If this is your situation, than it’s time to ask for help as soon as possible.
Where can you turn to for debt help?
A Licensed Insolvency Trustee (LIT) is a good first step when you’re seeking help with your debt. An LIT will explain the full range of debt relief options including a consumer proposal or bankruptcy. If you do not need to file a consumer proposal or bankruptcy, an LIT will refer you to another financial professional, such as a non-profit credit counsellor or a bank lender.
If you are more comfortable doing some research on your own before you speak to an LIT, the internet is a great source for learning more about managing debt, credit counsellors, formal debt solutions and Licensed Insolvency Trustees. Continue to build your financial knowledge by accessing more resources and articles. Increasing your knowledge will help when it’s time to make important financial decisions.
Breaking down the roadblocks to affordability starts with what you can control, and the biggest one to tackle may be your personal debt. Paying down your debt — or paying it off altogether — can increase your ability to afford your basic necessities today and the major life events still ahead of you.