Credit Canada

By Laurie Campbell
Executive Director, Credit Canada

TORONTO - January is cold. The days are short and for many, the mail box is an object of fear as bills begin to pile up. 

Too many people find this time of year financially crippling after an intense spending spree in December. This holiday season has no reason to be an exception. Canadians have never been in higher debt. They have been digging deep into their pockets or stretching their credit lines to the limit – and they’ve been blowing their budgets big time.

Unfortunately, too many associate what they spend on presents with how much they value the person who will receive the gift. The givers let emotion, rather than reason, dictate their actions. The result is wild overspending, followed by pangs of worry and guilt as the New Year brings new dread about how all the bills are going to get paid.

All is not lost, however. Here are some hopefully heartwarming words of advice for a cold season of debt.

You can still look forward to a financially successful year if you take the time to analyze your financial situation and take serious steps to remedy the problems. It just comes down to putting together a pragmatic plan of action. 

It means sitting down with yourself and others -- a spouse, a partner, a family member, or maybe even a credit counsellor -- to review your debt situation realistically. By being honest and thorough about personal or household income, and all the expenses that must be covered by that income, you can rise from the mire of debt.

A few guidelines can help you along the way:

First, consider the obligations you absolutely must meet, such as your rent or your mortgage. Look at your expenses in the light of non-essentials, like a morning café latte at the corner coffee shop, or any one of a number of other small purchases.

Also, keep your eye out for impulse buying, those spontaneous and often frivolous little purchases of things like gossip tabloids, sweets, and what have you that seem to come out of nowhere.

Of course, what may be considered a non-essential purchase to some may be seen as an absolute must-have item to others. Maybe that morning café latte could mean the difference between a good day or a bad day at work. In which case, take a very close look at all your options for cutting back on luxuries, as well as options for others in your life who affect your household budget.

Every little non-essential purchase and luxury you cut back on helps. And you may be surprised by how all these little economizing measures can add up, creating funds you can redirect to paying down debt. 

Second, it is important to look at the type of debt you have and the interest being charged. Ideally, you want to abolish your highest interest debt as fast as possible because it will save you more money in the long run. However, you must continue to pay at least your minimum payment on all other debt obligations. 

Third, if you possess several different credit cards, ask yourself why. Once paid off, try limiting your number of cards to one or two at the very most.

Many people convince themselves that they need several cards for points, different stores etc. That is simply not true. An all-purpose card should do the trick. Again, think rationally. The benefits of additional credit cards – points, specialty items etc. – often are not worth the extra interest you pay.

Fourth, once out of debt, look at strategies to avoid it in the future. This means serious planning, serious goal setting and making sure you are prepared well ahead of time for events that you know are going to occur such as Christmas. 

With a little self-awareness and self-discipline, you can ensure that you are well ahead of the game.

The New Year should be a time of opportunity, new beginnings and resolutions.  Being in debt -- no matter how you look at it -- is just a big drag.  By working hard to resolve debt issues once and for all, you can look forward to enjoying every New Year.

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Credit Canada is a non-profit, charitable organization that provides credit counselling and education programs to financially troubled individuals. The agency has been serving the community for more than 40 years and is an accredited member of the Ontario Association of Credit Counselling Services and a member of Credit Counselling Canada.

To schedule an appointment or to speak to a counsellor, please contact Credit Canada at
416-228-3328 or 1-800-267-2272.  Also, visit www.creditcanada.com for free online assessments.

CONTACT:

Laurie Campbell
Executive Director
Credit Canada
416 228 2526
lcampbell@creditcanada.com