Credit Canada

As the economy teeters and career insecurity mounts, personal financial management has become a key survival skill.

"Scary rumours are making the rounds at work and it's keeping me awake at night," a 30-something technician confided recently. "I live paycheque to paycheque and my credit cards are maxed out. If I lose this job I'm in big trouble."

Despite perceived bragging rights about being better financial managers than our American neighbours, the average household debt in Canada last year was more than $90,000, according to a report from the Vanier Institute of the Family. At the same time, annual savings of disposable income shrank to 3 per cent from 13 per cent in 1990.

"We've done a poor job of managing our money," says Laurie Campbell, executive director of Credit Canada, a not-for-profit counselling service (creditcanada.com). "Debt loads have never been higher, saving rates have never been lower."

"I'm not talking about the working poor," Campbell says. "They're struggling and for good reason. I'm talking about average middle-income earners who have gotten themselves into debt trying to keep up with the Joneses, buying in a frenzy, telling themselves that they work hard and their stress levels are up, so they deserve all these new things."
The current economic meltdown is a wake-up call, she says. "The bubble had to burst. The debt loads that we've been carrying have not been sustainable."

People just one paycheque away from financial calamity are living on the edge, Campbell says. Before falling over, they need to step back and take a serious look at how their money is being spent.

What's sorely needed, in her view, is greater financial literacy.
 
Itemize your current income, assets, expenses and debt to get a snapshot of your current financial situation Create a budget and live within it.

Look for immediate solutions to lighten the load. "Find ways to curb your expenses," Campbell suggests. "Sell a home you can't afford or park your car and take public transit."

Start paying down debt. "Credit-card debt is enemy No. 1," she says. "The average Canadian over the age of 18 has three credit cards ... and if you're carrying balances on credit cards you're throwing your money away."

Negotiate with creditors to work out repayment plans. Not-for-profit credit counselling services such as Credit Canada can handle negotiations of this kind. "Most communities have services of this kind and most of them are free," she says.

Build an emergency fund. "It will help you sleep at night," Campbell says. Start slowly. Put some money aside from each paycheque and build a financial cushion covering three to six months of expenses.

"Putting your financial house in order is wise on so many levels," Campbell says. "It will improve your relationships, your health and your ability to function at work.

"Remember what our grandparents told us: Don't live beyond your means. Save for a rainy day. Ensure that you have an emergency plan in case you lose your job."

*Reproduced with permission - Janis Foord Kirk.