If you’re here, we’ll give ourselves the liberty to assume that you are knee-deep in debt. Debt can be overwhelming and debilitating, but it is possible to break free from it and regain control of your finances.
A complete financial recovery is only possible if we get to the root of what made you fall into debt in the first place. The only way you can break free from debt is by changing the pattern of your financial behaviors.
Here is a money management guide to assist you as you transition to financial stability.
Step 1: Analyze your present financial state
The first step in breaking free from debt is to analyze your current financial state. This includes understanding how much debt you have, what types of debt they are, and the interest rates associated with them. Once you have a clear understanding of your debt, you can start to create a plan to pay it off.
Step 2: Prioritize your debts
Once you know how much debt you have, you must first prioritize which debts to pay off. Start by paying off high-interest debt, such as credit card debt, as it will cost you more in the long run. Next, focus on any indebtedness with late fees or penalties, as they will also cost you more money.
Step 3: Create a budget
Creating a budget is essential to breaking free from debt. Making a budget will enable you to see where you may make savings and where your funds are being spent. It will also give you a clear picture of how much money you have to put toward your monthly debt.
Step 4: Find strategies to boost your earnings.
In addition to cutting back on expenses, looking for ways to boost your income will be a game changer. You may do this by taking a part-time type of work, selling things you no longer require or figuring out how to use your abilities or hobbies to earn some cash.
Step 5: Stay motivated
Breaking free from debt takes time and effort, and it can be easy to get discouraged. To stay motivated, set small goals and celebrate when you reach them. Remember, every dollar you pay toward your debt is one step closer to financial freedom.
Step 6: Seek professional advice
If your debt is overwhelming and you need help to make progress on your own, seek professional advice. You can develop a personalized strategy to pay off current debts and get back on your feet with the aid of a financial planner or credit counselor. You may ask them, “What is a consumer proposal?” or “What government schemes can pull me out of debt?”
Canadian Government Schemes For Debt
In Canada, there are several government programs and initiatives that aim to help individuals and families manage and reduce their debt. Some examples include:
The Credit Counseling Service: This service is provided by non-profit organizations and helps individuals with budgeting and debt management. They provide free counseling, advice, and education on how to manage debt and improve credit scores.
The Bankruptcy and Insolvency Act: This federal law provides a legal process for individuals and businesses to resolve their debts if they are unable to pay them. It includes provisions for both bankruptcy and consumer proposals.
The Financial Consumer Agency of Canada (FCAC): The FCAC is an autonomous governmental organization that offers advice and assistance to assist Canadians in making wise monetary choices. They offer guidance on how to control debt, raise credit ratings, and stay away from financial con artists.
The Consolidated Credit Counseling Services of Canada: This is a nationwide, non-profit credit counseling organization that provides credit counseling, debt consolidation, and debt management services to Canadians.
National Student Loans Service Centre: This service provides information and assistance to individuals with student loans and helps them manage their debt.
It’s important to note that these government schemes are not a one-size-fits-all solution.
What Not to Do When You’re in Financial Debt
Avoiding specific actions when in debt is important because it can help you get out of debt more quickly and with less damage to your financial well-being
Don’t ignore the problem: Ignoring debt will only make it worse.
Don’t use credit cards to pay off debt: This will only add to your debt and make it harder to pay off.
Don’t borrow more money: Taking on more debt to pay off existing debt is not a sustainable solution.
Don’t avoid communication with creditors: Ignoring calls and letters from creditors will only worsen the situation.
Don’t miss payments: Failing will lower your credit rating and make it more challenging to acquire financing.
Don’t use debt settlement companies: These companies often charge high fees and may be unable to settle your debt.
Don’t rely on a quick fix: There is no easy solution to debt. It takes time and effort to pay it off.
Don’t forget to budget: To prevent taking on extra debt, make a budget and follow it.
How Do You Make a Budget to Get Out of Debt?
Making a budget can be very helpful when you are in debt. You may reduce your spending by using a budget to have a complete image of where your funds are going. Setting a budget allows you to prioritize paying off your debts while covering essential costs.
Additionally, a budget can help you avoid taking on more debt by keeping track of your spending and ensuring that you don’t overspend. By creating a budget and sticking to it, you can take control of your finances and work towards becoming debt-free.
Here are some steps you can take to make a budget:
Determine your income: List every stream of earnings, especially your salaries, any incentives or commissions, and all additional cash flow sources.
Identify your expenses: Keep track of your monthly spending, including automobile, house, and other recurring bills, housing expenses, and car installments. List your fluctuating expenses, including food, leisure, and retail.
Track your spending: Keep track of your spending for at least one month to better understand where your money is going.
Set a budget: Use the information you’ve gathered to set a budget for each category of expenses. Be sure to include a category for savings.
Stick to the budget: Once you’ve established a budget, follow it as strictly as possible. Routinely monitor to ensure that you’re on course with your spending plan and make any required modifications.
Create a savings plan: Decide on a budgeting objective, such as saving for your social security or a house deposit on a property. Make a strategy to achieve your objective, such as allocating a specific sum of cash every week or monthly.
Review and adjust: Review your budget and regular spending to see if there are areas where you can cut back or if you need to adjust your savings plan.
Keep in mind that building budgeting is a procedure that you must continue; if your earnings and expenditures change, you might need to make adjustments.
Summary
Breaking free from debt is not easy, but it is possible. By assessing your current financial situation, prioritizing your debts, creating a budget, increasing your income, staying motivated, and seeking professional advice, you can regain control of your finances and achieve financial freedom. Remember, it is not only about paying off debt but also about learning to manage your money to prevent you from falling into debt again.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
