Three Wishes From a Credit Counsellor To Establish Financial Stability in 2014
If I had three wishes for our society as we begin 2014, they would be:
- To spend less than we make.
- To create a plan of action for our debts.
- To put that plan of action into motion.To spend less than we make.
- The statistics are very alarming. The average Canadian is spending 164% of their household income. While this may be wonderful news for retailers, it is bad news for the average person. This over-spending and accumulation of debt cannot continue without severe repercussions. The government keeps warning us that interest rates will increase in the future. In addition, if you review salary increases over the past several years, most have not kept pace with the cost of living. This means that we are making less than we did a couple years ago, and are facing rising costs and interest rates. This makes it all the more critical to adjust how we manage our finances to ensure that we spend less than we make!
- Yes, most of us have debts, but what matters is making a concerted and realistic effort to reduce those debts. The only way to do that is with a solid plan. The first step is to sit down and actually produce a spending plan (another word for budget). Your spending plan should include the payment of your day-to-day bills, as well as money to set aside for those unexpected expenses. Your plan should be realistic – anticipate that your car will need repairs and Christmas is going to happen again in December. Include those expenses in your spending plan. Once you’ve determined your daily living expenses and income, then you need to incorporate as part of your plan how you are going to pay off your existing debts.
- Now that you have a plan, put it into action. Establish measures that will help you manage your plan. Maybe it is using cash, not credit cards. Maybe it is paying more on your credit cards than just the minimum payment. Maybe it is canceling and just keeping one credit card, or maybe reducing the credit limit on your cards. Whatever plan you establish, the only way to improve your situation is to put it into practice. Review your financial situation regularly to safeguard that you are sticking to the plan.