Christmas is over, the new year is here, and in a couple weeks credit card bills will arrive on the doorsteps of many Burnabarians.
Yes, the holidays are a wonderful time to gather with friends and family, but they can also be a time when some of us get a little carried away with our spending. Most of the time, we haven’t saved enough money through the year to ensure we can afford the gifts and goodies we splurge on, according to Scott Hannah, president and CEO of Credit Counselling Society.
If your bank account is a little out of control, there’s a number of things you can do to get back on track, says Hannah.
“It’s important that while you’re going down this path (you ask) ‘Why are we going down this path? What is it that I want to achieve?’ You need to have a goal,” he says.
Get help right away
The most important piece of advice is to get help sooner rather than later, according to Hannah.
“If you don’t have the skill sets today or the confidence to do this, get help. Sum it up to courage, pick up the phone, come talk to an organization like us where you can sit down and have a lot of the confusion demystified,” he says.
It could be that you’re in overdraft more often than not or you’re only making minimum payments on any debt or your level of debt isn’t going down, he says.
“You may be up to date with your payments, but you’re just not getting ahead. I would encourage, if that’s you, to seek help for your situation and to establish a plan to get out of debt within a reasonable period of time.”
Establish a realistic plan
Like all new year’s resolutions, if your financial goals are too ambitious, you’re bound to fail, says Hannah.
“Establish a realistic plan. If you kind of look at this the same way a person might approach getting healthy versus ‘I want to lose a whole bunch of weight,’ typically what happens is that people set themselves overly aggressive objectives,” he says.
This can end in a few different ways: either the person gets frustrated that they aren’t meeting those objectives or they cheat, he adds.
The best thing to do, according to Hannah, is to set goals that allow you to live within your means and aren’t too restrictive (this means budgeting some funds for fun and entertainment).
“Far too often we see people come to us in January saying ‘That’s it. This is the year I become debt-free.’ If it’s taken you three to four years to accumulate a certain level of debt, it’s likely going to take you the same amount of time to get out of debt,” he says.
Track spending for a month or two
Before you can your budget in check, you need to find out where your money is going, Hannah says.
He recommends tracking spending for a month or two to figure out what people are spending their money on – and be honest with yourself, he adds.
“The average person can probably account for about 80 per cent of their spending, but beyond that it probably gets a little hazy,” he says.
While doing this, try and factor in annual expenditures so you can get a better picture of what you need to save to make it through the year debt-free, according to Hannah.
The goal is to have a comprehensive understanding of what your monthly expenses are and how much annual expenses, like car repairs, vacations and Christmas costs, he adds.
Because a lot of people don’t allocate a small portion of money in their monthly budgets for annual expenses, they often find themselves using credit cards when those situations arise, which adds to their debt, according to Hannah.
“It’s the choice of either: ‘Do I react to Christmas or am I proactive?’” Hannah says.
Don’t forgo saving
Once you’ve got your financial goals worked out, tracked your spending and have a budget ready, the next step is to put it all into action.
But starting on a path to financial recovery doesn’t mean not saving money, according to Hannah.
“I think it’s important that a person reacquaints themselves with a savings account. It just means that if you’re focused on paying down your debt and paying it off that the amount that you’re saving is a small amount this year,” he says.
Having a separate savings account that can’t be accessed at an ATM is an important part of getting your finances on track, he adds, and it could also save you in an emergency.
“If you don’t have an emergency savings plan to deal with unexpected emergencies, you need to start one, and even if that’s putting $50 aside out of your paychecks right now, it’s a start. By accumulating those funds over time, it allows you to deal with the unexpected,” he says.
If folks are too focused on paying down debt and don’t include savings in their financial plan, they’ll end up relying on credit cards for emergency expenses and they’ll never get ahead, Hannah explains.
Monitor progress
Once you’ve been following your plan for a while, Hannah recommends checking in regularly and making adjustments as needed.
“That’s so important,” he says, “because things change within our budget. We may get an increase in pay, we may have some unexpected expenses that may be with us for a period of time, and you’ve got to put that in your budget.”
That means if your income goes up, decide what you’re going to do with it before it gets absorbed into your spending, Hannah adds.
Let’s say you get a raise and you make $100 more a month. Will you put the extra money each month into your emergency savings? Will you use it to pay down more of your debt each month? These are the questions you need to ask yourself, Hannah says.
Review spending
Another way to getting your finances in order is to review your monthly expenses to see if there are any you could save a bit of money on. Things like TV packages, phone plans and insurance rates are good places to start, Hannah says.
“It’s amazing when you start to look at all your expenses,” he adds.
“You might look at your insurance, and you’ve had the same car insurance with the same vehicle forever and contact your broker and say, ‘I want a better deal. I’ve been a great customer. I’ve never had a claim and yet my insurance premium keeps going up. I want a better deal or I’m going to look elsewhere.’ Chances are you’ll get a discount.”
TV packages and phone plans are the same thing. Call and see what the provider can offer in terms of a discount or maybe opt to cut out a few channels to reduce monthly expenses, he adds.
And unless you’re single, Hannah says it’s important to discuss your finances with your family – let them know why you’re making these changes and include them in the decision making.
Do you need help?
At the Credit Counselling Society of B.C., people can review their financial situation with a qualified credit counsellor and discuss options available based on their situation.
Established in 1996 as a registered charitable society, the society has helped hundreds of thousands of Canadians learn how to manage money and debt better. Services include:
- Free, confidential and non-judgmental credit counselling services
- Debt consolidation, repayment and settlement programs
- Money management education
- Budgeting assistance
- Information and referral services
Find the Burnaby location at Central Park Business Centre, unit 300, 3665 Kingsway, Vancouver. For more info, call 604-527-8999 or 1-888-527-8999 or check out www.nomoredebts.org.
