If you’re gearing up to turn around your finances and tackle debts, check out our top six tips to help boost your results, while avoiding some common pitfalls.
Do know who you owe. Organize your statements, online bills and any creditor communications so you have a clear picture of who is owed how much. Getting back on track will be next to impossible without organizing your bills and working out when payments are due, and how much is to be paid. Be sure to include smaller bills such as overdue cellphone bills or traffic tolls – small unpaid bills can still create a nuisance with credit ratings and collection calls.
Don’t cash in RRSPs. RRSPs are a federally protected asset in the event you make a Consumer Proposal, or need to file for personal bankruptcy. Redeeming retirement funds can cause issues down the road because there often isn’t sufficient time to save again before retirement. Income tax is also payable on RRSP redemptions which can mean that there might not be as much coming into your bank account as you’d need.
Do stop using credit. In order to stop the cycle of borrowing it’s imperative you address the underlying issues that caused the debts in the first place. Often there is an event that causes a temporary need to use credit to meet day-to-day expenses. Make sure your cash-flow has improved as much as possible so that you don’t rely on credit each month to make ends meet.
Don’t borrow from family and friends. Even though it can be tempting to take someone up on a generous offer of financial help, avoid letting friends and family lend you money, or co-sign debts with you. Family-driven funds often become a temporary fix and can cause friction if not repaid. Getting a co-signor gives your creditors more pockets to reach into in the event you’re unable to repay the debt in full. Co-signing a debt means that the parties are both responsible for 100% of the debt – not 50/50 each as is commonly believed.
Do investigate all of your legal options and be careful who you take advice from. Whether it’s well-meaning but uninformed friends and family, or a debt settlement agency aiming to collect fees – there are a lot of opinions when it comes to what to do with debts. Always do your research before you sign any agreements and be sure that you fully understand all of your rights and responsibilities with contracts.
Don’t pay for debt advice. It should never cost you money to find out what your financial options are. A Licensed Insolvency Trustee will meet with you for free to discuss your specific situation and evaluate your options with you. Being able to make fully-informed decisions about your future is priceless – but it shouldn’t cost you anything!
Conquering your finances can seem overwhelming, especially at the beginning – but taking the right steps can make being debt-free a goal you can attain!
For more information on how a Licensed Insolvency Trustee can help you achieve a fresh financial start please contact us for a free, confidential consultation.