Make new decade your time to succeed
Q: I need to get my finances in order, but I have a lot of credit card debt and I don't know what to do to get it under control. This has been a hard year and it will be a lean Christmas. Should I declare bankruptcy? I am worried this will make things even worse, any ideas? Sincerely,
Ken
A: Dear Ken,
Don't beat yourself up about your debt, it can be fixed. There are many Canadians that are experiencing dire financial problems due to COVID, and you are not alone.
Review all your options and really open your mind to all possibilities. Do you need to downsize your home to reduce your debt? Should you change your career and get a different job? Don't be afraid to get out of your comfort zone to fix your finances.
Declaring bankruptcy should be viewed as a last resort and you should exhaust all other solutions before contemplating this option.
Yes, the bankruptcy will ruin your credit; however, it is recoverable if you have to choose this option.
Once the bankruptcy has been settled and cleared, it is important to re-establish good credit right away. This could take up to three years to do, but remember you must do the incremental steps over time to get back in the game.
Be honest with yourself and be committed to change. Let go of any past indiscretions or setbacks and start again in 2021.
It is a new decade, and a new start to clear your mind towards financial freedom.
If you are like most, ending the year with considerable debt, there are a few other ways to fix this. The easiest method is to consolidate high interest loans into a new mortgage, line of credit or consolidation loan, to capture a lower rate and increase monthly cash flow. This consolidation should be viewed as a one-time transaction to put you on the right road to a debt-free lifestyle and should never be used as a continuous solution to get you out of future debts.
If this is not an option, make a list of all your debts and begin to tackle one liability at a time. Pick the one you are going to concentrate on and put as much as you can down on this debt every month, whilst only paying the minimum payments on the other loans. Once this debt is paid, then move to the next one, repeating the process of paying down one and maintaining the others with only minimum payments.
Once all the credit is paid, you can use these newfound funds to start a savings program toward investing. This is when you will stop feeling helpless.
Be sure to avoid the trend to sugar-coat your finances or make excuses to flee from finally resolving your debt this year. It is necessary for you to take action and get out of the victim mentality, finally creating certainty and options for your future. If this means finding ways to make more income, getting a new job, or cutting back on spending — then do it! It is in the reach of every person to become financially comfortable. Let go of your old habits and create new ones for 2021!
Let's make this new decade your time to succeed. Believe in yourself and most of all, believe you are worth it! You've got this!
Good luck and best wishes, Money Lady
Written by Christine Ibbotson, author of the best-selling book, How to Retire Debt Free & Wealthy, and a new book, Don't Panic – How to Manage your Finances and Financial Anxieties During and After the Coronavirus, available at all bookstores across Canada. If you have a money question, please email on website: www.askthemoneylady.ca