The Chronicle Herald (Provincial)

Debt troubles? Ask The Money Lady

- CHRIS IBBOTSON askmoneyla­dy@gmail.com @chronicleh­erald

Dear Money Lady,

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. Sincerely,

Ken

Dear Ken,

Don’t beat yourself up about your debt; it can be fixed. There are many Canadians 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 had 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 so 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 toward financial freedom.

If you are 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, while only making the minimum payments on the other loans. Once this debt is paid, move to the next one, repeating the process of paying down one and maintainin­g the others with 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

Chris Ibbotson writes a financial advice column, regularly speaks at bank advice events and is a frequent guest speaker for client focused retirement seminars coordinate­d by local financial institutio­ns. She provides personaliz­ed investment and lending advice to clients with a focus on wealth building, estate planning and tax minimizati­on.

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 ?? 123RF ?? Christine Ibbotson weighs in on options to reduce personal debt in 2021.
123RF Christine Ibbotson weighs in on options to reduce personal debt in 2021.
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