Those individuals who are living under financial stress are unable to avoid the pressure that comes with the having lost control over their finances. When there isn’t enough cash to pay the bills and every paycheque disappears almost immediately after it arrives, then that’s a sign that you’re likely living beyond your means.
You’re Facing Insolvency
Mounting debt and looming creditors are hard to ignore, and if you sense that insolvency is either on your horizon or already here, then you need to consult with a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) to assess your options. It could feel like the only option you have to recover financially is to declare bankruptcy, but a good trustee can show you that there are alternatives to bankruptcy that can still offer debt relief.
Whether you’re a good candidate for bankruptcy, if you’re someone who should file a consumer proposal, or if you can get on track with some credit counselling, you need to make permanent changes to your relationship with money in order to avoid future financial problems. Knowing your own spending habits is essential to addressing your money issues. Here’s how you can learn to spot the signs of distress in your life.
What’s Your Spending Trigger?
Are you someone who can’t say no to an online electronics sale? Do you like to end a particularly tiring day by treating yourself to something tasty at your favourite restaurant? You might not have a full understanding of what motivates you to make the spending decisions that you do, but the truth is that everyone has their own emotional triggers when it comes to buying.
You can’t learn how to spend less and save more without understanding the root causes of your spending. Common spending triggers include shopping while hungry, being in an emotional state like sadness or anger, telling yourself you deserve what you’re splurging on, you feel like you’re getting an incredible deal, or upgrading your lifestyle to keep up with an increase in income.
If none of those spending motivators sound familiar to you, then you can find out what makes you spend money by reviewing the past month of your purchases. Typically, taking the time to review your purchases (unplanned and planned) is a good thing to do regularly so that you can make sure you are sticking to your budget. It also gives you the opportunity to update your budget to reflect on where you need to spend your money.
If you add up all the minimum monthly payments of your current debts, does the minimum required monthly amount add up to over 20% of your income? If so, then your debt is too large for your lifestyle since debt that exceeds 15-20% of your income doesn’t allow you to put aside money for your fixed expenses or save for a financial emergency.
What’s more, if you can only afford to make the minimum monthly payments on your debt, then you’ve also got a problem that needs to be addressed. Even reasonable amounts of debt can grow to an overwhelming amount if you only make minimum payments and collect interest along the way.
When you can’t make the payments you need to make to get out of debt, then seek out the help of an empathetic and knowledgeable bankruptcy trustee. Together you can get to the root of your financial troubles and come up with a plan for long-term financial relief.