How to Make Debt Management a Priority from the StartApr 21, 2017
Did you and your partner discuss your debt management habits prior to commitment? Did you both bring debts into the relationship? Managing debts doesn’t have to be a mystery – communicating about finances and sharing financial goals can help you tackle your combined debts as a team and work toward the same mutual interests.
What’s your money attitude?
You and your partner may have contrasting ideas when it comes to money and that’s okay as long as you’re able to agree on important matters such as debt repayment, savings, investments and setting goals. One good method for determining if you’re both on the same page is to take this financial literacy self-assessment quiz. The quiz will rank your financial IQ against other Canadians and show you how to improve your score in areas such as keeping track of finances, planning ahead, and comparing financial services. Couples with different views on money might also benefit from keeping most of their personal finances separate, and only combining their money for shared household expenses. Some financial experts view this as the best way to avoid conflict, while allowing each partner some financial independence.
What’s your debt management strategy?
Having a concrete strategy for paying off your debts is not only efficient, it sets you up for a healthier financial future. Let’s say you have accumulated debt on a number of credit cards. Making only minimum payments to this debt each month will result in high-interest charges on your remaining balances. Meanwhile, you’re making little progress on paying off your credit cards. In this case, a debt strategy that involves focusing on paying your credit card debts first can mean saving on interest charges. If you and your partner both brought personal debts into the relationship or you are struggling with combined debts, create a strategy that will start your union off on the right foot. The financial goal calculator provided by the Financial Consumer Agency of Canada (FCAC) can help you plan your debt repayment strategy.
How to make your money go further
- Always use a budget. From day one, you and your partner can benefit from a budget. Plus, it’s something that will help you through the rest of your life, so it’s best to get into the habit early. Whether you keep your finances separate or opt for joint accounts and investments, a budget will help you predict upcoming expenses, reduce spending, pay down debt, and save for the future. Consider using a budgeting worksheet or an online budget calculator to make the process simpler.
- Save for short, medium and long-term goals. Setting SMART financial goals and sticking to them will keep you motivated to make better money choices. In order to get into the habit of setting savings aside each month, pay yourself first. If you find it difficult to include savings in your budget, look for ways to reduce spending or expenses, and focus on paying down debt — these strategies can increase your ability to save. Start by creating an emergency fund, with an eventual goal of accumulating three to six months’ worth of expenses. Then add other savings goals, short- and long-term. United Way’s Small Change app can assist you in making saving money a daily habit.
- Speak to a debt professional. Sometimes, making headway with your debt requires help. A not-for-profit credit counsellor can take a look at your budget and offer suggestions, provide assistance through financial workshops or advise you on debt management strategies. A Licensed Insolvency Trustee (LIT) will also advise you on different strategies for dealing with debt, helping you decide on the right option for your situation. Only an LIT is legally authorized to assist you with filing a consumer proposal or bankruptcy. An LIT will explain to you the difference between a consumer proposal and bankruptcy and review how either of these options may (or may not) suit your individual needs. The Office of the Superintendent of Bankruptcy website offers details about the process of insolvency, where to get a consumer proposal and the role of an LIT.
Have you and your partner discussed your individual debt management strategies? How will you manage individual or combined debts? Use a debt repayment calculator to compare your options.
Find further debt tips and connect with other Canadians who are taking charge of their finances by searching the Twitter hashtags, #LetsTalkDebt #BDODebtRelief