10 Tips for Resolving your Financial Problems

12 March 2020 by National Bank
Financial problems

No one is free from financial problems. Poor planning or going through a tough time, such as a divorce, illness or unemployment, can really tip the scales. Need help? Here’s some advice on how to manage your financial problems.

1. Identify the problem

Being in debt does not necessarily mean that you have financial problems. Few people would be able to purchase a home or a car otherwise. However, some red flags should be taken seriously.

Do one or more of the following statements apply to you?

  • You have many credit cards and you’ve begun to use one to pay off another.
  • You have to refinance your property to support your lifestyle or pay off debts.
  • You are unable to pay off more than the minimum amount required on your credit cards.
  • You are late on or skipped some payments.
  • You dedicate 40% or more of your gross income to paying off debts.
  • Your financial situation is a source of stress.

If any of these sound familiar, you will have to take certain measures to correct the situation.

2. Create your budget

The first step towards managing your financial problems is creating a budget. You can use software, an online budgeting tool, a mobile app or simply a piece of paper, a pencil and a calculator.

Write down your income and all of your expenses. To avoid underestimating the latter, save all of your bills for one month. Think about other one-time costs, such as school expenses, gifts, vacations, your driver’s licence, etc. Don’t forget to pay off your debts.

Many consumer associations also offer training on budgeting.

3. Lower your expenses

Some expenses can easily be lowered. Think about reviewing different packages, like your telecommunication services. You could save by ensuring that all they do is meet your needs – nothing more, nothing less. You could also start looking for deals at the grocery store and limit the cost of eating out by making your own lunches.

Analyze each of your expenses to see how you can lower or eliminate them.

4. Pay in cash

Debit and credit cards are convenient, but they can make it harder to track your expenses. Paying in cash can help you stick to your budget. For example, you can put your cash in separate envelopes for groceries, entertainment and clothing.

5. Stop taking on debt

Avoid taking on additional debt by living within your means. Make sure you have enough to repay your credit card balance and other debts. If you tend to make impulse purchases and regret them later, you may want to start leaving your credit card at home.

6. Avoid buying new

There are many alternatives to buying new:

  • Buy used or exchange goods. Check out thrift stores, online classified ads and Facebook pages for neighbourhood sales. There are many bargains and opportunities for trades.
  • Borrow or rent. This is a good option for items you will rarely use. For example, sign up for a library card to check out books or magazines.
  • Do it yourself. Using a coffeemaker is far more economical in the long run than buying a coffee every day.
  • Take advantage of freebies. For example, there are many free shows and activities at festivals.

7. Meet with your advisor

Your advisor will help you with your financial problems. They can review your banking package fees and your insurance coverage. They can also offer certain solutions, such as a reduced-rate credit card with annual fees.

Together, you can also look at the possibility of debt consolidation. Combining your debts on the same low-interest loan will help you pay them off more quickly. This will also facilitate the management of your finances.

8. Increase your income

Think about ways to increase your income to deal with your financial problems. Here are some options:

  • Ask your employer if you can work overtime.
  • Offer products and services for extra income.
  • Sell items that you no longer use.
  • Find a roommate.
  • Get a second job.

Be wary of ads that claim you can earn money easily. These are often scams.

9. Be realistic

If you have overspent for many years, you cannot expect to reduce your debt in just a few weeks. Realistic goals will help you stay motivated and reduce your financial stress.

Just like a diet, significantly restricting your expenses will only increase your appetite to spend. Plan a little wiggle room in your budget to treat yourself.

10. Improve your credit report

Do you have bad credit? If that’s the case, the financing offers you receive will have higher rates. Why? Because you present a greater risk for the financial institution. Here are some tricks to improve your credit rating.

  • Pay your accounts on time.
  • Keep a healthy margin between your balance and credit card limit.
  • Avoid applying for too many credit cards.

Maintain good habits

Once you have managed your financial problems, continue taking care of your personal finances. The money you save will allow you to create an emergency fund. Ideally, this should equal three months of expenses. If an issue arises, you will be able to take out the money you need without going into debt.

After that, you can start saving to finance other goals, such as your retirement, your children’s education or a trip.

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