Telling the truth about debtMar 26, 2015
Canadians are carrying record high debt levels and that is the truth. Yet, as reported recently, it is not stopping some Canadians from accumulating additional debt. Many individuals continue to purchase luxury items they did not budget for (like that flat screen TV), or take vacations that they cannot afford (that tropical getaway to escape our brutal winter). Are people avoiding the reality of their debt? Are Canadians being totally honest with themselves and others about their financial responsibilities? A recent poll conducted on behalf of BDO Canada Limited, revealed only half of Canadians are always truthful about their financial situation. As a matter of fact, 45 per cent admitted to telling ‘white lies’. And some of those travelling south may be a good example of Canadians not being totally truthful about their financial situation. They may be putting themselves and their families in a financial bind as a result.
The 35 to 54 year olds were the largest group that withheld the truth, and could be the most indebted ones as well. This is the group who has the largest earning potential, as they will have the most years remaining in the workforce. Unfortunately, they also financial concerns like mortgages, children’s education, job loss, and aging parents. If this age group continues to hide the truth and their debt increases, will their families be any better off?
The poll demonstrates Canadians make decisions to take on debt because they want to protect their family. Noble yes, but are they really protecting loved ones by making decisions on their own that could impact the family finances? As debt relief professionals, we know that answer is ‘no’. An open and honest conversation with the family about money needs to take place in order to keep the finances on track.
A few basic practices can help set the stage for the money and debt talk:
- Have a FAMILY MEETING to discuss the anticipated income and expenses for the next year. Include the regular monthly expenses and also those “wants” that perhaps can be added. By having an open conversation about the family budget, all concerned will have an understanding of what can be included realistically. Use the budgeting conversation as a teachable moment as the children grow up.
- Set realistic GOALS. The goals can be both short and long term. They can include such things as paying down debt, saving for a child’s education or planning a winter getaway.
- CREATE an annual family spending spreadsheet that includes income, savings and anticipated expenses. Update it regularly with actual amounts so you can monitor your financial progress.
- Keep the lines of communication open as the year rolls on. If a certain item seems unattainable or an unforeseen incident happens such as a job loss, discuss the impact the event will have on the family finances and adjust spending accordingly. This will help avoid the embarrassment of committing to purchases that perhaps are unrealistic.
Another important thing about being truthful about your finances is you will find others around you are in the same situation. Finances become more manageable when you keep the conversation open and honest. If you have come clean about your finances to your family and it becomes apparent you are unable to handle the situation, find a licensed debt relief professional to explain all of your options to pay down debt. Once you have decided how you will tackle the debt, going forward it will be easier to implement a spending plan for a successful financial future. Those around you may just follow suit once they see your efforts to fix the family finances and your debt disappears.