Time to Re-examine Your Financial Plan and Reflect on Your Debt ManagementNov 27, 2015
As a Bankruptcy Trustee in Sault Ste. Marie, I see people every day who need debt management assistance. While some have more serious financial issues requiring formal debt solutions, others simply need to take the time to reflect and re-examine. November is Financial Literacy Month in Canada so why not take this opportunity to reflect on your financial position and reexamine your financial plan before the year 2015 closes? Review 2015 and ask yourself these important questions:
- Am I satisfied with my current financial status?
- Do I have an up to date household budget?
- Have I stuck to my household budget?
- What type of debt do I carry?
- Do I have adequate emergency savings?
- Have I been honest with myself and my loved ones about my level of debt?
The Financial Consumer Agency of Canada (FCAC) has developed the National Strategy for Financial Literacy. The FCAC website has a number of tools that will assist you in answering the questions set out above. For example, you can find out how your money management skills measure up by taking the FCAC Financial Literacy Self-Assessment Quiz. The FCAC site also provides a budgeting tool to help you determine if you have a realistic budget. I assist people of all ages that tell me they do not have a current household budget. They realize that this has contributed to their debt problems and are happy to discuss budgeting techniques that help improve their financial literacy and reduce their financial stress.
Taking control of your financial situation will help you reduce stress, strengthen your family relationships and enhance your mental and physical well-being. Stress test your 2015 debt by taking the Financial Health Test. If the result of the test indicates that you are experiencing financial stress it is time to take control by becoming more financially wise about the options that are available to you. Being honest with yourself and loved ones will help reduce your stress level.
The FCAC also has a financial plan you can use to get you started on developing a plan or evaluating your current plan to be sure that it has all of the recommend components.
Evaluating the type of debt you carry is an important part of reviewing your financial position. Understand that there is good debt and bad debt and that the type of debt you carry has a significant impact on your financial position. An example of good debt is your mortgage which allows you to purchase a home and build equity or value in your home as the mortgage is paid down. Bad debt includes using your credit card as a source of income to balance your monthly living expenses. The cost of using a credit card is high as the low interest rates that we are currently experiencing have not really reduced interest rates on credit cards. The cost of carrying credit card debt will have a negative impact on your financial flexibility by forcing you to use future income to meet interest costs.
Another aspect of the FCAC’s financial literacy initiative is working on planning and saving for the future. A key component of this is setting goals. While setting goals is valuable for debt management, it’s also vital for acquiring savings. Short term as well as longer term savings goals should be a part of your financial plan. When setting savings goals it is important to differentiate between “needs” and “wants”. Goals allow for saving for the future; and one of the most important goals is establishing an emergency fund. An emergency fund allows you to be more financially flexible when an unplanned event occurs like job loss, illness or a vehicle repair. Emergency savings can help you avoid a financial crisis and the associated stress.
We encourage you to attend our financial literacy presentation in Sault Ste. Marie on November 25, 2015 at 6:30 PM at the John Rhodes Community Centre, 260 Elizabeth Street. The presentation is open to the public. I will review key financial literacy concepts, provide resources to help you implement the topics discussed above as well as answer questions specific to your situation. Please register by calling John Thompson or Nancy Lapish at 705-945-0990.