Credit Counsellors of Canada

Credit Counsellors of Canada

When debts and expenses are growing out of control, it is critical to take an active role in controlling one's financial situation. The first step is to get a high-level understanding of what has gone wrong before taking any steps towards rectifying the situation.

Personal finance problems fundamentally break down into two camps based on two interrelated quantities: income and expenditure. Borrowing money such as taking out payday loans provides temporary relief from financial pressure but is not a sustainable strategy. Resolving these issues over the long term can only be accomplished by working at one or both of these variables.

Income

The most challenging factor to tackle is income. Entire sections of the library are dedicated to increasing one's income and improving one's career and is a long-term process outside the scope of this article.

Expenditure

On the other hand, spending is an area that is usually a factor that can be addressed readily by nearly everyone. The first step is to compile a budget that breaks down all the monthly expenses and arranges them by priority. By identifying the budget line items that are discretionary and non-discretionary, it will be readily apparent where one can find the most accessible gains.

The first items to be removed from the budget are discretionary items. While Netflix and fast food are convenient, they aren't strictly necessary. Non-discretionary items like food staples and housing are the most difficult to address without incurring major efforts such as relocating or making radical lifestyle changes.

In the middle of these extremes are debt expenses. While not paying off debt isn't an existential threat, it carries the risk of damaging one's credit score and reducing access to credit in the future. Fortunately, this type of expense is readily addressed by reaching out to a professional credit counselling association. A credit counsellor can act as a go-between with your creditors to arrange a restructured payment plan that allows you to fit within your budget while still making good on your debts.