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Category: Budgeting

  • 10 Better Budgeting New Year’s Resolution Ideas

    It’s been 2019 for more than a month — so why are we writing about New Year’s resolutions in February?

    Did you know that only 8% of people actually stick to their New Year’s resolutions — and 80% of resolutions fail by the second week of February?

    If you are in this boat, it’s not too late. You can still meet your goals, or even create new ones if you didn’t set any in January. But the key is to make smarter resolutions that will last through the whole year.

    Financial resolutions are great goals to set. Little, daily actions can add up to big successes in the long run. Here are 10 New Year’s (or any time of year) resolution ideas you might consider for 2019 — and ways to stick with them:

    1.Create a budget and update it monthly.

    Why it works: By reviewing your budget monthly, you will see how your goals are progressing. You’ll also be able to see where you need to tweak and plan for the month ahead.

    Make it stick: Set aside a day each month for your review — like the 1st of the month. Create a calendar reminder on your phone.

    2.Track your expenses.

    Why it works: You’ll be raising awareness about how you spend your money. Just by tracking alone, you’ll be able to see patterns crop up.

    Make it stick: Download an app that connects to your bank account to make the tracking automatic. Plus, some apps allow you to sync your budget, so you can see when you’ve gone over a category.

    3.Set up automatic withdrawals into a savings account.

    Why it works: You only have to act once, and you’ll have your resolution completed! This can be a great way to put money aside for a rainy day or for a specific savings goal.

    Make it stick: Every time you have “found money” or get bonus money, add it to your savings account.

    4.Set up an RRSP or (if you already have one) make your contributions automatic.

    Why it works: Similar to the savings account, this is a one-and-done resolution. Once you have your RRSP set up, figure out how much you can put in and then make it automatic. The benefits of an RRSP are numerous and starting to save early can set you up for success in the long run thanks to compound interest.

    Make it stick: Have a garage sale (or online garage sale through a marketplace site) and add all the revenue to your RRSP.

    5.Pay off debt every day.

    Why it works: Author Jeff Olson calls this “the slight edge” — the small, consistent actions that you take every day. What you do every day is often more effective than what you do once in a while.

    Make it stick: Rather than focusing on the total sum of your debt, break it down into manageable chunks and resolve to pay off each chunk in little payments every day (you can even set this up to be taken from your bank account automatically). Just putting $5 per day towards your debt will add up to $150 in a 30-day month and it will hurt a lot less to see it go in $5 increments than a $150 lump sum.

    6.Pay more than the minimum balance on your credit cards.

    Why it works: Some people think that the minimum payment is all they have to pay, but unfortunately this isn’t always the case. Paying only the minimum doesn’t mean you have good credit. Instead, resolve to pay your credit card bills in full every month and not to charge more than you can afford to pay.

    Make it stick: Consider putting a cap on your credit card accounts or signing up for a secured credit card that acts like a debit card but reports to your credit agency.

    7.Plan for your taxes.

    Why it works: While income taxes aren’t due until the end of April, you can start getting organized now. Sort your receipts and other important documents so you won’t have to scramble at tax time.

    Make it stick: Pick up a cheap accordion file and label each section as a different category that you claim on your income tax. Keep this file by the front door and drop receipts, paystubs, etc. in as soon as you get home.

    8.Pack your lunch.

    Why it works: If you are buying lunch out every day, those costs can really add up. If your lunch costs $8, five days a week, that would work out to $2,000 extra per year assuming that you work 50 weeks and keep to your budget every day.

    Make it stick: Cook extra dinner the night before and take the leftovers for your lunch. This will avoid the before-work scramble and save you money.

    9.Set up a grocery delivery service.

    Why it works: We have all had that experience where we’ve gone to the grocery store with a list of only a couple items and come out with an entire cart’s worth of food. Eliminate this by looking into online grocery shopping in your area. Many Canadian grocers are offering it now and the delivery fees are often minimal, or even waived if you spend over a certain amount.

    Make it stick: Do your online grocery shopping right after dinner when you’re not hungry. If you do continue going to the store, eat a snack before you shop. Studies show we buy more when we’re hungry!

    10.Make an appointment with a debt counsellor.

    Why it works: Debt counsellors are experts at making a plan to deal with high-interest debt — the kind of debt that ends up costing you more in the long run. If you’ve been resolving to get a handle on your debt for years with no forward action, take the step to ask for help.

    Make it stick: Tell a trusted friend you made this appointment. Research shows that people are more likely to follow through with something if they have told others they are doing it.

    At DebtCare Canada, we’re here to support all of your financial resolutions. We’ll help you make a budget, track your expenses, plan for savings goals, and deal with debt.

    Contact us today to get started. Call 1-888-890-0888 or visit www.debtcare.ca.

  • What You Should Know to Be Financially Prepared for 2019

    Make a Personal Finance Plan for Higher Interest Rates, Mortgages, Line of Credit Payments, and More

    The new year is upon us. Do you have a personal finance plan for 2019?

    The Canadian economy is changing. We have already seen the effects of this in 2018. Canadian consumer debt is staying at high levels — Canadians owe more than $2.13 Trillion in debt —and interest rates are continuing to rise.

    The same tactics that used to work for managing your finances may not cut it for 2019.

    When interest rates were at all-time lows, if you wanted to renovate your house, it might have made sense to take out a purchase line of credit (PLOC). But rising interest rates mean both higher mortgages and line of credit payments, so this may not be a practical choice any longer.

    The housing market may continue to cool, so home value could decline — meaning it is possible that you will not be able to access as much home equity.

    Plus, if you are using lines of credit with variable interest rates, you may find yourself paying more over the long run, especially if you are already carrying other debts.

    Going into 2019, you should have a plan for your debt — a personal finance plan.

    First, ask yourself these questions:

    1. What debts am I currently carrying?
    2. Are there any that will fluctuate with interest rates (credit card debt, lines of credit, unsecured loans, etc.)?
    3. If so, is there a way that I can consolidate debt now before interest rates increase again?

    Then consider your home equity.

    And, finally, look at what is on the horizon for 2019 (and beyond):

    • What financial projects am I hoping to complete in 2019?
    • What big savings goals are coming up in the next five years? Ten years? (Retirement, kids going away to school, relocating, etc.)
    • How much will I need for those goals and what is the best way to finance them?

    When you know the answers to these questions, you can make a budget for the year ahead and stay on the right financial track.

    There have been several interest rate increases already, and economists are predicting even more in 2019. Waiting and seeing could prove dangerous if you are carrying a lot of debt.

    Even if you are not carrying a lot of debt, it may be in your best interest to think about big expenditures now rather than later. The new year is the perfect time to sit down and plan for the future. Be sure that your planning includes your personal finances!

    DebtCare Canada can help you make a personal finance plan that considers your entire financial position.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Preparing a Budget to Manage Back-to-School Shopping

    Back-to-school shopping in Canada can quickly get expensive. According to an Angus Reid poll of 1,500 people, in 2017 Canadians expected to spend $883 per family on back-to-school supplies and fashion — $325 more than they spent on holiday gifts last year.

    Over half of parents said that back-to-school shopping puts a strain on their household finances. Nearly 40% said it takes months for them to pay off the bill.

    If you’re already in debt, this could mean digging yourself into an even deeper hole. You need a plan to be prepared, especially with the current economic climate in Canada.

    As we’ve previously written, Canadian interest rates are on the rise. This means anything with a variable interest rate (like credit cards) will get more expensive with each Bank of Canada interest rate increase. So, if you rack up another $883 on your credit cards, the interest to pay it back could be potentially even higher if rates keep going up this fall.

    Don’t break the bank with back-to-school shopping — make a plan instead.

    1. Set a Budget

    How much can you reasonably afford to spend on back-to-school expenses without going into debt? Looking at your household budget can help you answer this. If you know what you typically spend in a month without back-to-school shopping, then you might be able to see where there is wiggle room for what you can spend.

    1. Choose Your Priorities

    As you’re reviewing your monthly household expenses, determine what is most important to you. For instance, if you have a monthly budget of $100 for entertainment costs, like new movies or a Netflix subscription, perhaps you forego those expenses this month to pay for back-to-school shopping. If you regularly order takeout, perhaps you decide to devote this month to cooking meals at home and use the savings for your school expenses.

    1. Determine What Back-to-School Supplies You Actually Need

    Your kids may not be big fans of this one, but it will really make a difference to your bottom line. What do they actually need for back-to-school? The school may have sent a list, or you can contact the administration and ask. For instance, they may be required to bring pencils, pens, and a scientific calculator, but they don’t need the latest iPad, the most expensive gel pens, or a brand-new lunch box every year.

    As for clothing, do they need new clothes because they’ve outgrown their old ones, or is new clothing just a nice-to-have? If it’s the latter, perhaps you agree to buy one or two new outfits but cap it at that. You could even put new clothing into your budget for the whole school year and use it as an incentive to keep grades up.

    1. Make Smart Shopping Choices

    Once you’ve determined what you actually need to buy, now you need to decide where to buy it. Some stores are going to cost more. If possible, avoid those shops. Plenty of great supplies can be found at less expensive options, like a dollar store, or , too. If you have friends with children a little older than yours, they may have clothes or school supplies their kids don’t need anymore.

    You can also get creative with your clothes shopping. Consider looking for a clothing swap (or organizing your own). This can be a lot of fun because it feels like going shopping without spending a lot of money.

    If your kids have supplies they’re no longer using, you could also sell those and use the proceeds for this year’s shopping.

    1. Look for Alternate Funding Sources

    If you absolutely must buy an expensive back-to-school item, like a laptop, and there’s no room in your budget, there may be assistance available. Ask about funding programs at your school or in the community.

    If you do need to go into debt to afford the back-to-school expenses, make it a smart debt. Don’t rack up credit card expenses that will take months to pay back, result in high-interest payments, and potentially harm your credit. Also avoid payday loans as they are dangerous cycles that are hard to get out of.

    Instead, look for a small personal loan with a reasonable interest rate that you can pay back in fixed monthly payments. This way you’ll know exactly what you have to pay every month and be able to budget for it accordingly.

    Back-to-school shopping can be expensive, but with some forethought it doesn’t have to break the bank. DebtCare Canada can help you make a budget or explore your options for loans or financial products that help you build credit.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • 2017 Budgeting Tips: Planning for the Year Ahead

    Many Canadians start a new year with a resolution to get their finances in order. Creating and maintaining a budget is a great place to start. This week, we’ve got the 2017 budgeting tips that will help you build a plan and stick to it.

    2017 Budgeting Tips:

    The first step in creating a successful budget is to think about why you’re budgeting. If you’re creating a budget just because – because someone told you it’s a good idea, be it a family member or a financial success book – budgeting won’t work. The real purpose of budgeting is to indicate where your spending weaknesses are and provide the structure for you to get stronger in those areas. It also helps to have a goal in mind – this works as a great motivator when it comes to sticking to your budget.

    Step two is writing down what you earn – from all sources.

    Step three is likely the most difficult and will probably take the most time – write down all of your monthly spending. This means both regular and sporadic payments. Sometimes it helps to have the first month be your test month. It shouldn’t actually be a budget at all, it should instead reflect your spending in an average month. Then you can use that data to build an accurate, realistic budget.

    Take advantage of the various budgeting tools available – even if this means something as simple as a pencil and paper. Use such tools to keep track of spending to ensure you’re staying within your budget guidelines.

    Creating a budget can be a frustrating task. Staying on budget can be even harder. Once you’ve created your budget, it’s important to stick to it. Here are some 2017 budgeting tips to stick to that budget:

    • Use cash and only cash, for everything
    • Divvy up your weekly spending into envelopes or jars
    • Make sure you get and keep receipts
    • Share the responsibility with someone else

    If your budget shows nothing left at the end of the month to pay down debts above and beyond minimum payments, you may want to consider other solutions such as a debt consolidation or even a consumer proposal, depending on how bad your financial situation is. Minimum payments will never lead to you paying off your debts.

    At DebtCare, we can help you create a financial plan to pay down debt and move towards a more stable financial future, no matter your current situation.

    Call us today, we can help. 1-888-890-0888.

     

     

  • Holiday Budget Planning: Tips to Keep The Season Cheerful

    holiday-budget-planningSo many of us are guilty of overspending during the holidays; the gifts, the outfits, the events, the food. All of this spending can quickly spiral out of control, turning what should be a joyous season into a stressful one. This is especially true if we start early and don’t keep track of what we’ve purchased. This year, keep the stress at bay with these holiday budget planning tips.

    Set a budget – and stick to it! This should always be the first order of business. Take a realistic look at your bank account and set a total that you can spend without setting yourself up for a massive bill once the holidays are over. Set an amount for each person you need to buy for and stick to it.

    A great way to do this is with the envelope system. Once you’ve set an amount, put that amount in an envelope with the receiver’s name on it. Once the envelope is empty, that person is done.

    Keep a list. All too often we buy, assume we are finished, and then see ‘that perfect gift’ that so-and-so just can’t live without. Trust us, they can. Keep a list of what you’ve purchased for each person, and consult it when you’re wondering if you have ‘enough’.

    Go DIY. Personal, hand-made items are often far more special than something purchased from a store. Take advantage of the countless boards on Pinterest and make some gifts. Just be careful, some DIY gifts are actually pretty costly, so just price out the items before diving in.

    Host a potluck. It isn’t just the gift giving that adds up around the holidays. Hosting a big party and providing food for all of your guests can get pretty costly. This year, instead of handling all of the food yourself, ask guests to bring their favourite holiday dish. This not only spreads the spending around, it may just open your eyes to new recipes to add to your cookbook!

    Start saving now for next year. Now is the time to start thinking about saving up for next year. Once the holidays end, start putting away even just a few dollars a week – once next November rolls around, you’ll have an impressive little nest egg from which to draw.

    Have a plan to deal with holiday debt. If you know that, no matter what you do, your budget won’t be able to handle the extra spending, and your credit will take a major hit, have a plan in place to deal with the debt.  Get in touch with a financial specialist to discuss all of the options available to you and get ready to start 2017 off on fresh financial footing.

    At DebtCare, we know how tough the holidays can be when money is a concern. Let us help.

    Get in touch today to find out about strategies to deal with debt before it gets any worse. 1-888-890-0888.

     

     

  • Tips for Starting Summer on Fresh Financial Footing

    summer familySummer is here, the kids are out of school and you have the next 3 months to look forward to “mom, do you have $20 so I can go to the movies?” Summer, more so than any other holiday, can be one of the most expensive seasons of the year. This is your opportunity to seize the day and kick your summer off on fresh financial footing.

    Cut back on expenses. People are out of the house more in the summer, so look at expenses you can trim back on.

    • Find savings in the budget – Even if you can find 10% savings in your budget you will be ahead of the game. It is not that hard to do either. Look at cable for example: during the summer everyone is out of the house, so why pay for the full supply of channels? Walk around the house – how many TVs do you have with rented cable boxes? Those boxes cost $5-$10 to rent monthly, and getting rid of 1 or 2 doesn’t mean those TVs won’t work – it just means that they may not have all 9999 channels – but your pocketbook will be heavier!
    • Register kids for activities – Registering the kids for activities is actually often far cheaper during the summer than having them home (depending on the activity). Organized activities are not only good for your kids’ personal development, they also keep them out of the house and keep them from eating all your food and asking for activity money, mainly because organized activities often involve some form of lunch room so your kids can bring a lunch instead of scooping $5 from you to go out to eat with their friends.
    • Have a garage sale – Want to generate a lump sum to pay bills or even for kids’ summer activities? A garage sale is a great way to do it. If you haven’t used something in a while, just get rid of it. This gives you a financial benefit and also leaves you with a de-cluttered house =)
    • Grow some produce at home – Food is often a huge expense, so curb your grocery expenses by starting a garden in your yard. Savings on produce can add up to a minimum $20 per week savings in your grocery budget.
    • Take a good hard look at your debt – If your cash flow feels pinched, one reason may be because your monthly payments on loans and credit cards are too high. Summer is a better time than ever to sit down with a financial professional to look at ways that you can restructure your debt to put more cash flow back into your household.
    • Take advantage of free, fun, family activities – There are tons of free activities that you can do with the family to help save. Look at the GTA – the beach, Centre Island, a host of parks – there are so many “entrance free” activities to enjoy that you can surely find savings on the weekends.

    Trimming back coming into the summer and clearly communicating your plans with your family is your best shot to glide through summer on better financial footing. Call DebtCare Canada today for more summer budgeting tips: 1-888-890-0888.

  • What Does A Trustee Do?

    If you have financial problems and have thought about consulting a trustee in bankruptcy, you may be curious about the role that they play in helping you deal with your financial problems, and may be asking yourself “what does a trustee do anyway?”

    The first thing to know is that a trustee in bankruptcy does not represent you. You may have seen advertisements by trustees that make it seem as though they want to help you. What does a trustee do? Well, they are a court appointed officer that administers bankruptcies and consumer proposals. They have an obligation to act in the best interest of both you and your creditors.

    Let’s look at a bankruptcy as an example. When you visit a trustee to file for bankruptcy they review all of your household income, debt and other financial details and then advise you on what your monthly payment in bankruptcy will be. You make your monthly payment to the trustee in bankruptcy each month. If you have assets or surplus income for example, what does the trustee do? They will ensure that they collect equity in those assets or surplus income for the benefit of your creditors. They are not there to protect your income and assets, they are simply administrators of the bankruptcy process. If they can collect more money through your estate for your creditors, they will.

    Consumer proposals are also administered by trustees in bankruptcy. When you visit a bankruptcy trustee directly to discuss a consumer proposal, they will assess your income, debt, assets and other personal household and financial information. What does a trustee do next? They will suggest an amount of a consumer proposal that they believe will be accepted by your creditors. This does not always result in the best deal for you, and if you visit a trustee directly you will have little to no negotiating power because they are simply administering your consumer proposal, so what they present to you is what they will be prepared to go forward with. They are not there to get you the best deal.

    Do you do your taxes without the help of an accountant? Not likely. If you were charged with a crime would you defend yourself without a lawyer? Probably not. Dealing with a trustee in bankruptcy is no different; you should not do so unrepresented.

    Having independent financial representation when considering a consumer proposal or bankruptcy is crucial because it enables you to have your personal and financial information reviewed by a professional who represents and is hired by you and who understands bankruptcies and consumer proposals. They can vet your personal and financial information, identify any issues before a trustee is made aware of them, and help you come up with a proposal to present to the trustee that you can live with.

    Do not answer the question “what does a trustee do” the hard way. Filing a bankruptcy or consumer proposal is an official process. Once you have committed to either one of these processes there is no turning back, so it is important to do everything in your power to ensure that you enter into the process with all of the necessary information. The more informed you are, the better financial arrangements you will be able to make, which will save you thousands.

    If you have more questions about this article “What does a trustee do?” or if you need representation in a consumer proposal or a bankruptcy please visit www.debtcare.ca or call 416-907-2582.

  • How to Rebuild Your Credit Blog Series – Part 4 Having Too Many Credit Products and Too Much Debt

    This is the fourth blog in a 4 part blog series about how to rebuild your credit. When you accumulate too much debt or have too many credit products, this can harm your credit. Credit card companies are aggressive, using marketing points programs, promotion and incentives to entice consumers to take out a credit card. Over time, it is not difficult to find yourself with several different credit cards with balances that are accumulating interest.

    If you want to know how to rebuild credit and you have several credit cards, your first step will be to close some of them. Some financial advisors will tell you that closing credit cards will actually harm your credit, when in fact in the long run getting rid of credit cards will increase your credit score. Having one or two credit cards is sufficient to have good credit so if you have more than that, closing some of them is a good idea. How you go about closing credit cards is the key.

    Firstly, closing all of your credit cards is not a great idea unless it is part of an overall plan to settle out your debt, and then taking out a single card to rebuild your credit. Simply closing down all of your credit cards without a plan to have a credit item to rebuild credit will reduce your credit score. If you have accumulated a lot of credit card debt and are working with a company to get rid of your debt with a plan to rebuild, then naturally it will involve wiping the slate clean (clearing and closing all credit card debt) and then starting fresh. In the absence of a financial plan to rebuild, closing all of your credit cards may reduce your credit score because you will not have credit reporting to your credit report. This is necessary to build your credit score because it shows new potential creditors, mortgage providers for example, how you pay your monthly obligations.

    Also, do not close out credit cards that have balances. If there are balances on credit cards you should first deal with the balances either by paying them off, settling them, or including them in a financial program to get out of debt. Once the balances are cleared, you can go ahead and close out the card. If you close cards when you have balances the result will be a credit card that has a balance and a zero credit limit and this will have the same negative impact on your credit report as if you have a credit card that is maxed out (see part three “Credit Balances That Are At, Close to or Over” in our four part blog series How to Rebuild your Credit).

    Additionally, if you plan to close out your credit cards make sure you write to the credit card provider clearly indicating that it is you who wants to close out the credit card balance. When a creditor closes your credit card they can report one of two things to the credit bureau: “credit limit closed by consumer” or “credit limit closed by credit grantor” – you do not want the latter reported on your credit report. Sending a letter will enable you to prove to Equifax that you in fact closed the card in the event that the credit does not report who closed the card accurately.

    This may all seem like good advice, but if you are drowning in credit card debt, closing credit cards right now is not really an option without a financial plan. Learning how to rebuild your credit takes time, as does dealing with accumulated credit card debt. There are fast and effective methods to deal with debt and start rebuilding your credit, but in most cases they will involve the assistance of a financial professional who can guide you out of your debt with a plan.

    If you would like more information about how to rebuild your credit or if you are in debt and need some guidance, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • Debt Reductions Companies in Canada – Do Your Due Diligence

    When making a big ticket purchase like a vehicle, you do your research right? You check the history of the vehicle, ensure it has not been in accidents, learn about the ownership, check the maintenance record for the vehicle and more. Your personal finances are no different and if you are in financial trouble, before choosing a company to help you, you really should do the same kind of research.

    “The banks are offering a program that’s about to run out” or “time is running out on Federal Government Programs”; sound familiar? Debt reduction companies are spending hundreds of thousands of dollars on advertising per/year to sell you on this message. The question is; is it true? And do they “really” help? Is there really a program that all of the banks collaborated on and is time running out? Is it true that the Federal Government programs that help Canadians get out of debt could end in the near future? And…what do they do anyway? Let’s get to the bottom of it.

    First of all; all of the banks have not gotten together to offer a debt reduction program, hence time is not running out; because it simply isn’t true. The only Federal Government programs that help Canadians deal with debt are administered under the Bankruptcy and Insolvency Act (BIA). The Federal Government has made no announcement that there is a plan to eliminate the BIA legislation and there is no other Federal Government program that we are aware of that helps Canadians get immediate, legislated, debt relief. Seeking debt relief under the BIA does not mean that you have to go bankrupt and Federal Government programs are a viable means to get out of debt when a financial crisis emerges. The BIA offers different remedies to deal with debt, but the principal program offered by debt reduction companies doesn’t even involve relief under the BIA.

    Debt reduction companies collect money from you on a monthly basis over a period of years with a promise that in the future they will settle your debt. By way of contrast, debt consulting companies represent you and provide you with a range of options to deal with debt that could include a consolidation or even enrolment in a credit counselling or Federal Government program. Debt reduction companies have one primary goal and that is to collect your money on a monthly basis. This is where the money that they use to advertise to you comes from. The Financial Consumer Agency of Canada (FCAC) recently issued a consumer alert about debt reduction companies; you can view the alert here http://news.gc.ca/web/article-eng.do?nid=649969.

    Before you deal with a debt reduction company, do your due diligence. While writing this article we took some simple steps that any consumer who has access to a computer can take to research a company; the results really scared us.

    We visited the first debt reduction company’s website and there were many red flags. First, there wasn’t any information about the company’s ownership. Are they Canadian? American? Who is their president and what does he or she stand for. The company publishes no information about their ownership whatsoever. Red flag #1!

    We Googled “who owns [company name]” and nothing came up. Red flag #2!

    We went to Linkedin and ran a search by company name to see how many professionals on Linkedin are employees of the debt reduction company. The only profile that came up was an individual page branded for the company – not one employee and not a single name of anyone associated with this company emerged as a result. You would expect that a company that bills itself as a national provider of debt reduction services would have at least one employee with a profile on Linkedin; the world’s largest professional networking site. We would liken this to you not knowing a single person who has a Facebook account. Red flag #3!

    Finally, we searched “[company name] reviews” and on the first 3 pages of Google we found no less than 6 pages by companies who represent people and individuals themselves who reported very serious claims about this debt reduction company. Red Flag #4!

    Don’t believe everything you hear! Ads are paid for by the advertisers, companies pay the BBB to be members and any company who doesn’t wilfully and publicly provide information about their corporate structure and ownership, may not be a company you should commit to paying hundreds of dollars per/month for years to come.  When it comes to debt reduction companies do your due diligence.

    For more information about debt reduction companies and how you can do your due diligence please call DebtCare Canada at 416-907-2582 or visit www.debtcare.ca

  • What is a Good Budget and What is a Debt Service Ratio?

    The first step to building a positive financial future is to have a budget and to understand your debt service ratios. What is a debt service ratio? There are actually two kinds of debt service ratio. A debt service ratio is a measurement used by the bank to determine if your bills represent an acceptable proportion of your income.

    The two primary debt service ratios are your gross debt service ratio (GDS) and your total debt service ratio (TDS).

    Your gross debt service ratio represents your monthly house payment divided into your gross monthly income, expressed as a percentage. The maximum acceptable gross debt service ratio is 30%. With that said, 30% is the limit so if your GDS is 30% that is not really positive. A healthy budget should include a GDS that’s approx. 25%. If your GDS is more that 30% this is an indicator that your housing payments are too high.

    Your total debt service ratio represents your monthly housing payment plus your monthly payments to all loans and credit cards, divided into your gross monthly income and expressed as a percentage. The maximum total debt service ratio is 40%. With that said, 40% is the limit so if your TDS is 40% that is not really positive. A healthy budget should include a TDS that’s approx. 30%. If your TDS is more than 40% it is an indicator that either your housing payments or your payments of other debt are too high.

    GDS and TDS are two components of a budget. What is a good budget? A good budget involves reasonable housing payments and reasonable payments of debt and expenses with surplus income left over to contribute to savings. A good budget should factor in all of your expenses. One key to positive money management is awareness. There are three primary budget related factors that contribute to families that live paycheque to paycheque. The first is unrealistic housing payments, the second is over spending and the third is too much debt.

    When looking at your budget, consider what you spend on things like entertainment, food (especially take out and dining out) and shopping. These are the three most common places that wasteful spending occurs. Avoid credit cards and use cash as opposed to your debt card an effective way to be more aware of what you spend and to avoid incurring more debt. Set yourself a daily cash allowance that includes a weekly personal reward so following your budget is not all work with no play.

    Where debt is concerned, take a good hard look at how much you owe and how you are paying your creditors. If you are only able to make minimum payments or are finding it difficult to even make minimum monthly payments, this is a sign that you may be over-extended. Sitting down with a debt consultant is one good way to realistically review the debt that you owe and your budget to come up with a financial strategy to deal with debt and improve your financial situation. If you still have questions as to what it a good budget or about debt-servicing, debt consultants can generally answer those questions for you too.

    For more information about building a good budget and gaining a better understanding of your debt service ratios please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca