Debt repayment, retirement income savings, child care costs and household food costs. These are some of the largest financial challenges facing us today. Recently BDO Canada Limited conducted some research into the affordability of life in Canada. The Ipsos poll looked at what challenges everyday Canadians are currently facing. The results, detailed in an Affordability Index, show that a shockingly high number (46 per cent - almost half) of Canadians admit their income isn’t sufficient for them to live debt free, and that nearly one-quarter (23 per cent) indicate that their debt is “overwhelming”.
The concern I have about the above survey results is the parasitic nature of debt. Once your debt has become overwhelming it drains your purchasing power and sucks the energy out of your household and your relationships. A re-read of my blog on getting off the debt treadmill is a helpful place to start for those that are overwhelmed by debt.
What else can you or should you do if you are one of the many Canadians facing an affordability crunch?
If you’re trying to tackle life’s affordability challenges, the first action you should take is to sit down and review your recent purchase history. Gather the data on where your money has gone. This should be easy if you are keeping a budget and tracking household expenses. Once you have your data, go through the expense items and on a piece of paper or Excel spreadsheet, separate all of your expenses into one of two categories: need or want.
To tackle debt and life’s affordability challenges you need to really challenge yourself to keep your expenses down to the basic needs. Trust me on this, a person rarely “needs” a latte, or gym membership. If you are trying to tackle debt you have to be brutally honest with yourself and cut things back to the only the necessaries of life.
After you have isolated the needs from the wants, the second action you should take is to remove the temptations in your life. Learn to live on cash, cut those cards and stick to your budget by removing the crutches supporting your impulse purchases.
Now that you are down to spending on just the needs in life, and the credit crutch is gone, it’s important to really balance that budget. Then, sift through the clutter in your life for possessions to sell to help pay down debt. Selling items like treadmills and bicycles and downsizing the car are just a few ways to find funds to help you pay down your debt.
Life is short and it isn’t cheap. Missing out on the good stuff because debt repayment costs are eating up your income can be avoided with some planning, self-control and little bit of budget work.
Jayson Stoppel is a Licensed Insolvency Trustee and Chartered Accountant with BDO First Call Debt Solutions. With over 18 years in practice, Jayson assists individuals, families and companies with financial difficulties in Thunder Bay and throughout Northwest Ontario. To reach Jayson by email: JStoppel@BDO.ca. To find Jayson on Twitter: @CreditCoachJS.