3 Financial Goals That Can Help You De-stress Your DebtFeb 02, 2017
For many BC families, times were tight in 2016 — whether it was due to the volatile housing market, the high cost of living or the wage cuts some experienced after losing jobs in Alberta’s oil industry. Unfortunately, 2017 may bring a new set of financial challenges and the stress that goes along with them — BC is predicted to be hardest hit by the expected rise in food prices this year. Some families may need to cut back further to make ends meet. Some may find themselves using credit to stretch their income, and ultimately looking for debt help.
The good news is there are positive steps you can take to improve your current financial situation and prepare for what’s ahead. It starts with creating goals that are Specific, Measurable, Achievable, Realistic and Timely, or SMART goals. The Financial Consumer Agency of Canada website has a short video and a Financial Goal Calculator that will help you create your own SMART goals for 2017. Here are three goals that you might want to include in your 2017 financial plan.
- Make small changes over time. When money is tight, achieving debt freedom can seem like a distant goal. There’s no doubt that larger, lower interest debts — like mortgage debt — are meant to be repaid over a longer period of time. However, if you have a lot of high interest credit card debt or a large student loan, it’s a worthy financial goal to fast track repayment if you can. Think in terms of achievable changes. A few minor adjustments to your budget, when made over time, can really have a positive impact on your debt reduction goals. Keep track of any reduced expenses or changes in your spending behaviour on this United Way Small Change App — then direct what you’ve saved towards debt repayment. Small changes add up over time.
- Contribute to a rainy day fund. Having money set aside in case of an emergency is a real stress reliever. Most financial advisors suggest having three to six months of living expenses in your emergency savings, but don’t let that amount add to your stress. An emergency fund of that size is a long-term goal for most individuals. Think short-term instead. What would be a manageable amount for you to put aside weekly, monthly or annually? Even a small regular contribution will make a difference over time.
- Learn about alternatives to payday loans. An increasing number of Canadians are resorting to payday loans to make it from paycheque to paycheque. A recent survey reveals that the number of Canadians taking out payday loans more than doubled from 2009 to 2016. The problem is that payday loans are much costlier than other debt options. Annual interest can reach almost 600%. In fact, the BC government has recently instituted restrictions on how much interest can be charged on payday loans — the maximum fee that can be charged on $100 loan decreased from $23 to $17 on January 1, 2017. If you feel like a payday loan is your only answer, it’s important to understand that there are alternative solutions. Consider seeking debt assistance from a Licensed Insolvency Trustee (LIT) to explore other debt relief options that are available.
Even when times are tight, it’s important to set short, medium and long-term financial goals. A year spent on or tackling high interest debt, establishing a rainy day fund or learning about debt solutions can help make a real difference to your financial well-being.
What are your financial goals for the year ahead? Join the conversation on Twitter using the hashtag #BDOdebtrelief.