Personal Financial Counselling
Personal Financial Counselling Can Help You Take Control of Your Finances
For those in Calgary and Edmonton, it’s no secret that debt can be a major burden on your finances, your mental health, and your overall well-being. Whether you’re dealing with credit card debt, student loans, unpaid income taxes or other financial obligations, it can feel like you’re trapped in a never-ending cycle of payments and stress.
In 2021, Alberta led the country in personal debt. According to this CBC article, Albertans had the highest average debt at over $25,000. A March 9, 2023 CTV article reported that credit card debt increased 15% over the past year. Families in Calgary and Edmonton are feeling the pinch with food and fuel inflation. The good news is that there is a way out.
Personal financial counselling can help you break the chains of debt and take control of your finances once and for all. With the help of a skilled financial counsellor, you can create a plan to pay off your debts, manage your money more effectively, and achieve your financial goals. In this article, we’ll explore the benefits of personal financial counselling and how it can help you achieve financial freedom. So, if you’re ready to take control of your finances and start living the life you deserve, read on to learn more!
Understanding Your Current Financial Situation
Before you can take steps to improve your financial situation, you need to understand where you currently stand. This means taking a close look at your income, expenses, and debt. Start by creating a list of all your income sources, including your salary, any side hustles, and any passive income you receive. Next, make a list of all your expenses, including your rent/mortgage, utilities, groceries, transportation costs, and any other bills you have. Finally, make a list of all your debts, including credit cards, loans, and any other financial obligations.
Once you have a clear picture of your current financial situation, you can start to identify areas where you can cut back on expenses and make adjustments to your budget. This will help you free up more money to put towards paying off your debts and achieving your financial goals.
Identifying the Root Cause(s) of Your Debt
One of the most important steps in getting out of debt is identifying the root cause of your financial problems. This may be a lack of income, overspending, or a combination of both. By understanding the root cause of your debt, you can create a plan to address the underlying issues and prevent them from happening again in the future.
For example, if your debt is primarily due to overspending, you may need to take a closer look at your spending habits and make adjustments to your budget. This could mean cutting back on non-essential expenses like eating out or buying new clothes or finding ways to earn more income to cover your expenses, such as a part time job or turning a hobby into a source of income.
Creating a Budget and Financial Goals
Once you have a clear understanding of your current financial situation and the root cause of your debt, it’s time to create a budget and set financial goals. A budget is a plan for how you will allocate your income to cover your expenses and achieve your financial goals. Your financial goals may include paying off your debts, saving for a down payment on a house, or investing in your retirement.
When creating your budget and financial goals, it’s important to be realistic and take into account any unexpected expenses that may arise. You may also want to work with a financial counsellor to ensure that your goals are achievable and aligned with your overall financial plan.
Debt Management Strategies
Once you have a budget and financial goals in place, it’s time to start paying off your debts. There are several debt management strategies you can use to accelerate your debt payoff and achieve financial freedom. These include:
Debt Snowball Method: This is a debt repayment strategy where you focus on paying off your smallest debts first and then move on to your larger debts. By starting with your smallest debts, you can build momentum and gain motivation as you see your debts disappear one by one.
Debt Avalanche Method: This is a debt repayment strategy where you focus on paying off your debts with the highest interest rates first. By prioritizing your high-interest debts, you can save money on interest charges and pay off your debts faster.
Debt Consolidation: This is the process of combining multiple debts into a single loan with a lower interest rate. Debt consolidation can make it easier to manage your debts and reduce your overall interest charges.
Orderly Payment of Debts: An orderly payment of debts or OPD, is a structed repayment plan in which 100% of your unsecured debt, such as credit cards, lines of credit, income tax debt and unsecured bank loans are paid off over a maximum of 5 years with an interest rate of 5%. This program works well for people who can afford the monthly payments with the reduced interest rate.
Consumer Proposal: A consumer proposal is a structured settlement of your unsecured debts over a maximum period of 60 months at an amount less than the face value of your debt depending on your personal situation. A consumer proposal must be filed through a Licensed Insolvency Trustee, who is licensed by the Government of Canada to assist people in getting a financial fresh start.
Bankruptcy: When all other avenues to deal with your debt have been either exhausted or are simply not viable in one’s personal situation, bankruptcy may be the right solution to getting yourself out of debt and on the road to financial freedom. Like a consumer proposal, a bankruptcy must be filed through a Licensed Insolvency Trustee.
Saving and Investing Tips
In addition to paying off your debts, it’s important to set aside funds to establish an emergency fund. An emergency fund is a savings account that you can use to cover unexpected expenses like car repairs or medical bills. While everyone’s needs are different, a goal may be to have three months of expenses set aside in an emergency fund.
Since none of us are going to get any younger as time marched on, starting some form or retirement account should be worked into your financial plan. Speaking with an investment advisor would be a great starting point in starting this journey.
The Benefits of Working with a Personal Financial Counsellor
While you can certainly take steps to improve your financial situation on your own, working with a personal financial counsellor can provide additional benefits. A financial counsellor can offer expert advice, guidance, and support as you work towards achieving your financial goals. They can also help you stay accountable and motivated and provide ongoing support as you navigate the ups and downs of your financial journey.
How to Find a Reputable Financial Counsellor
If you’re interested in working with a personal financial counsellor, it’s important to find a reputable provider. Start by asking for recommendations from friends or family members who have worked with a financial counsellor in the past. You can also search online for financial counsellors in your area and read reviews from past clients.
When choosing a financial counsellor, look for someone who is experienced, knowledgeable, and has a track record of helping clients achieve their financial goals. You should also feel comfortable with your counsellor and be able to communicate openly and honestly with them.
Speaking with a Licensed Insolvency Trustee (“LIT”) may be one of your first choices. A LIT will review your personal situation and will review all of your options that are available.
Common Misconceptions About Personal Financial Counselling
There are several misconceptions about personal financial counselling that may be holding you back from seeking help. Here are a few common myths and misconceptions:
Financial counselling is only for people with a lot of money: Financial counselling is for anyone who wants to improve their financial situation, regardless of their income or net worth.
Financial counselling is only for people with a lot of debt: Financial counselling can help you achieve any financial goal, whether it’s paying off debt, saving for a down payment on a house, or investing in your retirement.
Financial counselling is expensive: While some financial counsellors do charge high fees, there are many affordable options available. You can also look for non-profit organizations that offer free or low-cost financial counselling services.
Success Stories of Individuals Who Have Benefited from Personal Financial Counselling
Working with a personal financial counsellor can truly be life-changing. Here are a few success stories from individuals who have benefited from personal financial counselling:
Samantha: Samantha was drowning in credit card debt and struggling to make ends meet. She began working with a financial counsellor who helped her create a budget and debt repayment plan. With the counsellor’s support and guidance, Samantha was able to pay off all her credit card debt and achieve financial stability.
Mike and Julie: Mike and Julie were in their 50s and had no retirement savings. They began working with a financial counsellor who helped them create a retirement plan that was achievable within their budget. Today, Mike and Julie are on track to retire comfortably and enjoy their golden years.
Chris: Chris was a recent college graduate who had no idea how to manage his finances. He began working with a financial counsellor who taught him about budgeting, saving, and investing. Today, Chris is debt-free and has a solid financial plan in place for his future.
Debt can be a major burden on your finances and your overall well-being. But with the help of personal financial counselling, you can take control of your finances, pay off your debts, and achieve your financial goals.
By understanding your current financial situation, identifying the root cause of your debt, creating a budget and financial goals, and using debt management strategies, you can achieve financial freedom and live the life you deserve.
So, if you’re ready to break the chains of debt, consider working with a personal financial counsellor, today!