Estimated reading time: 11 minutes
Uncover the signs of financial difficulty and learn how proper money management can help you avoid bankruptcy. Take control of your financial situation today.
Financial Difficulty Is A Mop and Bucket Away
A common cause of financial difficulty typically stems from an inability to manage money properly.
Obvious right? Well, not to everyone, which is why bankruptcy exists.
Money management is the key to success and critical to anyone who wants to avoid financial difficulty.
Reducing financial difficulty seems as easy as getting more credit, but that’s only a short-term fix.
It’s a band-aid that many Canadians take on because they feel they have no options other than credit counseling and bankruptcy.
Going bankrupt is no easy decision,, but if you’ve dug a, deep hole, that may be your option.
Before you even jump on the end-game wagon, perhaps there are signs that you are missing.
It’s easy to brush debt under the carpet when you have other sources of income or ways of silencing creditors.
No one wants to believe they are suffering financial difficulty, making it easier to ignore mounting debt.
This avoidance causes Canadians to hide from their debt concerns in the first place.
Financial Difficulty Ahead
Dear Mr.CBB,
My husband and I have been married for five years, and I feel we are headed towards a life of financial difficulty.
Unfortunately, I am the only person in the relationship who can sense this impending doom since I pay the bills.
I was hoping you could help me compile a list I could sit and share with my husband when I talk to him about our financial problems.
I think having support from a financial expert such as yourself might help him grasp our problem’s severity.
I’m tired of taking on the burden of stress every month, trying to make bill payments on time, and wondering if we will lose our house.
For instance, I had to borrow money from my sister last month to pay the mortgage.
I’m terrified for the rest of the year as I hope to juggle the money to make ends meet.
Thanks for any help,
Audrey.
Pickering, Ontario
What is Financial Difficulty?
Financial difficulty is when you can’t make ends meet, as Audrey is experiencing above.
You are not able to pay your bills on time, as a whole, or you are even limiting one budget category to pay for another.
An example might be lowering your grocery budget to pay the minimum payment on your credit card bill.
It becomes a sink-or-swim situation when you realize you are in financial difficulty.
It won’t fix itself and will take an army of people, typically those who created the financial difficulty, to fix it.
However, many warning signs regarding financial difficulties are hard to miss.
Credit Card Problems
If you dread getting the mail and let it pile up once a week only because you know there are bills to pay, this is a big problem.
Credit card debt is one of the most common forms because owning a credit card is easy.
The problem with credit card ownership is being loyal to the money you spend by paying it back in full.
When you don’t do this, the amount you owe will continue to rise through interest accumulation and any other purchases you make.
If you find you are only paying the minimum balance and have multiple credit cards maxed out or near, you are in financial difficulty.
Using a Spouse’s Credit Card
The other day, I watched a documentary about a woman who was unhappy with her life and took on shopping as a high.
When her credit cards were maxed out, she would steal her husband’s credit card and use it to shop.
Since she managed the bills, he wouldn’t even know she was doing this because she ensured it was paid off by defaulting or paying the minimum on other debts.
Limited Savings
You may have financial difficulty if you don’t have a savings account with emergency savings for 3 to 12 months of your monthly expenses.
The worst feeling in the world is having an empty bank account or living paycheck to paycheck.
Borrowing Money
You may take cash advances from your credit card, take out bank loans, or call friends and family to lend you money.
If you do any of the above, you suffer from financial difficulty and need to mop it up quickly.
If you are the lender in this situation, especially friends and family, consider whether you can afford to part with money you may never see back.
Graduating with debt from a bank loan and no job will also push you into this category.
Although you may have heard borrowing to educate yourself is a good debt, at the end of the day, it’s still debt.
Bill Payments Late
Are you that person who pushes the limit on due dates for your bills in hopes you’ll come into some money?
Perhaps you’re calling utility companies and offering them excuses or lying about why your bill payment will be late.
Whatever the case, late or partial bill payments are a sign that financial difficulty is in your corner.
Fight it, or it will fight you.
Minimum Payments
You should never pay the minimum payment on credit cards if you can afford to pay it in full.
You shouldn’t even be using a credit card if you can’t pay the bill every month.
Credit cards are not free money, and paying only the minimum is asking for trouble.
Stealing
If you must resort to stealing, then it’s pretty apparent you suffer from financial difficulty.
Stealing is not only illegal, but it can land you in jail, a police record, and a hefty fine, along with a ban from the store.
So many things can happen when you get caught stealing that it’s never worth the effort.
Almost every community in Canada has a food bank or community service to help people in need of food, clothing, and furniture.
If you are stealing big-ticket items to sell to pay your bills, you have financial difficulty and a money mindset that needs adjusting.
Lastly, you have financial difficulty if you are breaking into cars, houses, or businesses or coming up with scams to steal money from people.
Creditors Calling
You have financial difficulty if you cringe when the phone rings because you think it’s a creditor wanting you to pay them back.
Creditors will hound you until you pay all or even part of the money you owe a company.
In some cases, the company you owe a debt to will sell that debt to third-party creditors who will come after you, knife and fork in hand.
They will stop at nothing to get their money back, even if they break the laws in Canada.
It happens every day, law or not.
Related: How To Deal With A Debt Collector You Can’t Pay
Homelessness
Lastly, if you live in your car, couch surfing, or on the streets, you suffer from financial difficulty.
Resources are available to those in need, and if you want to get off the streets and into a new life, leap.
You can’t expect a job to come to you, so do what you need to do to get where you need to go as long as it’s legal.
5 Ways To Fix Financial Difficulty
When you suffer from financial difficulty, one of the first steps to take is to let your creditors know.
They may offer payment options by making a simple phone call and explaining to them that you have financial setbacks.
Other ideas would be to use the food bank to help cut down on expenses and pay off debt so you can get ahead.
Before buying anything new, shop for second-hand items such as clothing and other household needs.
Let’s have a look at five other ways you can work on fixing your financial difficulties.
1. Budgeting
Getting out of debt with a budget is commonly heard from about every financial expert, and it’s true.
You must know where your money is going and have a place for it every month.
By creating a budget, you have a money plan that keeps your finances in order.
However, for a budget to be efficient, you need income and consistency.
2. Teamwork
If you are in a relationship or married and are suffering financial setbacks, you must work together.
Having only one partner take on the burden of financial hardship is a surefire way to stress, depression, divorce, or terminating a relationship.
Take turns with budgeting chores or take charge of who does what and when in terms of budgeting.
Having a budget is only one step in the process; executing the budget is the other.
Both need to be present for a budget to work.
If you are not in a relationship, you know what you need to do and have only your answer.
3. Multiple Income Streams
I remarkably advocate for having more than one or two income streams because they will always be handy.
Starting this blog became a second income stream I never imagined would happen.
Sometimes, doing something you love can earn you extra income on the side or even passive income, as in this blog.
Passive income is when you earn money while you are sleeping.
Anything you profit from, such as earned income, second income (spouse), investments, rental income, and online businesses, are just a few examples of multiple income streams.
4. Financial Tracking
It would be best to track where your money is going, or your finances will fail.
The easiest way to track your money is to request receipts and document daily expenses.
Taking 10 minutes to familiarize yourself with your spending habits is worth its weight in gold.
Fixing financial difficulty when you have a spending record allows you to wipe away the debt.
5. Learning To Say No!
There are lots of reasons why you need to say no when it comes to your money.
- Do your friends/family invite you out often for a night on the town? (Parties, Gatherings, Trips.)
- Have you been asked to co-sign to help someone in need?
- Does the lure of sales tug at your pocketbook?
- Are you bored and find yourself spending money you don’t have?
The reasons you should say no is personal and can take a devastating toll on your financial life.
An unfortunate lesson we learned early in our budgeting career was walking away.
Learning to say no to spending, lending, and borrowing money is a big step towards financial freedom.
Borrowing money to get a mortgage differs from borrowing money from a credit card.
One assumes a long-term investment with a potential return, and the other is just stuff you buy with the money you don’t have.
Don’t be ashamed to back away from purchases or saying no to your friends and family invites to spend money.
Approach Financial Difficulty head-on
In review, financial difficulty can happen at any age, even when you think you’ve mapped out your path in life.
Health problems, job loss, and many other crises can creep up when you least expect it.
If you want to be prepared, get ahead of the money game now so you aren’t suffering.
In the end, there are limited resources to help people in financial need, and they typically amount to the word Basic.
Whatever you do, make sure you do it for the reasons that meet your needs today and tomorrow.
Discussion: What steps are you taking today to avoid financial difficulty?
Leave me your comments below and any tips you may have for Audrey.
Mr. CBB
When I found myself in financial difficulty after a marriage breakdown, I would ask myself if I would actually DIE if I didn’t spend money on item XYZ. If I could continue to draw breath without XYZ…it simply did not happen. I knew very well that if I had shelter and water, I could find enough food to not die and as a result I could make a bigger dent each month in my outstanding bills until my entire debt was paid off. Did I eat well…healthy yes. Did I eat what I wanted to eat…no. I ate enough to survive. But, I managed to dig myself out of that HUGE financial hole in a couple of years and then there was no stopping me…it was onwards and upwards!
Easy changes for me were to realize I could not afford to continue smoking or drinking alcohol…I was shocked how much I could save by giving up those two items. To this day, I still don’t smoke or drink. In fact…since those funds are no longer needed for debt repayment in my world, they are instead used to ensure hubby and I can travel every year. Some years we go further than others, but we always get to go somewhere.
My question is how badly do you want out of this mess? Are you willing to go to any lengths to be debt free? It really is quite simple, QUIT SPENDING! You may need to earn more income as well. If it isn’t life critical…shelter and water with minimal food – get rid of it! No cable, no phones, no internet, no shopping, no going out for dinner, no whatever else you are spending money on! Harsh yes…but just STOP spending!
The library has books, music, movies and internet that you can borrow for FREE so you aren’t without options for entertainment. It’s time to figure out all the FREE things you can do to enhance your quality of life…walks, picnics, outdoor music festivals, meet up with friends in a park for a visit and bring a thermos of tea to share. Look for FREE classes to take. I learned to sew, quilt, crochet and do canning by taking FREE community classes. I was out in the world with people and it was FUN! Learn to love the word FREE, let it be an inspiration and challenge to you. Look for FREE and let it enhance your life. Our local pool and skating rink have FREE days, watch for them in your community. At least a couple times of year there are FREE dance classes. Hubby and I are certainly not Fred Astaire and Ginger Rodgers but we have taken some free classes…ballroom, salsa, line dancing. It’s an evening out together for FREE. My hubby calls me “The Keeper of the Calendar” and yes I keep track of all the bring forwards, billing dates, appointments etc but I also put in the effort to plan fun stuff that’s free into every single week of our life together. Everyone needs something to look forward to and I announce what we have coming up in the week that I have planned for us. Sometimes it’s Dinner and a Movie Night at our house…we get a movie from the library and I make a big pot of soup or maybe a bowl of popcorn for us to enjoy. I plan cards nights, games nights, reading and a pot of tea nights…really the possibilities are endless. And make sure to work the fun stuff to suit the season…when was the last time you made snow angels together or went snow shoeing around the neighborhood? How about bike riding? Could you put on your rubber boots and go splashing in the puddles on a walk? Cooking and baking together can be another lovely winter pass time where you get to enjoy the tasty rewards. Put on the radio and enjoy a few tunes while you work. Most nights hubby and I eat meatless meals…get some books out of the library and learn how to make budget friendly but tasty meals. I must have read 100 library books when I was laid flat on my back for 6 months after an MVA and the investment of my time has saved us bundles by teaching myself how to eat vegetarian and be healthy. After the 100 books I invested in our future and met with world famous vegan author, Vesanto Mellina, for a 1 hour vegan nutrition discussion to make sure I thoroughly understood what it would take to eat vegetarian and bolster our health in the process. I was on track but I felt much better having it confirmed by someone formally educated on the topic. Hubby still enjoys meat but I plan it into his packed lunches for the office. Pack a travel mug for your tea/coffee in the morning and a stainless steel thermos for your ice water…there’s no need to pay for drinks away from home. I encourage you to pick whatever topic excites you and learn, learn, learn but do it for FREE!
Hubby and I have attended many financial seminars…put on by banks, credit unions, investment companies and seniors facilities, all for FREE. I’m always on the hunt for a webinar that I can learn from as well. It can be done from the library…and if the topic excites me, I can grab a book afterwards to expand my understanding on the subject.
If you want to appreciate your life, volunteer somewhere. It will give you a whole new appreciation of how good your life is compared to others. Are any of your neighbors seniors or disabled? Mow their grass or shovel their snow for them and I am sure you’ll receive either a glass of ice water or a hot drink for your efforts depending on the season. The elderly have a lifetime of wisdom to share…and it’s FREE!
Remember that whatever changes you make, they are just for today. You can do anything for one day, even if you wouldn’t want to do it for a lifetime! One day at a time, you can get yourself back onto sound financial footing. Start now!