Bankruptcies soar above 50% in June 2009 in Canada

Posted: August 11th, 2009 | Author: Mo2 | Filed under: Banks, Finance, Mortgage, Planning | Tags: , , , , |

The recession is hurting many. Losing jobs can lead to the downfall of so many parts of our lives especially if we have debt. In most likelihood we all have some sort of debt from credit card balances to car loans and mortgages. This number is most likely reflected in most nations around the world as we are all in the same boat to some extent.

http://www.cbc.ca/consumer/story/2009/08/11/june-canada-bankruptcies235.html

According to this CBC article, there were 10,823 bankruptcies in the month of June this year, up 54.3% from the same time a year before.


What Can You do to Avoid the same boat?
There are times when everything falls apart but you need to stay prepared for the worst scenario. That’s why so many talk about the “Rainy Day” fund and its importance. You need to keep 3 months worth of living expenses saved away. This basically means that you need 3 months of wages so that you can survive in the case that you lose your job.

The problem is that with the recent recession, many are unable to find a job within 3 months of losing their job. This is a tough reality since it’s getting increasingly difficult to find a job, which is evident from rising Unemployment numbers. You may have to settle for a pay cut or try and explore different career opportunities but having a job is extremely important so that you can take a positive step forward and keep your finances in order.

What part of your Finances should you make your priority?
The obvious part of this is your living expenses. Not only should you be putting out money to buy food and pay for rent, you have to sit down and look to cut costs. You have to lower your living standards if you are living paycheck to paycheck and look to save money. The more you save, the more you helping yourself move a step forward.

After you have done that, pay down the debt carrying the highest interest. Credit cards usually have effective interest rates that are insane. As long as you carry balances on any credit card, you are on the road to financial doom. Never carry a balance on any credit card! If you have a line of credit with the bank, use that to pay off your credit card.

Upon paying off your credit card and maintaining a monthly balance that you can pay off each month, look to pay down your line of credit and bring that down to a manageable amount. Thereafter you probably have bigger debt like car loans and the mortgage on your condo or house. Don’t think that you will eventually pay these off over time, strive to pay them off as soon as possible. The interest you will save over time could be better invested in stocks and other investments to make you money and lead to your financial freedom.

Check how you can pay down your mortgage, many banks have ways of making double up payments to pay down only your principal without paying interest. A couple of these payments could immense savings in interest! Don’t be surprised in bankers don’t tell you about this, they want to make money by charging interest, why on earth would they want to tell you how to lose revenue they could earn?

I’m a former banker so I can say this. If you find someone giving you advice such as this or ways to sincerely save money then you’ve found a rare breed of a banker that actually cares and should treasure their advice. But you need to do your homework so that you don’t tricked or suckered into “investing” into something you don’t want to be invested in.

Pay Off Your Mortgage!
One of the biggest expenses that we have is paying for shelter. Whether if its rent or paying our mortgage it’s usually a big chunk of our paycheck and this is why you need to do everything you can to pay down your mortgage. Once you pay off your mortgage you have taken a huge step towards Financial Freedom as you will have disposable to put in other more useful places like investing!

Make your money work for you! This is the key to financial freedom. If you can grow your wealth and reap the benefits then you will be happy with your finances and life. Hardly sounds easy and it isn’t but it will definitely be worth the effort! This is probably one of the biggest reasons to buy a home instead of renting. The next would be the value appreciating in your home. In Canada, we have the Principal Residence Tax Exemption which allows us to sell our home and upgrade without having to pay tax on our capital gains that result from the sale. Take advantage of every chance you are given.

Hope this helps!


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