10 tips on how to avoid a visit to your licensed insolvency trustee

2023-10-06  3 minute read

Jean-Francois Cliche

Debt Solutions

No one wants to find themselves in a position where they need to discuss their personal finances with a stranger. That’s why one of the first things you should look for in a Licensed Insolvency Trustee is someone who will help you avoid needing them in the first place. Overcoming your financial difficulties often starts with preventative measures — often small changes you can make if you find your finances heading in the wrong direction. Sometimes insolvency is a viable option. But let’s not go there just yet.

Here are 10 tips on how to avoid a visit to a Licensed Insolvency Trustee.

couple reviewing paperwork on counter

1. Make a budget

Budgeting is an essential part of planning your finances. If you lose track of your finances, you risk

missing payments or going over budget, eventually accumulating debt. Track your expenses and take

some time at the start of each month to plan your payments ahead of time. Keep your bills and receipts. Stay on track with limiting spending just to budgeted items. Always compare your actual income and expenses to your budget at the end of each month. And keep your budget updated as your financial situation changes. For additional guidance, use MNP’s budget tracker spreadsheet.

2. Live within your means

The cost of living is rising and for some people, even treating yourself to a steak is becoming a luxury. Don’t lose track of your own financial means. Even during the current economic crunch, implement small strategies that will provide some of the same products and services without the extra cost. Reduce the number of subscriptions you have. Order pickup instead of delivery. Carpool, ride your bike, or use public transit instead of driving every day. Small changes like this will help you avoid spending more than you earn so you can prevent the accumulation of debt and financial difficulties.

3. Pay your bills on time

Set calendar reminders. Automate your payments so you don’t forget about them. Do whatever you need to make sure you’re paying your bills on time. Unpaid bills can result in late fees and additional interest, contributing to financial difficulties and accumulated debt. It may seem like a small thing, but it all adds up fast.

4. Avoid excessive use of credit cards

They may be convenient — and we all know how tempting online shopping is — but credit cards can quickly become a significant source of debt. Interest accumulates fast making it even more challenging to erase the deficit. Use other forms of payment as much as possible and make sure you consistently pay off the expenses you’re charging to credit. Consider alternatives that provide the same convenience, without incurring personal debt. Visa debit, prepaid credit cards, secured credit cards; or financial technology services such as Neo, Stack, KOHO, or Mogo are all viable options.

5. Save for the future

Saving can be one of the most challenging strategies for your long-term financial health, but it’s certainly one of the most important. Savings don’t just set you up for retirement — or perhaps that fun vacation — savings are also there for emergencies, preventing more severe damages to your finances. In the unfortunate event of job loss, home and car repairs, or even illness, savings empower you to weather the storm without falling further into debt.

6. Read the fine print

There are a lot of details in any financial agreement. Often, they come across as being more complicated than they need to be. But understanding them is crucial. Before taking out any loan, make sure you understand the terms and conditions. Fees and interest rates may be hidden, which can ultimately increase the cost of the loan. Or consider the finer details of co-signing for loans. If someone defaults on that loan, the co-signer will be responsible for paying the remaining balance. Understand those details.

7. Do not ignore financial problems

Financial troubles can feel overwhelming, but facing them head-on is the fastest, easiest, and most effective way to overcome them. Resolve that you will address your financial problems as they arise — whether that means reassessing your budget or reaching out for professional advice. The sooner you face financial difficulties, the more (and more affordable) your options will be.

8. Do your research before investing

Investing without understanding the risks and benefits can lead to significant financial losses. Either independently or with support, put in the time to learn about where you’re trusting your wealth. What kind of investment is it? What are the pros and cons? Become an expert in your invested capital.

9. Diversify your sources of income

It’s nice to have job security. It’s also rare to have job security. No matter what your situation, you can always benefit from multiple sources of income. Having a single source of income can be risky in the unfortunate case of job loss or even salary reduction. Spread out those eggs in a few different baskets. Take on an additional part-time job. Freelance if you have relevant skills. You can even advertise lawn mowing or snow removal services on online classifieds. Host a yard sale and get rid of some of that clutter while you’re at it. Every little bit will help make a difference.

10. Ask for help if needed

Don’t be afraid to ask for help or support. You do not need to face financial difficulties alone. Hopefully, you never need an insolvency professional. But if you do, reach out to a trustee who can provide sound advice and options for getting out of debt and avoiding insolvency. Licensed Insolvency Trustees are the only professionals in Canada who are qualified to advise on all the debt relief options available, including Bankruptcy and Consumer Proposals. MNP offers Free Confidential Consultations to all Canadians to assess their financial situation and discuss the options for a financial fresh start.

If you follow these tips, there is a strong chance that we will never work together. Great news. But if you ever need help in straightening out your financial situation, I will be here to assist you in regaining the financial health you deserve.

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