How you can stop the creditors from calling and finally get on top of your finances

Every living thing is wired for one of three responses when faced with an imminent threat. It can fight, it can flee, or it can freeze. We all want to think we’d have the courage to stand up and fight when the time comes. Unfortunately, we don’t really get a say — at least not at first. Instinct takes over and selects the option our subconscious feels gives us the best chance of living to see another day.

Of course, most of us don’t run into life of death decisions nearly as often as our ancestors did. But we face existential threats all the time.

A debt collector has very little in common with a hungry grizzly from a purely logical point of view. But our 500-million-year-old stress response doesn’t think, it can only react. Money and possessions are how we make our way in this world. And when someone comes looking to take those things away, that threatens our way of life. Naturally, our only options are to fight, flee or freeze.

Show yourself some compassion

Maybe you tend to bury your head in the sand when finances get a little tight. Maybe you beat yourself up about it and utter obscenities in the mirror every time a new creditor notice arrives in the mail. Maybe you’re tired of this cycle but can’t seem to break free of it.

Before passing judgement on yourself, try to remember whether you freeze up or feel compelled to run away, your response is automatic and completely normal. You can’t be ashamed of what you can’t control. What’s more, criticizing yourself only reinforces the threat and causes you to freeze up even more or run away from the problem even faster.

Everyone knows about the so-called fight or flight response. Problem is fight or flight (and we always forget about freeze because it doesn’t rhyme) is usually where the conversation ends. Life and death scenarios are fleeting, yet we rarely talk about what comes after the threat has gone. People don’t keep fighting or running, and they don’t stay frozen forever. Their senses return and they do what they need to do to prevent that threat from coming back.

Indeed, a grizzly is not much like a debt collector at all. When the grizzly goes away, you’ll probably never see it again. Creditors are far more tenacious. And that’s why you need every precious second when your thinking brain comes back online to do whatever it takes to stop them from coming back.

Shore up your defenses

Whatever response you typically have at the first sign of money troubles, the following tips can help you take those all-important next steps:

Make a list

As the old saying goes, “better the devil you know than the devil you don’t.” Trouble can’t sneak up on you if you know where it’s coming from. Create a spreadsheet of every single creditor, how much you owe, your interest rates, your minimum monthly payments, and when those payments are due.

Review your spending

A misstep only becomes a lesson when you’re able to learn from it. Set aside a few hours to review your bank statements over at least the last year — make a note of any spending patterns that may have caused your debt to become unsustainable.

Create a budget

Create a system that works for you to (1) track your income, (2) pay your essential living expenses (e.g. groceries, rent/mortgage, utilities, transportation, insurance, etc.), (3) pay down your debts, (4) build your emergency savings, and (5) monitor and manage any non-essential spending.

MNP’s free budget tracker spreadsheet is a great place to start.

Start planning

Step one is to ensure you’re keeping up with all your essential living expenses and the minimum payments on all your debts. This will prevent any new creditors from coming after you in the future.

Step two is to identify any creditors you’re behind with, by how much, and whether your budget will allow you to catch up.

Step three is choosing the right strategy to get out of debt once you’re caught up on any back payments. You could go for the debt snowball (pay down the lowest value debt first) or the debt avalanche (pay down the highest interest rate debt first). And sticking with it.

Increase your income / decrease your expenses

There are three options if you get stuck on any of the planning steps above. The first is to review your budget again to determine anywhere you could save money. Think everything from clipping coupons to switching insurance provers to moving into a cheaper home. The second is to increase your earnings. This could involve anything from selling valuables (e.g. vehicles, jewelry, furniture, clothing, etc.) to taking on a part time job.

Speak with a professional

Your third option is to schedule a Free Confidential Consultation with a Licensed Insolvency Trustee. They can review your entire financial situation and advise you of your options. This could include everything from tips to improve your budget to working with a credit counselor or filing a Bankruptcy of Consumer Proposal.

A Licensed Insolvency Trustee is dutybound to provide an unbiased opinion on the best debt solution for you in the near and long term. They can help you evaluate several factors, including the financial costs of each option, impacts to your lifestyle, impacts to your credit rating, and more — so you can make an informed decision that makes the most sense for you and your family.

Cut yourself some slack

Evolution has primed us to persevere against predators, through the elements, and against one another. Maybe one day we’ll develop better instincts to navigate this comparatively recent financial landscape. Until then, all we can do is learn from our mistakes and move forward the best we can.

Just remember, you wouldn’t turn away a helping hand if you were stuck in the path of a raging bushfire. Take advantage of any resources available to help navigate through this financial storm. That’s why it’s there.