Balancing the budget is more important than ever for Canadians. From tax credits to monthly grocery money, you’ll do better and stretch your money further if you pay close attention to your spending. But getting caught up in all of those numbers can be daunting for the average homeowner, so how do you cope? Make use of simple accounting services or formulas, and you’ll be ahead of the game in no time. Read on to learn how to utilize these each and every day.
Calculate Net Worth
Your net worth is one of the most important calculations you can make. It tells you how much money you have to spend outside of your current responsibilities.
To calculate this, you’ll first need to make two lists–one for your current assets, and one for your current liabilities. For the sake of this example, your assets should be considered to be your household’s overall net income per year, after taxes. Liabilities refer to any regularly scheduled payment or credit you’ve accumulated. That includes credit cards, monthly bills, rent, power, and water.
You may also want to factor in grocery budgets, large insurance payments, and anything else that gets paid on a regular schedule. If you need help, use this budget calculator to lay out your amounts.
Take a look at the math when used to calculate a yearly net worth.
Household Income Per Year: $50,000
Household Liabilities Per Year: $20,000
Simply subtract your liabilities from your income.
$50,000 – $20,000 = $30,000
What you’re doing here is taking your net income, subtracting everything you pay out each and every year, and getting the remaining amount left over. This can be very useful when trying to budget a debt recovery plan, especially if you’re looking into a big purchase like a car or a home.
To supplement your own information, use the following formula:
Formula: Household Assets – Household Liabilities = Your Total Net Worth
You can use this step-by-step formula to figure out how much interest you’ll pay over time on any monthly payment that requires it. It works for credit cards, mortgages, financing bills, and lines of credit, too.
Start by figuring out the amount you want to borrow. Here’s a real-world example:
Loan Required: $100,000
Payment Months: 120
Interest Rate: 1%
$100,000 % 120 = 833.33
Formula: Your Total Amount Borrowed % Your Payment Months = Your Monthly Payment Before Interest
Next, find 1% of $100,000
$100,000 % 1% = 1000
Formula: Your Total Amount Borrowed % Your Interest Rate = The Total Interest You’ll Pay Over Time
Quick Tip: This example assumes you’ll be making payments on time. Late payments may change your results, as fees and extra interest are added. For this reason, you may have to recalculate your formula after each late payment.
Next, divide this by the number of months in your payment plan.
1000 % 120 = 8.33
Formula: Your Total Interest Result % Your Payment Months = Your Monthly Interest Payment
Add this result to your monthly payment amount.
833.33 + 8.33 = 841.66
Formula: Your Monthly Payment Amount + Your Monthly Interest Payment = Your Total Monthly Payment
If you get numbers after the decimal place, as in this instance, round to the nearest dollar. In this example, you would round up to 842. This result is the amount you need to pay each and every month in order to have your loan totally paid off in 120 months.
These two formulas may be simple, but they can be extremely helpful when trying to get a fast, overall picture of your current financial status. The first is crucial before planning any budget. The second can help you to ensure that you make good decisions about credit before you sign any papers. To ensure that you’re always ready, keep this sheet tucked into a kitchen drawer or home office desk. It’s an excellent step on the path to making good financial decisions for your household.
Most people wait to seek credit counselling services until they are at a point of financial desperation. If you have gone through this, you probably understand how hard life can be when you cannot pay your bills. Instead of letting your kids learn this hard lesson on their own, why not give them credit counselling services before they need it. Not only will this help them learn how to manage their money, but it may help them stay debt-free for the rest of their lives. Here are three things credit counselling can teach them.
Living on a Budget
The first benefit of credit counselling services for young adults is that it will teach them the importance of budgeting. Most people know that budgets are important, yet many people fail to use one.
A budget helps a person control spending by limiting it. It begins with a person’s income and fixed expenses, and it helps a person know how to wisely use the leftover money. A couple of principles that credit counselling will teach your children regarding budgeting is:
It may have taken you years to begin living on a budget, but your kids can benefit from this if they begin learning to live like this when they are first on their own.
Living Within Their Means
One of the hardest things to learn is how to live within your means. It can be very easy to take out a loan to buy something that you can afford payments on, even though the thing might be more than what you really need.
Buying a car is a good example of this. You might be able to afford a $500 monthly payment, but you might not realize how long 72 months is when you take the loan. On the other hand, if you buy a cheaper car and have $500 payments, you could pay the car off in 36 months.
Living within your means is simply spending less than you have, but it also involves spending wisely. Here are some of the principles your kids can learn about this if they attend credit counselling:
Through credit counselling, your kids may learn better spending habits and ways to reduce spending.
Planning for the Future
Finally, credit counselling emphasizes the importance of saving money. Building an emergency fund is one of the first steps taught, but learning how to save for retirement is also important. Saving money for retirement is easiest to do when a person starts young.
By starting young, you have the ability to save a little bit of money each month, and this will eventually add up. Starting young also gives the money time to work, and the money will grow simply because of the way interest works.
Credit counselling services can help young adults learn the different options for saving money, and this can help them develop a savings plan that is right for them.
If someone had taught you these basic principles of money management when you were first starting out, you may have been able to prevent going through really hard financial times. You can help your kids with this by sending them through credit counselling services. They will learn a lot from this, and someday they will thank you for doing this.
When debts are mounting and your financial picture begins to feel hopeless, it might seem like the only option is to declare bankruptcy. Before taking such a drastic step however, it may be wise to consider alternatives. Here are four possible ways to tackle your debts and improve your finances while avoiding bankruptcy:
One of the best alternatives to bankruptcy is a consumer proposal. Instead of having to pay an insurmountable amount of debt, with a consumer proposal you pay what you can afford while still getting to officially rid yourself of the debts. A consumer proposal includes agreements with each company to whom you owe money, offering to pay a smaller, more manageable percentage of the debt in exchange for the debt being declared settled.
In some cases, the consumer proposal also extends the amount of time you have to pay your debts. The proposal is an official, legally binding document drafted by a bankruptcy expert, making it more effective than simply trying to work out settlement agreements with your creditors all on your own.
Click here for info on filing your consumer proposal.
Get an Extra Job
While working an extra job may not sound appealing, even a very part-time job can help you get your debt under control quickly, potentially helping you to avoid bankruptcy. The financial benefits of extra income can definitely make temporarily giving up some of your nights and weekends worthwhile.
If a second brick and mortar job doesn’t sound appealing to you, consider looking for online freelance work that you can do from home on your own schedule. Some skills that easily lend themselves to freelancing include writing, photography, web development, and graphic design. Just be sure to consistently use your extra income for tackling your debt in order to avoid bankruptcy.
Sell Off Assets
Oftentimes in bankruptcy your assets and personal belongings will be sold off against your will. A much better option is to voluntarily downsize and sell anything you don’t need, and then use the funds to pay down your debt. By taking this approach, you can simplify your life while also helping yourself to avoid bankruptcy. Make an honest appraisal of your life and look for areas where you could downsize in order to make some extra money. For example, maybe you have two cars but with a little planning could become a one car family.
Moving into a smaller place and selling excess furniture and electronics is another great way to come up with a possibly substantial amount of cash toward your debts quickly. Selling jewelry, designer clothes, and even small kitchen items and books can quickly add up and take a big chunk out of your debt.
Leverage Your Home Loan
If you own your home, you may want to meet with your mortgage broker to discuss the possibility of modifying your mortgage. You may be able to refinance the loan in order to lower your interest rate, thereby lowering your monthly payments. The monthly savings can be applied to paying down your debts more aggressively, which can be a great way to avoid bankruptcy.
If refinancing isn’t an option, you should ask about loan modification plans which can sometimes allow you to make lower monthly mortgage payments, either temporarily or in the long-term. If you have equity built up, you might also want to consider taking out a home equity loan or line of credit and using this to pay off some of your other debts.
By implementing one, or a combination, of these solutions, you may be able to avoid bankruptcy while still getting your debt under control. Be sure to meet with a bankruptcy expert or financial planner to discuss your options in detail.
Are you struggling in a sea of debt in Alberta, Canada? You’re not alone. Economic times are tough, and it is easier than ever to find yourself unable to pay all of your bills. Your first inclination might be to go see a bankruptcy trustee about filing bankruptcy and getting your debts discharged.
While this is an excellent solution for many people, and may ultimately be the right one for you, you should know that it is not your only option in most cases. Remember, filing bankruptcy relieves the financial pressure, but it also puts a dent in your credit score for six to seven years on average.
Before you file for bankruptcy in Alberta, consider these three alternatives to help get you back on the right financial track:
1. Get Into a Debt Management Program
In a Debt Management Program, all of your unsecured debts are rolled into one monthly payment. You make this payment each month to a credit counseling agency, which then distributes the money among your creditors.
It is not a legally binding agreement, and in most cases, you must pay back the whole amount of debt. However, sometimes creditors will agree to a reduced repayment amount. Wage garnishments are usually not suspended when you use a Debt Management Program, and creditors can still contact you.
Your creditors all have to agree to participate in this program with you in order for you to qualify for it. Most will agree because it means they will definitely be getting paid something. The consolidation of your debts into one monthly payment usually makes repayment easier on you.
There is a time limit on paying back your debts under this program. They must be paid back within four years of starting the program in most cases. Occasionally, creditors will extend the repayment period to five years, depending on individual circumstances and situations.
2. Enroll in an Orderly Repayment of Debt Program
According to NoMoreDebts.org, this special bankruptcy alternative program is only available to residents of Alberta, Saskatchewan, and Nova Scotia. Being able to use this bankruptcy alternative is one of the benefits of living in Alberta.
In this program, you work through the bankruptcy courts to come to an agreement with your credit card companies to repay them on a set schedule. All of your credit card companies must agree to participate in the program with you to do this. Once they all agree, the interest rates on all of your credit cards are set at five percent, and stay that way until the debt is paid off.
This program is only for credit card debt, so only use it if your minimum monthly payments are more than you can afford without the program. The debt must be paid off within thee years, so you know you will be free of credit card debt in that time.
3. Work Out a Consumer Proposal
Consumer proposals are very similar to Debt Management Programs. The big difference is that instead of being a mostly informal agreement arranged through a consumer credit counseling organization, a consumer proposal is a formal legal agreement arranged by a bankruptcy trustee.
The proposal has to be agreed upon by both your creditors and the Office of the Superintendent of Bankruptcy in your area. You make your monthly payments to the bankruptcy trustee, who distributes the money to your creditors. Wage garnishments must stop when you use a Consumer Proposal, and creditors are not allowed to contact you.
As with a Debt Management Program, the debt you owe is may or may not be reduced. You must pay the reduced amount back within five years.
You don’t necessarily have to declare bankruptcy in order to get out of debt in Alberta. You have other alternative options at your disposal. If you are not sure which option is right for you, or if bankruptcy is really your best choice, talk to one of Alberta’s certified bankruptcy trustees at a place like Harris & Partners Inc. Do it today, and find out the best way for you to get out of debt quickly and with as little damage to your credit as possible.
As an entrepreneur, you’re open-minded and probably quite resourceful when it comes to getting what you want. But finding clever ways to finance a business can be challenging and often requires that you hunt down multiple sources. Whether you need the money for office space or software and product development, here are five creative ways to get the capital required to get your new business off the ground.
Seek an Angel Investor
Most people think of an angel as a lifesaver. And when it comes to having an investor for your business, that’s exactly what they are. Angel investors are wealthy individuals who believe in your business and the future of your product, and essentially want to know that in the great scheme of things, they are making a difference.
Because they are not “in it to win it,” meaning they will not get back what they invest, it’s important to understand exactly what they will gain from investing in your company. This will improve your odds of winning them over. For instance, if you need funding for a day care business, you’ll want to find an angel investor who is passionate about children and families and will feel good about helping you run a company that is family oriented.
Lease Instead of Buy
Whether you need heavy machinery for new construction or plan to have a roomful of computers for your business, heavy equipment leasing instead of purchasing equipment is a great way to bring down business costs. Monthly rates are typically cheaper than when you buy, making this a tremendous advantage over purchasing large equipment. Many banks and companies will provide the funding for short-term as well as long-term leases. So you could use the equipment for 3-6 months or 3-6 years, depending on needs.
Because your business obviously doesn’t have any sort of credit established, some finance companies will make the loan based on your personal credit history, so be prepared to offer that information up.
Presell Your Product
How much money do you think you could make if you started selling your product before you even open shop? It seems like a crazy concept, but just suppose that you have the funds to make 200 units of your product. If you’re able to sell all 200 units, you could net a profit that would allow you to make 400 more.
Getting decent traffic to your website and establishing a presence on social media will certainly help you to meet your goals. This is exactly what Priska Diaz had to do after coming up with the idea for her air-free baby bottle. Before major investors and retailers would even listen to her pitch, she had to prove that there was an interest in her product. She got an interest all right. Her presell efforts earned her enough to keep making more, and she now runs a highly successful business.
Enter a Business Plan Competition
Monetary winnings from a strategically played competition can mean the difference between business launch and complete bust as Jen Barnett learned. She won more than $80,000 worth of capital that helped fund her food marketplace in 2011.
A business plan competition allows you to not only go up against other business owners but also to network with them and learn a plethora of effective business and marketing strategies. It can even provide you with practice at wooing potential investors down the road. Most people who enter these competitions agree that the feedback they get from the judges is worth more than anything.
To find available contests, start in your hometown and network with similar entrepreneurs. From there, check local colleges and universities and then national and global corporations.
Start a Crowdfunding Campaign
Crowdfunding is the new wave of seeking investors for almost anything. Entrepreneurs utilize an online platform to create an account and announce what they are raising funds for. It allows an infinite number of people to pitch in small (or large) amounts of money for a product or business that they believe in. Account creators can reward those who donate in various ways, like offering them some sort of public recognition or by giving them a physical product once the business opens.
Does it work? While it’s not a guarantee, it absolutely does work for many. And when it does, it works big. Check out this article which discusses a company called Yes Man Watches that was able to raise $15,000 within the first three days of their crowdfunding campaign on Kickstarter.
There’s also peace of mind for those who donate: if the account creator doesn’t meet their financial goal–meaning they don’t get enough investors–no one has to pay. So it’s somewhat of a risk-free concept for those who want to contribute to something that is sure to take off.
Having bad credit can hinder your ability to get financing for some of the bigger investments in life such as buying a home. In fact, low credit scores can make it tough to rent an apartment, buy a cell phone, or even get a decent rate on insurance premiums for your home. Luckily, your low credit score isn’t set in stone. Here are four effective ways you can go about raising your score once and for all:
Make Some Payment Arrangements
If you’re facing delinquent accounts on your credit report, you’ll need to work on getting them paid off so that they no longer play a negative role in your score. You may be able to get your debtors to agree to payment arrangements so you can fit the payments into your budget without feeling the pinch too much. Here are a couple of options to consider:
Some debtors may be willing to report your payments to the credit bureau as you make them, which will work to increase your score while you settle your accounts instead of having to wait until they’re fully paid off.
Get a Bad Credit Car Loan
Believe it or not, investing in a new or used vehicle is a great way to improve your credit score overall. This is true even if you have a not-so-great history with other debtors. It’s really just a matter of finding a dealership that’s willing to work with people who have imperfect credit (there are many!) and finding a vehicle that you want to buy. Luckily many dealerships now offer bad credit car loans.
Your credit report will reflect each payment that you make which should start to affect your score within just a couple of months. But keep in mind that building your credit doesn’t erase the delinquent records on your account so you’ll still need to address those in order to benefit from a good credit score overall.
Apply for Secured Credit
A secured credit card doesn’t really provide you with the ability to purchase things on credit. You’ll be expected to fund the card with your own money before using it. The system works a lot like a bank account where you’ll be spending money that you already have. But with each deposit and each purchase, your credit score will grow.
And the best part is that you won’t be putting yourself in debt in exchange for that higher score. Some credit companies are willing provide you with unsecured credit after proving your ability to fund your secured account on a regular basis. But don’t assume this is the case when choosing a secured credit card. If this is something you’re interested in working toward, make sure that the company offers this opportunity before you sign anything.
Get the Scissors Out
If you still have credit cards lurking in your wallet or in a desk at home, make sure there is never any temptation to use them by simply cutting them up with scissors. By adopting a cash-only financial lifestyle, you’ll ensure that you don’t put any more stress on your credit score as you work to repair it. When there aren’t any credit card bills to keep up with on a monthly basis, you’ll find it much easier to find the funds to pay off old debts.
After putting some of these methods to use you’ll be well on your way to experiencing a financially stress free lifestyle. You may also find that various opportunities open up for you once your credit score is out of the woods. Read on for more information.
When you are staring at a stack of bills, it is easy to feel overwhelmed and all alone, even though many people are in the exact same boat. In fact, the average American owes $15,607 to credit card companies, and $32,656 in student loans. To help manage your debt, many lenders offer consolidation services, which might lower your interest rate and lump your bills into one manageable payment. However, debt consolidation isn’t right for everybody. Here are two ways to tell if this valuable service could help your situation.
1: Check to See How Much You Stand to Save
As you compare your debts to one another, it is easy to start feeling angry. You might notice that the payday loan place down the street charged you a whopping 35% interest rate, while you are only paying a 5% rate for your car. It can also be frustrating to keep track of different due dates and past due balances. Fortunately, debt consolidation can make all of that a breeze.
When you take out a debt consolidation loan, you are effectively borrowing one large sum of money that you can use to pay back all of your different accounts. Instead of paying several different creditors, all you need to do is pay back the consolidation lender in one monthly payment.
Consolidation loans can be incredibly helpful for some people, but they aren’t right for everyone. To demonstrate why consolidation loans would be right for some people and wrong for others, take this hypothetical situation as an example.
Two people owe $6,000 to the same companies, but have different principal amounts and interest rates. Here is a rundown of their financial situations:
Customer A Owes $6,000 Customer B Owes $6,000
Credit Card 1: $500 at 25% Credit Card 1: $1,500 at 12%
Credit Card 2: $500 at 15% Credit Card 2: $1500 at 8%
Auto Loan: $800 at 9% Auto Loan: $1000 at 5%
Student Loan: $4,000 at 2% Student Loan: $1500 at 7%
Personal Loan: $200 at 20% Personal Loan: $500 at 15%
Total Yearly Interest Total: $392 Total Yearly Interest Total: $530
Now think about what would happen if each customer decided to get a personal consolidation loan for $6,000 with a decent 7% interest rate. Each customer would end up paying $420 per year in interest, which would be a killer deal for Customer B, but would actually cost Customer A $28 more. Many people might wonder why this is the case, since Customer A’s interest rates are generally much higher than Customer B’s rates.
The reason that Customer A would be a bad candidate for debt consolidation is that the majority of their debt is a student loan with a low interest rate. Although a consolidation loan would lower the majority of their other rates, it would increase their student loan interest by 5%.
To determine if consolidation is right for you, click here and carefully analyze your debts. Be mindful of any large amounts that you owe, which could throw off the total amount that consolidation could save you.
2: Consider your Credit Score
In order to mitigate the risk associated with lending people money, banks adjust the interest rates that they offer depending on your credit score. A low score might indicate that you are less likely to pay money back on time or in full, which can end up costing the bank money in collection fees, lost income, and labor.
To offset these expenses, banks tend to charge people who have low credit scores higher interest rates. On the other hand, a high credit score shows the bank that you have a history of being reliable, so they are more likely to offer you a lower interest rate.
Before you apply for a debt consolidation loan, print off a free copy of your credit report in order to become familiar with your credit score. If you have a higher score than you did when you accumulated the debt, a consolidation loan might lower your average interest rate.
If debt consolidation seems like it could help you, talk to your lender today. You might be able to get a handle on your bills, without spending more money than you have to.
If your life took some unexpected twists and turns that left you with heaps of debt, you can make the decision to do something about this. There are several options, but a visit to a bankruptcy trustee might be the best step you ever take. This appointment will give you a chance to ask questions, and you will learn the answers to all of your questions–even the toughest ones. Here are two things you may want to ask about before you decide to file for bankruptcy.
What Happens to Student Loans?
Going to college is a great way to better yourself and have more opportunities in life, but it can also leave you with a lot of loans. Student loans can be hard to repay, especially if you cannot find a good enough job. Through bankruptcy, you might have hope though.
Filing bankruptcy does not automatically discharge student loan debt, but it can. It really depends on the age of the debt. Your bankruptcy trustee will want to know how old the debt is and when you last attended college with the loans. This is important because:
Now, there is one exception according to the Office of the Superintendent of Bankruptcy Canada. If five years has passed and you are struggling with a major hardship in life, the court may allow a discharge of the debt. This decision is purely based on how the court feels you acted with the loan proceeds, and on how having this debt would affect your financial future.
The other option available is to apply for the Repayment Assistance Plan (RAP). If you do not qualify for a discharge of your student loans, this program may lower the amount you owe. When a person qualifies for this program, the person will only have to repay what he or she can comfortably pay back.
With all of these options, there is a good chance that you may be able to get by without repaying your student loans, but it will depend on your individual situation.
What Happens to Tax Debt?
Owing money to the Canada Revenue Agency (CRA) is not a good thing. This agency has the power to come after you to get the money owed, and there is not much you can do to stop this. Through bankruptcy however, you may have a way to settle or eliminate the debts you owe to the CRA.
Many people believe that this type of debt can never be included in bankruptcy, but this is not the case. A bankruptcy trustee will be able to review your situation and tax debts, and he or she will tell you whether or not this debt can be discharged. There are times when you can include tax debt in bankruptcy, but it depends on the events and situations in your life.
If the trustee cannot find a way to include this in your bankruptcy, there might be another option. Your trustee might be able to work out a repayment or settlement plan. Through this, the CRA might agree to wipe away all of the interest and penalties you owe, and they may also agree to lower the amount of tax debt you must repay.
If most of the debt you owe is for these two things, it is important for you to find out if they can be discharged through bankruptcy. The best way to do this is by scheduling an appointment with a bankruptcy trustee from a company like Faber in your area.