Today, we hear a lot of remarks about the US economy approaching the so-called "fiscal cliff". How is your personal finance? Are we heading towards the fiscal cliff of 2013? Canadians are in debt. Every month, we read that the ratio of debt to disposable income has risen and is currently at an unstable 164% level.
While the world and many in the world have praised our government for its excellent financial management, few have warned of unsustainable levels of personal debt. In fact, our central bank governor Mark Carney accepted the appointment of a similar position in the famous Bank of England. Is his legacy a hero or a bad person? History shows that he keeps interest rates low and encourages many people to take on the debts they can't afford?
It is commendable that he, our finance minister and prime minister, have been warning Canadians of these dangerous high personal debt levels. However, Carney can suppress the increase by raising interest rates. Of course, higher interest rates will curb the current slow economic growth. Even so, I think short-term pain is better than a possible personal financial situation. If the debt stays at its current level or grows, a collapse may occur.
What can Canadians do to avoid their fiscal cliffs? Let's take a look at three important steps.
- Accepting you is a dangerous lever.
- Establish a mechanism to take on debt
- Develop a new vocabulary to guide your behavior
Accept that you are a dangerous lever
The problem cannot be resolved unless you recognize the problem. Do you think you have too much debt? Your banker may tell you no; but you can answer this question by yourself. Take Helicopter view. What is the emotional reaction between you and your family about your debt? Are you worried? Can't sleep? If so, your debt is too much. Of course, look at the ratio, but this is the key barometer.
The emotional cost of debt is the first and most important cost. If the debt is 10% of the income and causes at least one of you or your family to have problems, it is too much. Still, you have to accept the reality and decide to live with it, no longer bear the reality, and start to realize a debt-free lifestyle.
If you are a Christian, bring this emotional tension to Jesus [Matthew 11:28].
Establish a mechanism for debt reduction
People are impatient. We live in one just now society. Sadly, it is very likely that you have been in debt for a long time, and it is likely that you will quit for a long time. Accept this fact and learn to endure it.
Develop strategies to get through debt. See how you got there; prevent draft principles from happening again; then write a financial plan, either alone or with help. The plan should be concise and succinct, and according to your principle, you may have no debt for a certain period of time.
If you are in debt due to impulsive spending, then you may have a principle that will never be purchased without a list and budget. Similarly, when you feel you need to spend money, you may have to wait 24-48 hours, during which time you will talk to your spouse or responsible partner.
You must find a method that might apply to you, determine if you need help, and try to get help.
Prepare a debt meter and put it on your refrigerator. Monthly, when you pay off your debt, adjust the debt.
Develop a new vocabulary to guide your behavior
It sounds simple and simple, and when you get it, it will be your most effective "control tool" for debt control. What do you believe will determine how you will be. If you believe that an emergency has occurred and you are not spending enough, you will not change your behavior. However, if you think that in addition to the timing, most of the "budget emergencies" can be planned and should be planned by regularly allocating funds for the corresponding plan.
Your car needs repair. It needs new tires. Your stove will go, and so on. The problem here is the timing. You don't know when these potential budget destroyers will happen. Even so, you know they will happen, so create one Capital fund, Rainy days funds, contingency funds or other means to preserve these predictable events. If you accept this fact about the emergency, and understand that in order to achieve this you must sacrifice today's consumption, this is the beginning of your major victory in debt.
Another key vocabulary change is accepting that you can't manage money, you can only manage your behavior - from money management to lifestyle management.
Summary
As we enter 2013, please check your financial situation. You will know if you are on a fiscal cliff. Please be assured that you do not need more money to help you. First, you need to accept your location. Next, set up a mechanism to let you live where you are paying your debts. Then check your vocabulary, your beliefs, and adjust them to reality.
I pray that you will turn away from the tempting credit and start getting out of debt.
[c] Copyright 2012, Michel A. Bell
Orignal From: Canada's personal finances fiscal cliff: Are we still there?
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