Preparing for a Financial Disaster • Financial Planning
through her bankruptcy and she wants other people to realize that despite the seemingly insurmountable challenges any financial disaster presents, there is help. “Once I got up the courage to finally seek help – which I waited too long to do – I found out that with a good plan and a financial expert to help guide me through it, there was light at the end of the tunnel,” she says. She sought advice and ultimately decided bankruptcy, while certainly not pleasant, was really the only viable option after trying to avoid the inevitable for so long. “That’s how far it had gone.” After consulting a debt consolidation company, she began the long road to rebuilding her credit after bankruptcy and trying to make ends meet. “Even though it’s horrible to go through a bankruptcy, taking the first important steps made me see how I could rebuild our life together,” she says. Her entire thought process about money changed. No longer was each bill a painful chore to pay. Even going grocery shopping became a good experience. “It’s a complete feeling of being grateful and thankful I have the money to pay the bills.” For most people, facing a financial loss is a likelihood, according to Crystal Wong, senior manager of financial planning for TD Waterhouse in Calgary. “Most people have experienced some type of financial loss already, whether it’s big or small,” Wong says. “After an unexpected incident, many customers take saving money more seriously.” And they should. TD economic data shows Canadians save just three per cent of their pre-tax income, which is one of the lowest saving rates in the western world, says Wong. Simons admits her credit suffered along with her self-esteem going through the process. After ensuring she and her husband could make enough income to meet her budget, she then started rebuilding and maintaining good credit, doing her taxes, plus putting money into savings through automatic transfers each month. People seem to be able to come up with the money for a vacation to Mexico or Hawaii, so why can’t they put a small amount into savings through an automatic deposit? Even $50 a month adds up. She’s been through the worst of it and has now rebuilt her life, even after a double whammy that took a drastic toll. She just wants other people to be more aware of how close they really are to financial ruin at a moment’s notice. “It only hits you once it’s too late,” Simons says. “If you just prepare for the reality of a possible disaster of some kind, and face it head on if and when it does hit, then you’ll be able to weather the storm.” BiC 78 • November 2011 BUSINESS IN CALGARY | www.businessincalgary.com
Avoiding a Financial Disaster • Establish an automatic monthly deposit at a manageable dollar amount to contribute to any savings vehicle, such as a TFSA or RRSP • Pay down your mortgage faster when possible, but consider a flexible mortgage, which provides the ability to skip some payments later on if necessary • Develop a three- to six-month emergency savings fund • Pay cash whenever possible and avoid using credit without paying it off monthly • Spend less than you make: develop a budget and stick to it • Pay off high-interest credit card debt first and pay off credit cards each month • Consolidate debt when it gets unmanageable to make a single monthly payment • If something happens that puts your entire financial picture at risk, consult a specialist to determine all your options, such as Credit Counseling Services of Alberta (Money Mentors), a debt consolidation company or your financial planner • Develop a plan to rebuild: ensure a reasonable income; consolidate debts or consider bankruptcy, rebuild your credit over time slowly • Develop a comprehensive, written financial plan and review it every three to five years SOURCES: MONEY MENTORS, TD CANADA TRUST