The Debt Spiral: How to avoid and stay out of spiraling into debt.

 

How many times you have put all of your attention for years to paying off all your debts and then all of a sudden, with only a few payments left, a financial emergency shows up. That financial emergency could be a car that won’t start a broken furnace or an unexpected job loss.

How did it make you feel when, just as you were ready to be free of all your debt, this emergency pops up its ugly head? The panic sets in and you feel defeated again because life is dealing a harsh blow and all your efforts were in vain.  You now wonder why you even tried to pay off your debt just to be placed in the downward spiral again. You call a friend who is very sympathetic, but is unable to help you solve your financial problem.  Pacing up and down the house, angry or crying, you know for sure there has to be a better solution.

You say out loud, speaking to no one:

 

  • WHAT CAN I DO TO MAKE SURE THIS DOES NOT HAPPEN AGAIN?
  • WHAT AM I DOING WRONG?
  • WHERE CAN I FIND HELP?
  • WHO HAS THE KNOWLEDGE AND WILLINGNESS TO HELP ME?
  • WHEN WILL THIS STOP?

 

You finally realize that you are the only one who can stop this downward, debt spiral. You decide to take control.

Finding help you know for sure is your first step. You think. “Well, it’s to do with money, maybe I should talk with someone at my bank.” You visit your bank and explain to the first person you meet that you need to find a way to get out of debt.  An appointment is made for you to meet with a Financial Advisor.  You meet with the Advisor and explain why you are there and how defeated you feel after putting so much effort into paying off all your credit cards, and lines of credit only to find yourself facing a financial emergency and not having any extra funds to deals with it. The Advisor offers you a loan.  Right then and there you knew that you already had this conversation before and did get a loan which put you in the same position you are now.  At that moment, you tell the financial advisor that you had done this before and that there is something missing because you end up in the same position two or three years latter.   The financial advisor looks at you and says, “This is all I can do for you.”

You then say, “Is there someone else who can help me?” The Advisor replies, “Well, we do have a Financial Advisor who has more experience. Let me see if she is free. I will be back.”  A few minutes latter you meet with the more experienced Advisor. You notice right away that she has a different approach. She shows and explains to you the Debt Spiral. Something clicks and you know WHAT you were doing wrong.  You found WHERE to get help, WHO had the knowledge and most of all WHEN you will finally stop the SPIRAL.

In your finances, you are your own advocate. You have to express yourself and keep asking questions. You know something is wrong and you seek help.  Now you know that you must always save even while paying down debt.

Take a very close look at the Spiral. It helps you realize that while paying off your debt you also should be saving, even if it is a small amount. But, they must both be done simultaneously; paying off debt and saving so that when the emergency shows its ugly head you can use the savings to take care of it and continue paying off your debt uninterrupted. Your savings is always being done automatically so it grows steadily.

If you are not focused on your financial plan you will make decisions that will keep you forever in the debt spiral. The person at your financial institution is there to assist you in meeting your financial goals. If, when meeting with them, you notice or realize that all they want, is to sell you the latest financial product they have to offer even if it does not match your financial goal, say no. You want someone who will hear and understand your needs and help you reach you financial goals. You need someone who is working for you, not for their quarterly sales bonus.

Getting off the debt spiral requires planning and a little help from your bank. You can make this happen by having all your saving and payments done automatically. You are in control.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster.  She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto.  Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank.  During her tenure at TD Canada Trust she held various positions interacting with customers of the bank.   As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

HOW TO SHOP SMARTER AND SAVE MORE

I have a few tips or you on how you can shop smarter and save money.  

 

 As your Financial Advisor after looking at your financial plan  I make this statement to you “you need to shop smarter” I am sure your reply to me would be, what do you mean and how can I do that” What are the things we shop for the most? We shop for food the most it does not matter where we live or whether we rent or own our own home we always have to shop for groceries or buy some sort of food product.

I would like you to take a complete inventory of all the food products in your pantry, kitchen cupboards, refrigerator and freezer. Make a list take photographs enter it on your computer on your I phone, cell or whatever portable devise you carry.

Plan the meals you will be preparing for the next week or two.

Next make a grocery list checking to make sure you are not purchasing something you already have on your inventory list.

Be careful not to purchase package or prepared foods they cost more and are usually not that healthy.

Check for all your coupons against your grocery list; look at the specials for the stores where you shop take these with you.

You will also need a pen to cross off the things you have bought as you go along.

Once you get to the store stay focus on that mission of shopping smarter, remember the store is a business in business to make as much money as they can and their plan is to get you to buy more than you need so they meet their target or bottom line and your job is to get what you need and no more which will save you money.

 

If you are tempted to get something on special remember if store A has it on sale this week Store B will also have it next week.  The manufactures wants the store to sell all their goods so they each get the special do not be tempted, stay on plan check your inventory list, you will find that you have six of those item already. 

I had a lunch and learn at my work and my co-worker went home and did that inventory the following Monday she came to me with a big smile on her face she said “I followed the plan to take a complete inventory and found out I had so many past due items it was very sad to see how much money I wasted I could not believe that I had seven bags of sugar and four bags of rice, but then when I went grocery shopping on the weekend and did it as you suggested I saved $65.00. My usual amount is $200.00 but because I knew what I already had and only bought what I needed for the two weeks of meals I planned I only spent $135.00 it was worth it.”

 

The most important thing when shopping is to know what you want whether you are shopping for a House, a Car or a household appliance. Do your homework, know what you want and how much you want to spend for the item before leaving home.

The person selling to you is in business to make money you are in business to keep as much as you can of your money while getting value for what you are spending.

 My co-worker she has stayed on her plan and she has taken that $65.00 she usually spent every two weeks and placed it in her vacation accounts. She is well on her way to a great vacation.

 Tessa- Marie Shillingford is the author of Controlling the Debt Monster.  She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto.  Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank.  During her tenure at TD Canada Trust she held various positions interacting with customers of the bank.   As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com