How to Survive an Economic Crisis
At the end of 2019, the average Canadian debt rose 2.7% to $72,950.
This is a startling figure that follows a trend where debt is becoming a severe issue in the country.
Lots of people suffer from critical financial problems, which are aided by other factors in the outside world.
Perhaps you’ve been made redundant at work and no longer have a source of income every month.
Maybe your credit score took a hit, and you’re unable to access credit to help you pay off some of your debts.
Regardless of how you ended up in this situation, you can’t deny you’re in an economic crisis.
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Money is hard to come by, debts keep mounting up; it feels like you’re slowly drowning in a whirlpool of financial problems.
If the economy also suffers a hit, it’s even worse for you.
There will be less help out there to try and get you out of your crisis.
With that in mind, we’d like to bring you five tips to survive an economic crisis.
This advice will help you stay on your feet and avoid plunging into more debt and more financial turmoil.
Focus on your debts first
Your first step is to gain control of your debts.
It’s never beneficial to owe money to various creditors.
Things get especially tough in an economic crisis as they are more likely to press you for money.
They need it more than usual, so they put you under extra pressure to pay up.
As a debtor, your life is in the hands of creditors.
This is a simple fact as they are the ones with power over your finances.
If they demand payments, you have to make them or risk having assets seized and collecting more debt on top of what you already owe.
Focus on reducing your debts as quickly as possible.
This may mean you consolidate your debts into one loan, it could mean offering debt restructuring terms to creditors, it may mean filing a consumer proposal.
There are lots of debt-relief options out there, and we are more than happy to help you with this.
If you’d like to learn more about our debt-relief services, feel free to browse our site or call us.
The bottom line is that debt will hold you back.
If you’re in debt and suddenly have no job, you end up in a terrible situation.
You need to find work while also managing all these payments.
Your bank balance can quickly dwindle, leaving bankruptcy as the only option.
Reduce your debts, take control of your life, and you will survive your economic crisis.
Establish a budget to curb your spending
Overspending is a common problem in modern society.
We’ve simply been given too many tools that make spending easier than ever before.
Look at contactless payments as a great example.
Now, you can walk into a store and pay for anything with a tap of your credit or debit card.
It’s so easy to spend a lot of money without thinking about it.
The same goes for online shopping – you can spend hundreds, thousands of dollars, all from the comfort of your bedroom.
The problem with overspending is that you leave no room for error.
Let’s say your monthly income is $3,000.
But, you spend close to $3,000 every month as well.
You’re basically living paycheque to paycheque.
At the end of the month, you’re desperately waiting for payday as you know you’re running out of money.
This poses a massive problem in scenarios where you have more expenses than usual.
What if your car breaks down?
Your energy bill is higher than normal?
What if you have to take time off work with unpaid leave?
All of these situations leave you in a position where your income doesn’t match your spending.
As a result, you either miss bill payments or take out a payday loan to cover yourself.
Either way, you end up in debt, triggering a host of financial problems.
This can all be solved if you created a budget.
Set a budget for every month, making sure you reduce your expenses.
If your income is $3,000, but you manage to only spend $2,000 or $2,500, you’ve given yourself more wiggle room.
In effect, you have more money saved away to help out when you need it.
You also stop living paycheque to paycheque and have a more comfortable financial life.
Stop borrowing money
Sometimes borrowing money is beneficial, other times it isn’t.
Typically, we refer to this as ending up with good debt or bad debt.
Good debt includes things like a mortgage loan as you use the money to buy an asset, which can end up growing in value.
Bad debt refers to any instance where you borrow money for the sake of it.
This includes things like credit card debt, payday loans, etc.
If you want to survive an economic crisis, you have to stop borrowing money.
It can be very tempting, but borrowing too much puts you in the hands of creditors once more.
Now, you’re back at step one where you have to focus on paying off your debts.
Many Canadians have become accustomed to borrowing credit all the time.
This can be a hard habit to cut, but it is worthwhile.
In essence, the aim is to follow the advice in the previous point: create a budget to curb your spending.
When you spend less, you have less need to borrow money.
Ultimately, this puts you in a position to be financially dependent.
When you rely on others for money, that’s when things go downhill.
Downsize
Most people associate downsizing with selling a big home and moving into a smaller one.
In truth, this is just one aspect of what the term encompasses.
Downsizing is more about your entire life, rather than where you live.
The idea is that you take a step back and look at how you live your life.
Do you really need all of the things you pay for every month?
Do you need a four-bedroom home when only two people live in your house?
Is it worth paying for multiple subscription packages when you barely use them?
Do you even need a car when everything is within walking distance?
When you start asking these questions, you quickly realize that you’re wasting a lot of money.
Downsizing can make your life simpler and more affordable.
Even the act of cancelling a subscription service can help out.
You pay $10 a month for something you hardly ever use, that’s an instant saving of $120 a year.
You’ve had that subscription for five years, meaning you could’ve saved $600 without it!
Yes, it can be a bit of a shock to the system when you downsize and get rid of a few luxuries in life.
However, you get used to it.
Plus, it’s a small price to pay when you consider how much money you save every month and every year.
This feeds into your budgeting plans and ensures you live within your means.
Do you need to move into a tiny home and give up everything in your life?
Of course not!
It’s merely a case of seeing where you can simplify your life to save money.
Plan for the worst
The best way to survive an economic crisis is to be ready when one falls upon you.
Let’s say the economy collapsed today and thousands of Canadians lost their jobs.
You’re one of them, so what will you do?
Most people have no plans for situations like this.
Nobody likes to think about it because it’s not a nice thing to consider.
Still, you have to plan for the worst to ensure you survive.
There are a few things you should think about:
- Diversify your income: Consider other ways you can make money alongside your main job. This might mean a part-time job, but there are so many ways to make additional money while working full-time in this day and age. Diversifying your income means you aren’t badly hit if you get let go from your main job. There’s still money coming in every month while you look for a new one.
- Save & invest: We’ve already spoken about saving money and how valuable this can be. It’s smart to put some of your savings in an emergency fund that you only touch in emergencies. This can help you pay for things if you’re out of work and looking for a job. Investing is like saving, but you can gain more money from it. If you’re made redundant, you can cash in your investments and have some extra money to help you out.
It’s also clever to always have a resume handy and updated.
This makes it easier to quickly apply for jobs if you need one.
Making contingency plans will keep you in control of your life if bad things happen.
Use these five tips to survive and economic crisis in your life.
It’s all about being prepared and understanding how to avoid bad financial habits.
Some economic catastrophes can’t be avoided, but you can still survive them.
Call us for debt-relief help!
If you need help getting out of debt and reclaiming your life from a financial crisis, call us today.
We can set up a consultation to pursue all the options and help you become debt-free.
Alternatively, fill in our evaluation form online, and we’ll get back to you.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
