Household makeover: a financial success story to show how you can live within your means

household-makeover:-a-financial-success-story-to-show-how-you-can-live-within-your-means

Couple managed to pay off a previously insurmountable amount of debt and even had money in the bank

There are many hidden debt relief options in Canada, writes Sandra Fry. Photo by Getty Images/iStockphoto By Sandra Fry

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I don’t know about you, but I am sick of being bombarded with doom and gloom news about our economy. During the holidays, I’d much rather spread some cheer and bring hope to people who may not think this is the best time of the year. So instead of another “how to fix your finances” piece, I’ll share a financial success story instead.

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In my almost 12 years as a credit counsellor, I have been fortunate to help thousands of people learn to better manage their money and clean up their debts. I can’t even describe the joy it brings to coach clients through to the point of debt freedom. But rather than start at the end, let’s go to the beginning of one of my favourite success stories.

I first met Bob and Suzie (names changed for confidentiality) when they were stressed about their finances and struggling to make ends meet. This stress was having a detrimental effect on their health and relationship. They were also starting to fall behind on their minimum payments and were running short of money to cover basic necessities such as food and utility bills.

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Their debts had accumulated from very normal life circumstances that many of us can relate to: reduced family income during a first and second maternity leave; a decade of child-care expenses straining an already tight budget; buying a home and using credit to buy furniture and appliances; upgrading vehicles to make them more suitable for family life; and relying on credit to cover budgetary shortfalls.

Before meeting with me, Bob and Suzie had already applied for a consolidation loan at their bank. They did not qualify for the loan because their debt-servicing costs were too high; they owed too much for their level of income. Not realizing that there are many hidden debt relief options in Canada, they were very worried they might have to consider bankruptcy or sell their home to get rid of their higher-interest debts.

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After we made sure their budget was balanced, we reviewed all their available options. Bob and Suzie had lived in their house for a while and had managed to build up some equity, which is the difference between the value of a house and how much is owed against it. Unfortunately, they did not have enough equity to pay off all their debts, but there was enough available to pay off the two vehicle loans. This eliminated almost $1,000 in monthly payments.

Once we freed up that money in their budget, Bob and Suzie had the cash flow to afford debt repayments. They chose to participate in a debt-management program that consolidated all their credit cards, unsecured loans and lines of credit into one monthly payment. Their creditors reduced their interest rates going forward so that they could be debt free sooner.

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This also meant their debts were getting smaller each month, rather than continuing to balloon in size due to interest and fees. As their stress eased, they were able to focus on managing their money more effectively. They tracked their spending and gained insights into their habits, allowing them to adjust their budget, live within their means and start working on other goals.

Recommended from Editorial Teamwork is the secret that helps common people achieve uncommon financial results Five tips to keep your credit score safe this holiday shopping season How a little hustling on the side can help solve your budget woes as rates and inflation rise With a little less money going towards debt payments, they were able to put money into savings for emergencies and those irregular expenses such as clothing, gifts and car repairs.

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Article content We provided Bob and Suzie with free, online money management tools and classes to ensure they had the skills to get their debts paid off and avoid relying on credit to balance their budget in the future. After a year of living without credit, we helped them rebuild their credit ratings. Each applied for and got a credit card with a low limit.

By the time they completed their debt-repayment program, they had the ability to balance their budget, put money in savings and properly use credit. Except for their mortgage, they paid off all their credit every month.

We met one final time to celebrate their success. Bob and Suzie were excited that they had managed to pay off a previously insurmountable amount of debt and even had money in the bank. With their final payment in sight, they were planning what to do with the money that used to go towards repaying debts. A vacation without bills, putting money towards their kids’ education and actively saving for retirement were all very much doable goals now.

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Article content If the story of this lovely couple sounds like something you’d like to emulate, find hope this holiday season by reaching out to a local non-profit credit counselling agency in your area. They will do a free review of your finances as well as explain all the affordable options to help you achieve your debt-freedom goal.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 26 years.

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