The Importance of Financial Literacy and Consumer Proposals
November is financial literacy month in Canada – but what does it mean to be financially literate? To me, financial literacy means that you have a degree of comfort and familiarity with financial concepts such as budgeting, interest charges, retirement savings, daily savings, debt and such other concepts that impact your life directly and indirectly every day, or even financial options like consumer proposals and bankruptcy.
The problem has been, in my view, these skills were not taught in school and, unfortunately, they are not skills that you will just ‘pick up’ on your own.
Improving Our Financial Literacy
I’ve spent decades helping people with their debt as a licensed insolvency trustee and in that time, I’ve heard too often that “everything was okay until…”. The … has been any of a number of different things. I lost my job so I could no longer make my minimum payments, I maxed out all my credit cards so I couldn’t meet my monthly expenses, I lost my public housing and now can’t afford all my living expenses.
I believe that the issue is that people don’t really understand the root cause of their financial problems. It isn’t that credit cards are maxed out, it’s that you are living (at least to some degree) on credit. That is definitely unsustainable in the long run – there’s nothing wrong with putting a few things on your card and paying it off, but letting debt roll over month to month leads to exorbitant interest rate charges and can be difficult to recover from financially.
You must be able to meet your current living expenses with your current income. If you find that your income cannot support your current lifestyle, then it’s best to reevaluate your budget. In other words, you need to have a financial plan, in other words. This can be tough; you must be able to prepare and stick to a realistic budget. Credit cards cannot be used as a crutch to help you get through to the end of the month because how will you pay your expenses next month and the month after?
If you have a high debt load and are just making minimum payments, that’s exactly what the credit card companies want – and that’s not a good thing.
The credit card companies love those types of customers because they make outrageous amounts of money by charging interest on the purchases made on the cards of up to 29%.
A common message on credit card statements is “If you make your minimum payments your credit card will be paid off in 39 or 54 or 60 YEARS. Would you want to pay your credit card bill for 60 years without ever buying anything else on the card?
If you’re in that situation or are similarly indebted, it’s time to consult with a licensed insolvency trustee.
Understanding Your Financial Options: Consumer Proposal
A licensed insolvency trustee can help you address the financial literacy challenge that is facing so many Canadians.
One of our specialities is a consumer proposal (also referred to as a consumer debt proposal). Essentially, this is an offer by you to your creditors on a payment plan that allows you to avoid bankruptcy – and all its accompanying consequences like loss of assets, surplus income payment requirements, loss of tax refunds, etc.
Consumer Proposal Vs Bankruptcy
A consumer proposal has two major components: creating a proposal (payment plan) for your creditors, then a meeting with your creditors if the proposal is rejected by 25% (calculated by dollar value of the debt) of creditors, a meeting of creditors takes place. At the meeting, a simple majority of creditors is needed to support the proposal in order to move ahead.
As mentioned above, a consumer debt proposal is a valuable tool that can save you a lot of the headaches that are associated with bankruptcy, and can often save you a good bit of money as well.
Caplan Debt Solutions – a Leading Consumer Debt Proposal Firm
At Caplan Debt Solutions we will not only help you eliminate debts so you can get back on solid financial footing, we will help you learn about financial concepts such as budgeting and financial planning.
We’ll look at your financial goals and help you understand the importance of financial literacy and become more financially literate. Financial literacy is a generational problem. No one wakes up one day and says I have no idea how to manage my finances. But putting these debt issues or unsustainable living for too long can have a severe impact on your life.
It can be hard to ask for help but it’s very easy to get. All you have to do is make that first phone call to Caplan Debt Solutions.
We are non judgemental and will never make you feel badly about your financial situation. We are here to help. A simple phone call can put you on the road to financial freedom.
You don’t have to live with the stress of an unmanageable debt load or not knowing how to manage your finances. Let us help you take control. Become debt free and financially literate with Caplan Debt Solutions.