Budgeting for the Best Solution: Hamilton Ontario Personal Bankruptcy Blog

Posted on Thursday, November 09, 2006

A client I first spoke to last month called me back. She was struggling with knowing how much she can afford to pay her creditors. She knew she and her husband could afford to repay the debt, she just wasn't sure how much. Should she file a consumer proposal and try to pay back a portion of the debt they owe? OR Should she enroll in a Debt Management Program with a credit counseling agency and repay 100% of the debt owing? She told me she just wanted to "do the right thing". This is not an uncommon quandary. Knowing how much we can afford is often what gets us into financial trouble in the first place. And how much we can afford varies greatly between individuals. I suggested to this client that, as a first step, she and her husband project what I call a "brutally honest" budget. What do I mean by "brutally honest"? An honest budget captures our real spending vs. what we think we spend. I suggested they start by listing their fixed expenses, which is all of the expenses they have no choice but to pay. This includes rent or mortgage payments, utilities, car payments etc. What would then be left over is the amount available to spend on variable expenses, or the expenses that they have some control over. This includes groceries, meals out, entertainment etc. In the case of these particular clients, this amount would also have to cover a payment to their creditors. The math, if done carefully and honestly, can often assist in the debt solution decision. These particular clients also enlisted the assistance of a credit counseling agency. The counselor they met with reviewed their budget, and made some suggestions that eventually led them to their final decision to explore a consumer proposal in more detail.

If you are dealing with debt, and are struggling with budgeting for a solution, you are not alone; this is a very common query. Please feel free to contact us at 310-PLAN; help may be just a phone call away.

Budgeting for the Best Solution

Posted on Thursday, November 09, 2006

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