Is It Time For A Licensed Insolvency Trustee To Review My Finances?
Everyone should know what it feels like when you DON’T HAVE financial trouble.
That’s when your income is more than enough (Without Using Credit) to pay all your basic living expenses like rent or mortgage, utilities, food and household expenses, clothing, vehicle/transportation expenses, some for the fun things in life like eating out, entertainment and hobbies, and occasional holidays, while being able to put aside something for a rainy day fund or retirement savings.
But you don’t usually go from no problem to a big problem overnight. A financial problem usually creeps up on you over time. As you become comfortable with your level of good income and healthy finances, you tend to relax in your spending habits and spend more on better shelter, vehicles, food and entertainment, and expensive “toys” like RVs, boats, ATVs and the like. Often the better home and “toys” are financed and you end up having more and bigger financing payments which reduce the amount you can save.
Sometimes just overcommitting to these payments and spending habits makes you over-reliant on credit. For example, if you bought a boat & accessories for $30,000 for cash from savings you have a boat worth $30,000 and no monthly payment expense. Your savings have diminished, but there is no extra payment deducted from your monthly income. But if you financed the purchase of the boat and pay $600 a month that comes out of your monthly income.
If you finance more purchases for extra vehicles, and RVs and even smaller purchases like clothes and travel on credit cards or lines of credit that you do not pay off in full every month, you end up committing to higher and higher finance payments and overall debt builds up. What we sometimes see is the situation where someone has a fairly healthy take-home income of maybe $7,000 a month(which is over $110,000 a year salary), the basic living expenses are maybe $4,000 a month and they have monthly financing payments for the RV and extra vehicles for $2,500 and with the $500 left they are trying to make payments on $30,000 or $40,000 of credit card debt. The interest on those credit cards eats up most of that $500 so the balance owed can take forever to pay.
This is a financial disaster waiting to happen.
If anything happens to lessen your income, such as illness, injury, work slowdown or layoff, your ability to manage all of these payments falls apart. For a time you may subsidize your monthly payments by using up savings. When that runs out you may start to use more credit from credit cards of lines of bank credit to make minimum payments which just worsens the overall problem.