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What Are the Financial Warning Signs That I Should See a Trustee?

Financial Warning SignsMany individuals and families these days are dealing with tight financial conditions. It’s not uncommon. You may have been making financial maneuvers for many months just to get by. But, how do you know when you may be headed for more than just a tight budget? What are the warning signs that you are seriously overextended, and may in fact already be insolvent?

First, a definition of solvency

Let’s put this in a monthly context, since most bills come monthly. A person’s solvency is simply a measure of the quantity of funds they currently have at their disposal, balanced against their current financial obligations.

If you can pay your monthly bills (say, with wages or other funds that belong to you) without taking out additional credit, you are solvent.

If 100% or more of the funds at your disposal in a month (usually your paycheques) are consumed by your financial obligations (usually bills), you may be insolvent. You may be left with bills you cannot pay.

You can actually be insolvent and not realize it. How?

Easy! Perhaps things are getting financially tight every month, but you ease the pressure by accepting the offer of a new credit card. The new funds temporarily pay your bills, and allow you to feel things are OK! You hope for the best, but … in a couple of months you are in the same spot again – this time with an extra credit card bill to pay. Guess what? Your problem is insolvency – and it’s getting worse, as insolvency often does.

Here are a few signs that you may be insolvent (many of which I experienced myself before filing my Consumer Proposal):

  • Finding it impossible to save
  • Rarely using cash or debit for important expenses
  • Robbing Peter to pay Paul – using one credit card to pay the bill for another credit card
  • Putting basic necessities (rent, food) on a credit card because you have no other funds available
  • Having maxed-out credit cards
  • Realizing that a great amount of your monthly income is being consumed by interest
  • Congratulating yourself on making it through another month while doing any of the above

And here is the most insidious sign of all:

  • Feeling that your finances can’t be all that bad because you’ve been granted yet another credit card.

This last one is perhaps the most dire sign. As my Trustee once pointed out, the credit card industry is one of the few that will continue to give you more of what is getting you into trouble, even when they can see the end looming. The other industry, of course, is illicit drugs.

It cannot be over-emphasized: no matter how good it may feel, being accepted by a credit card company is in no way a sign that your financial picture is healthy.

Is any of this sounding familiar? If so, don’t be ashamed

It’s hard to face the fact that you may be insolvent. After all, it sounds like something that happens only to the lazy, or the irresponsible – but this is far from the truth. In 2014, a total of 118,050 people in Canada filed for Bankruptcy or Consumer Proposal. Over a million Canadians have experienced insolvency in the last decade alone. Most of these folks were doing their best, just like you.

If you are in fact insolvent, you qualify to file for Bankruptcy or Consumer Proposal. These are financial remedies that are designed to give honest debtors a new start.

Are you experiencing some of the above signs, but feel unsure of your financial position? A Trustee can help clarify it for you. There’s no risk – your first appointment is free, and you will feel better knowing your options for going forward.