What the Trustees at Jean Fortin & Associés recommend

In summary:

• Recognizing signs of financial difficulties early and seeking help promptly can prevent the situation from worsening.
• Understanding your finances, especially through budgeting, helps you better control spending and reduce debt.
• Preparing for unexpected events (emergency funds, credit management) helps limit the risk of falling into debt.
• Adopting healthy financial habits and consulting an expert at the first signs of trouble encourage long-term solutions.

Every year, the trustees at Jean Fortin assist thousands of Quebecers facing financial difficulties. As a result, we are directly exposed to the financial realities of the families and individuals who seek our help. What we consistently observe is that those who recover most successfully are those who take action early.

Below, you will find our recommendations to prevent your financial situation from becoming an overwhelming burden.

Recognizing the warning signs

Before looking at ways to solve a financial problem, the first step is recognizing that one may be developing. Our advisors and Licensed Insolvency Trustees regularly help people identify the warning signs that their finances may be heading in the wrong direction:

• You do not know the total amount of your debts.
• You rely on credit cards to make ends meet.
• Every month, you struggle to pay your bills and meet your obligations.
• You only make the minimum payment required on your credit cards.
• You sometimes pay your rent or mortgage late.
• You constantly feel stressed about money.
• You have difficulty saving or setting money aside for yourself or your children’s future.

Of course, more alarming signs may also appear, such as collection calls from creditors due to unpaid accounts or being denied a new loan application.

Ignoring these warning signs is the worst thing you can do, because financial problems do not resolve themselves. It is essential to face them and take steps to restore your financial health. Just as an illness is more likely to heal when treated early, reacting quickly to financial difficulties makes it possible to find effective solutions while minimizing the negative consequences.

Our 5 tips for managing financial difficulties

1. Create a budget and reduce your expenses

Creating a budget is the foundation for preventing financial difficulties and maintaining control over your finances. By having a clear picture of your income and expenses, you can quickly identify excess spending and adjust your habits before your financial situation worsens.

The goal is not to eliminate every expense, but rather to identify realistic ways to reduce certain costs in order to free up money for your obligations, especially debt repayment.

2. Build an emergency fund

To avoid the stress of unexpected events, our experts recommend that everyone maintain an emergency fund covering three months of fixed monthly expenses. Why is this so important? Because we observe that 60% of people who file a consumer proposal or bankruptcy with Jean Fortin do so following an unexpected life event: separation or divorce (25%), job loss (25% before the pandemic), or illness (10%). All of these events can disrupt a budget, and without a financial cushion to help cover rent and debt payments, you may be forced to choose between missing payments or relying on credit to get by.

In the 1^st scenario, your credit report could be impacted for years, potentially up to 6 years. In the second, you may be adding to your debt burden and making it even harder to regain control of your finances. That said, the best way to build an emergency fund is to set up an automatic transfer from your paycheck every 2 weeks and deposit it into a savings account.

Of course, given today’s economic climate, setting money aside is easier said than done. However, there is no amount too small to start with. In the meantime, if you do not yet have savings, make sure you at least have access to a line of credit that could help you in the event of a sudden drop in income. A line of credit generally has one of the lowest interest rates among credit products, excluding mortgages. Keep in mind that financial institutions are more likely to approve you for a line of credit when your financial situation is still stable. So, do not wait until you urgently need one to apply. It costs nothing when the balance is zero, and it can be there when you need it.

3. Master your credit

Credit cards are one of the leading causes of debt for the majority of people who consult us. Controlling your debt level is therefore essential to avoiding long-term financial problems. Here are a few practical tips:

• Limit yourself to one credit card and make sure to pay it off every month to avoid interest charges. For example, we have seen debtors with a $10,000 balance at a 20% interest rate take up to 23 years to repay it while paying nearly $20,000 in interest. It is a real trap.
• It is also important not to accept every credit offer you receive. Just because a financial institution offers you credit does not mean you should take it. Even if the institution says you can handle it, borrowing to the limit of your financial capacity means paying substantial interest and increasing your financial risk.
• Finally, make it a habit to regularly assess your financial situation using tools such as the debt ratio.

Being aware of your debt level will allow you to make necessary adjustments quickly and stay on the right track.

4. Adopt sustainable financial habits

Adopting sustainable financial habits is an effective way to prevent long-term financial problems. For example, it is better to avoid “buy now, pay later” programs, which can create a false sense of control while quickly increasing your debt load.

Whenever possible, prioritize paying in cash and take advantage of available discounts. Our experts also recommend taking the time to compare merchants before making purchases. These simple habits help maintain a healthy balance between your income and expenses.

5. Take action early by consulting an expert

If you’ve tried making changes to your budget or managing your debt on your own but aren’t seeing the results you’d hoped for, it may be time to speak with someone who can help. Financial difficulties can happen to anyone, and the earlier you seek advice, the more options you may have available. During a free, confidential consultation, a Jean Fortin advisor can take the time to understand your situation, answer your questions, and help you explore potential solutions tailored to your needs. Whether it’s improving your budget, consolidating debt, refinancing your mortgage, or considering a consumer proposal, we’re here to help you better understand your options and make an informed decision. You can easily book an appointment online and take the first step toward greater peace of mind.

By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee