Money mentors or money coaches can help provide you with the education on financial matters. If there’s anything you don’t understand about personal finance, you can ask your money mentor. They cover typical topics, such as:
If you’re struggling with debts, money mentors can also provide debt counselling sessions. They can teach you how to pay off your debts and live debt-free. They can help you have a clear idea about the various debt-relief options we have today and what debt repayment program suits your financial situation.
Read this blog article to learn more about money mentors and how they can help with your financial education.
Financial Education & Debt Advice
Financial education is an important thing that we should all pursue. A study released by Statistics Canada in 2019 has shown that the debt-to-income ratio is rising considerably in recent years.
Your debt counsellor AKA money mentors will discuss financial terms and scenarios to put you in control. The number one aspect of getting money advice is to live within your means.
One of the first terms they will discuss is your DTI. A debt-to-income (DTI) ratio is the ratio between the amount of debt owed for each dollar of household income.
Another term is the debt-to-asset (DTA) ratio. Canada’s consumer DTA suggests that a significant portion of Canadian families have experienced financial issues. Some are being choked by high-interest payday loans and others are skipping debt payments.
According to a study, 11% of Canadian families that reported having debt in 2016 had delayed or skipped paying their unsecured debts (e.g., payments for utility bills, credit cards, and personal loans). Moreover, 4% of those who were tied on a mortgage had delayed or skipped payments. Another 4% of Canadian families admitted using payday loans.
In light of these statistics, we promote the importance of having a money mentor. Making late payments or failing to pay your debts can only exacerbate your financial troubles. Because you’ll incur additional penalty charges and fees it will hurt your credit score. That’s why money mentors stress that you must pay your unsecured loans and mortgage debt on time.
A debt counsellor will suggest before you take out loans or credit cards, you should shop around for ones that have low-interest rates. The inside information they provide is priceless. Some suggest you should avoid payday loans because of exorbitant interest rates that often become a debt trap.
Money mentors can also advise you on how to improve your credit score so that you can avail yourself of lower interest rates and favourable terms on your debt. Improving your credit score doesn’t happen overnight. There are several steps that you must take to better your credit.
Of course, you need to pay your debts and bills on time. But, debt counselling by seasoned money mentors will explain things like credit utilization. The financial literacy of money mentors gives a better perspective on debt.
A money mentor can suggest strategies to help build credit. Strategies such as keeping your credit utilization ratio at 30% or less and not maxing out your credit cards or lines of credit is sound debt advice.
They can help you understand why to avoid applying for too much new credit. When you apply for new credit accounts only do so if you need them. Learn when you should check your credit reports and how to dispute any inaccuracies by debt counsellors.
Money Coaches Use of Debt Calculators
There are various calculators you can use to compute your total debts and how long it will take you to pay them off. Websites like debt.ca provide different types of debt calculators to help consumers be mindful of their debts.
Debt Repayment Calculator
The debt repayment calculator helps you determine the timeframe to eliminate consumer debts and how much interest you have to pay.
Debt Consolidation Calculator
If you’re having difficulty repaying unsecured debts, you can consolidate them into a single monthly payment at a reduced interest rate. The debt consolidation calculator will help you compute how much money you can save if you consolidate your debts.
Debt-to-Income Ratio Calculator
Knowing your debt-to-income ratio gives you the degree of your debt problem. So, if you want to compare your income per month to your monthly debt payments, you should use the debt-to-income ratio calculator.
Spending your money is part of personal finance. However, there are expenses that you need to control to maintain a healthy and stable budget. The guilt calculator computes your annual expenses on entertainment, and other ‘wants’ and helps you realize how much you can save if you minimize such spending.
Money mentors will help you understand the various debt-relief options to manage and eliminate your debts. Read on below to know about debt consolidation loans, consumer proposals, credit counselling, debt settlement, and bankruptcy.
Debt Consolidation Loan
This debt-relief option consolidates your debts into one monthly payment at a lesser interest rate. A debt consolidation loan makes it easier for you to budget your debt repayment since you’ll only be paying a single monthly bill. You can also save money because of the reduced interest on your new loan.
You can work with a Licensed Insolvency Trustee to negotiate with your creditors to pay less than the total amount of your debts. You can minimize your debts by up to 70% to 80% by filing a consumer proposal, and you can also keep your assets.
This debt repayment arrangement is legally binding after it’s filed by the LIT and accepted by your creditors that hold more than 50% of your total debts. You won’t receive collection calls, and the interest on your debts will be frozen.
Credit counselling can provide you with the knowledge of managing your debts and developing a long-term plan to live a debt-free life. A finance professional will assess your income and expenses to help you pick an option to pay off your debts. Solutions may include negotiation with your creditors to lower your monthly payments or reduce your interest rate.
Debt settlement professionals can give you financial advice on how to overcome your debt problems. A debt settlement program can reduce your monthly payments and interest rate. Under this program, you can also avoid filing for bankruptcy and the red tape of creditors.
Bankruptcy should only be considered as a last resort to solve your debt problems. Your debts will be forgiven after filing for bankruptcy, but you may need to give up some of your assets for this to happen. Moreover, it’s also hard to get new credit after you have filed for bankruptcy.
Seek the help of money mentors to manage your finances and solve your debt problems. You can contact debt.ca to learn about personal finance and the different tools and strategies to pay off your debts.