Life likes to take its twists and turns. When that happens it can be hard to get back on track with bill payments. Max is facing just such a situation. Read along while CFA, Mubina, walks through strategies on what to get caught up quickly.
The question
A few months ago, I fell and broke a couple of vertebrae. I’m very fortunate to live in Canada so I’m not so worried about medical debt. The thing is, I was in the hospital for a few months and I didn’t have anyone to help me keep on top of my other bill payments. I’m quite a bit behind now and am not sure the best way to get back on track. Any advice would be much appreciated.
Max P., Cape Breton, N.S.
The answer
Hello Max, I’m sorry to hear this. I hope you’re on the path to recovery. Recuperating your finances is the next big challenge for you. I can imagine it might be overwhelming but facing them head-on will help you refocus your attention on your first priority, i.e. health, that much sooner. Here’s an actionable list of steps to help you get started.
Make a list
Listing down the description, amount owed and due date of every bill will help give a bird’s eye view of all your payables.
The essentials first
Utility bill, water bill, property tax – these bills qualify as essentials and recommend clearing these bill payments first. It’s typical for mortgages to be combined with your property taxes. If they’re not, then pay off your property tax through your financial institution. If you miss these payments it could result in the municipality putting a lien on your home, which would take priority over the mortgage debt. You may consider paying property taxes monthly to reduce the financial load.
Pay off the penalizing creditors first
Prioritize the bill payments that will charge a penalty if the payment is done after the due date and which bills carry high interest rates/penalty rates. That way you know which bills to knock off first.
Credit card bills usually carry the highest interest rate. It is not enough to simply pay off the minimum due. While paying the minimum due can help keep your credit score intact and help avoid a late payment fee, interest is still charged on the remaining bill amount every month. This means you’re paying interest and the minimum due amount over and over again and that entraps you in the vicious cycle of revolving debt. So it’s best to clear your entire credit card payment.
Create a budget
As you convalesce, I’m sure you’re also trying to regain some semblance of normalcy in your day-to-day life. Amidst that, my suggestion may sound hard to implement, but I would strongly recommend creating a new and slightly more frugal budget. This includes reducing or eliminating discretionary expenses. Set aside the cash saved towards paying down old bills. This exercise will also help you give your spending habits a relook and possibly change them for the better and for good. There’s another area of expenses that many of us ignore:
Banking fees
You may unknowingly be paying a lot to maintain your bank account and for certain services that you may not even be utilizing fully. A chargeable service that can easily be replaced for a zero-cost one is a statement fee. Banks charge a fee to send you paper statements but electronic statements are usually free.
ATM Fees
ATM fees are another avoidable charge. These fees are charged when you make an ATM withdrawal outside of your bank’s ATM network or exceed the number of free withdrawals per your banking plan.
Non-sufficent funds
Non-sufficient fund fee charges happen when your account balance goes below a certain amount or a cheque payment bounces.
Banking app
Consider downloading the banking app or using mobile banking, Often, these methods provide a range of services to you free of charge. It will also help you keep track of your account balance and help you ensure you don’t go below the balance as per your banking plan.
No fee bank
Consider choosing no fee banks. They’re online banks that charge less to no fees however they may lack the same level of customer service or features as a traditional bank so be mindful of that.
Credit unions
Credit unions are a cost-effective option versus banks. Some offer lower interest rates on personal loans and mortgages and may charge fewer, or lower, fees for certain transactions. So if you feel you’re stuck in a high fixed-rate mortgage that your current financial condition can no longer afford, consider moving to a credit union.
Watch out for debt relief scams
Debt relief scams often target indebted consumers by falsely promising insolvency options like consumer proposals and bankruptcies. Beware of calls that make unrealistic promises or pressure you to make quick decisions, ask for upfront fees or administration fees or say that they will negotiate with creditors on your behalf. Below are tips to help you recognize signs of debt relief scams.
- Look up the general information about the company. How long have they been open? Do they have a physical location? Do they use high pressure tactics?
- Look at reviews. How recent are they? What is the company’s overall rating?
- Check whether the organization is rated by the Better Business Bureau or other third-party rating organizations like TrustPilot. These organizations have no conflict of interest giving them inherently reliable information about the company you’re considering.
- Look up the general information about the company. How long have they been open? Do they have a physical location?
Negotiate with your creditors
Work out a payment plan with your creditors. Many creditors, like banks and financial institutions, have payment options, programs or arrangements to thrash out a plan with those struggling to pay their debt. they would much rather receive partial payment than nothing. Start by explaining your financial situation and then ask for information about repayment plans or hardship programs.
Consider financial assistance programs
The Government of Canada offers several assistance programs and benefits to aid low-income groups or to help overcome any temporary financial struggles. Here are some of them that may be relevant to you.
Canadian Pension Plan disability benefits: A monthly payment you can get if you are unable to work because of a disability.
EI Sickness benefit: EI sickness benefits can provide you with up to 26 weeks of financial assistance if you can’t work for medical reasons. You could receive 55% of your earnings up to a maximum of $668 a week.
Benefits differ across provinces. Go through your province’s income assistance program. For example, Nova Scotia offers income assistance ranging from basic assistance to special needs. The Standard Household Rate is for basic needs such as food, clothing, shelter, fuel, utilities, and personal items. You can find the link to the program below:
https://novascotia.ca/coms/employment/basic-needs-assistance/index.html
Final thoughts
These actions will help ensure that all your outstanding accounts are in order or, at the very least, you’ll have an idea of all your outstandings. I hope you’re able to catch up on your bill payments and get back to the pink of health soon!
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