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The Neglected Family Budget
Canadian households are more indebted than they have ever been, but with some simple steps they could do a better job of managing their debt, lowering their interest payments and making more money available for other uses.

What is a key to managing debt?
Creating and sticking to a budget. It’s one of the simpler parts of financial planning but even if people do create a family budget, they often don’t check to ensure that they’re actually spending within the limits they’ve set for themselves. Whether your immediate goal is to reduce your debt, save for retirement, save for education or buy a car, the key is spending within your means. There are going to be months where expenses are much higher and you need to know how you are going to cover those expenses. If it is by borrowing, you have to have the cash flow to pay down that debt after the unexpected expense.

How can people tell if they have too much debt?
There’s not a specific percentage. You can look at how much of your total income is taken up by debt payments and if that seems high to you that’s one indication. You can also check what would happen to your mortgage or debt payment if interest rates were to increase by a significant amount. If you couldn’t absorb those payment increases, that would be a sign you’re carrying too much debt.

How much of a percentage rise should you have a cushion for?
At least two to three percent. Interest rate predictions are very difficult to do over a long period of time. You want to focus on how much interest rates might change in a two- to five-year period.

What should people do to reduce their debt?
Make sure you know where you’re spending your money and see how much money you can allocate to other financial goals. Find out where your money is going and allocate what you can to debt. Canadians tend to carry anywhere from three to five different credit products. Often there’s an opportunity to consolidate some or all of those into something that’s more efficient or at a lower rate. We’re big proponents of setting a debt-reduction goal and tracking it the same way you’d set a target for retirement savings. Check after six to twelve months to see if you’re on track to hit your goal. People should also speak to a financial advisor to incorporate their debt-reduction goal into their broader financial plan.

What’s a good definition of living within your means today?
It comes back to setting that budget. A budget will help you understand what payments you need to make to reduce your debt, what contributions you need to make to your investments, what you need to cover all your expenses and, finally, how much discretionary spending is available to you. And work within that amount. If you’re looking for more discretionary spending, ask a financial professional to look at the types of debt you carry and see if you can reduce your debt expense by consolidating that debt at a lower rate. Without a budget you don’t have any context to know if you’ll be able to meet your debt-reduction goal.

How deeply in debt are Canadians?
We currently have the highest debt-to-income ratio on record, for as long as we’ve been tracking this through Statistics Canada. On average, we have $147 of debt for every $100 of disposable income. One in six retired households still have $100,000 or more in debt.

How precarious a situation are Canadian families in?
It varies widely from household to household. In a lot of cases that debt is applied to productive uses like their house and education for their kids. Not all debt is bad. The major risk is economic events we don’t anticipate that cause really high interest rates, in particular for a younger family that has taken on the maximum debt for which they qualify. They’re going to be stuck with these large inflexible payments. New homeowners may also have unexpected expenses and that’s when people end up having to dip into credit cards or other types of debt, which are sub-optimal because of the interest rate. It creates, for a family, quite a bit of cash-flow stress and pressure, either to cover those unexpected expenses or to contribute to other financial goals.

Where should people go to avoid, manage or reduce debt?

This is part of the core problem. People just aren’t talking to anyone about debt. You look at the 40-somethings and 63 percent of them aren’t talking about debt to anyone, yet a significant portion of them carry a lot of debt. We think the industry can increase the focus on planning to reduce debt, and we believe independent financial advisors may be in the best position to do this.

What is an independent financial advisor?

Advisors who are not employees of a product provider; they’re free to offer financial products from a variety of providers. And because they’re not required to sell the products of any particular organization, they’ll gravitate toward what they feel is the best solution available on the marketplace for a client, as opposed to being tied to a limited product shelf.

What happens to people who don’t manage debt properly?

They’re not able to reach their other financial goals, or not in the time frame they’re looking for. The main impact of carrying too much debt is strain on your cash flow.

The “American Dream” is the goal of many fresh graduates, immigrants, and ordinary people living in this country. For many, this entails owning a decent sized home, having at least one car on hand, and raising a happy family. A lot of people think this is hard to come by nowadays, especially since the economy has entered a period of uncertainty. However, living this dream is still a possibility for some people who have been very responsible financially; as they can get a mortgage loan they can use to buy a home.

However, there are certain requirements that render only certain people qualified to take out a mortgage. These requirements may be stiff, but such restrictions ensure that only those who can pay-off a long term debt responsibly are the ones who can get a mortgage. The maximum term for a mortgage loan is around 30 years, so it is definitely a big deal to lenders.

As is the case with many loans, the most important requirement lenders verify is the borrower’s credit rating. In general, one would need a credit score of 720 to ensure that there are no negative adjustments to the mortgage. A credit score of 760 would allow someone to get the best deals and terms possible on a mortgage loan. By removing any delinquent accounts, and by ensuring that the credit score is above 720, home buyers can get a better mortgage deal.

Houston mortgage lenders require borrowers to verify their income to determine what type of home they can afford. Many times, borrowers overstate income in order to buy more luxurious or upscale homes, and in the end struggle to make payments because of the higher mortgage rates for these homes. One will definitely have an easier time keeping up with payments on a house just right for the family.

One more thing Houston mortgage lenders look for in potential borrowers is their housing history and seasoned assets. One’s previous rent history can be furnished through a Verification of Rent from one’s landlord. Typically, the last 12 months are needed by the lender. The lender will also require money in the account that is at least two months old. This makes it seasoned, and helps boost net worth.

In conclusion, Houston mortgage borrowers have to prove that they are financially responsible and productive citizens in order to gain a mortgage. They can then buy a house, pay off the long-term loan, and start living the “American Dream” that is the goal of so many people. It will be a difficult journey, but it will get easier over time with timely payments and hard work.

A Loan comparison, with its growing necessity has now become a service that is being provided by a number of companies. These companies in general charge a fee on loan comparison, and help you decide which loan is best suited to your needs after doing a comprehensive survey and research of various loans available in the market. This makes the job of picking a loan easier for you, and if done by a trusted service provider, you can go ahead and obtain the loan without a comprehensive double check being a necessity. With the growing influence of technology in our lives, there are also a number of websites that undertake loan comparison services for free. In such cases, you will be asked to specify certain details of the loan, enter it into the loan comparison calculator, which will then compare it to a certain set of fixed loan types and information database that is already available. These cannot, however, been blindly trusted for authenticity, and hence can only be an added information to the loan comparison activity carried out by you. There are also a number of blogs that specify personal cases of loan comparison that is done, which can be looked into only to obtain an idea of how loan comparison should be done.

The majority of the working class will apply for a credit card the moment they start receiving a lavish pay. A credit card can be seen as a symbol of wealth for many people. Of course, a credit card does help financial transactions in many ways. However, when used unwisely, the user may end up in a heavy debt.

Sadly, that is what most credit card users worldwide currently experiencing. These users do not get into heavy debts due to the heavy spending rather, it is due to poor financial management. This article will explore ways in which debts from your credit card can be stopped.

First, credit card users should develop techniques to settle the existing balances of the credit cards. By settling the balances they owe first, they will be able to better plan their future expenditures without getting involved in more debt. A good paying off method will help to reduce the debts at a constant rate. This technique will help to reduce the shock of seeing a huge balance at the end of a financial period. Early payoffs will also help to reduce the interest rates which are compounded monthly.

Secondly, those who are opting to use a credit card should analyse their personal financial situation before even thinking of applying for a credit card. If one is uncertain of his financial situation let alone his or her capabilities, he should not use a credit card. Though it can be convenient, failure to meet the payment deadlines will result in high interest rates which will add the amount owed by the user to the bank. If the person still has other bills to pay every month and is running tight on budget, then, it is better for the plan to have a credit card be postponed until all further debts are cleared off.

As a conclusion, to be able to stop credit card debts, one must be very wise in judging his or her financial capabilities especially when it comes to paying off debts since it is these decisions that will affect the amount of debts owed to the bank by the user.

Though flexible mortgage has become a big part of the mortgage market lately, not everyone understands what it is. A flexible remortgage is a mortgage that offers you better control over managing your finances by letting you control the amount of money you pay every month. Basically, they allow you to make your repayments flexibly by paying less or more than the amount due whenever necessary, for the times when you have extra cash or when finances are tight.

Flexible remortgages give plenty of advantages, especially to people whose salaries are very irregular due to bonuses or commissions, or to self-employed borrowers. Flexible remortgages let such people pay off their mortgage earlier than what they expect, without being charged a penalty. In the past, the remortgage market charged a higher interest rate, but now, many lenders offer flexible remortgage deals at the same interest rates.

With traditional remortgaging, there may be huge penalties charged if payments are not made on time. However, flexible remortgages enable borrowers to repay it earlier than scheduled to reduce on the amount of interest to be paid. As interest is calculated in a monthly or daily basis, flexible remortgage can make a huge impact on the amount of money spent.

Sometimes, lenders may also offer a payment holiday. A payment holiday is an agreed period of time where you stop paying your mortgage. Take note that interest fees will still be incurred during a payment holiday though, and lenders may require that you build up a reserve in advance before you get it.

Some lenders have some conditions attached to flexible remortgages, like not allowing overpayment near the end of the mortgage. It’s up to you to read the fine print properly before you sign anything. Not all flexible remortgages offer the same thing either, so make sure you understand what is being offered and what is included.

Bear in mind that underpayment and payment holidays may also increase the mortgage term and total amount to be paid. If you find the thought of flexible remortgaging appealing to your needs, it may be extremely beneficial to you in the long run as overpaying settles your debt sooner and gives you freedom.