Make a budget to spot your financial troubles before it’s too late: experts

Make a budget to spot your financial troubles before it’s too late: experts

TORONTO — In the 11 years Scott Terrio has spent in the financial services industry, he has heard the same thing over and over again: “I should have come in to see you 12 to 24 months earlier.”

That refrain comes from his clients — some who have had to move homes or file for insolvency — to climb out of mountains of debt they’ve accrued.

It’s obvious you’re in deep trouble when collection agents are constantly calling or you have months of unpaid bills piling up. However, the ideal time to decide you need financial help is long before it gets to that, says Terrio, the manager of consumer insolvency at Hoyes, Michalos and Associates Inc., a licensed insolvency trustee in Toronto.

But what should be your warning sign? That’s tricky to determine because most experts agree there is no magic earnings-debt ratio or even a specific number of straight months of spending more than you earn that should alert you of financial trouble ahead. Everyone’s financial situation is different, so the warning signs and how fast someone can act on them will vary, professionals say.

Terrio recommends keeping an eye on your monthly cash flow because it can be a telltale sign of when you need to be more prudent.

In Canada, there are reportedly plenty of people who could benefit from paying some extra attention.

The Canadian Association of Insolvency and Restructuring Professionals expects personal insolvencies will grow in 2020 after the rate of filings increased 8.9 per cent in November over the same 12-month period the previous year.

When looking at your cash flow, pay attention to any balances you have on high-interest debt because they can be good indicators of your financial status, says Terrio.

“If you’re carrying balances for six to 12 months or 24 months, you probably should be talking to somebody at that point,” he says.

For Kim Inglis, a financial adviser and associate portfolio manager at Raymond James, a first sign of trouble is spotting when you are spending more than you make.

“If you’re seeing people that are trying to keep up with the Joneses and they’re not saving at all because everything that they bring in a month is going out and then some, that’s a definite sign that they are not establishing the right habits,” Inglis says.

Nicola Wealth financial adviser Kyle Westhaver agrees.

He says he sees a lot of people who end up in trouble because they have no clue what they are spending every month and so they won’t necessarily spot a problem right away.

“If you create a plan for the year and you say, ‘I am going to spend $5,000 a month’ and you are lagging behind, it would allow you to pay more attention and know when you’re in trouble,” he says.

Warning signs should be even more heightened when you are considering paying off one liability with another, he adds.

“If you are paying your credit card off with your line of credit that is an easy moment to realize I don’t have a great handle on my situation,” she says.

Most advisers agree that a budget is a good place to start because it helps you set goals and can alert you when you spend too much.

Depending on how concerned you are about your financial situation, many advisers recommend turning to professionals for help.

But there are some things people can do if they catch their situation early enough or want to help turn their finances around.

“They can travel in the off-season instead of peak season and they can bring their lunch to work instead of buying every day,” Inglis suggests. “There’s endless, endless ways you can cut back and just little changes make a big difference.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, announced more than 1,500 active cases in Alberta Monday afternoon and five additional deaths. (Photo by Chris Schwarz/Government of Alberta)
New COVID rules coming

Central zone active cases up by 100 in last 24 hours

(Black Press file photo.)
Rocky police charge three suspects after pellet gun shootings

Three incidents results in several injuries

Red Deer city council gave final approval to a mask bylaw that will go into effect on Nov. 30. (Black Press file photo).
Red Deer city council approves mask bylaw that takes effect on Nov. 30

It could be ‘superceded’ by a provincial mask bylaw, if one is announced Tuesday

Lynn Van Laar, chair of this year’s Christmas Wish Breakfast, said the event was planned outdoors to minimize the risk of COVID. Photo by Mamta Lulla/Advocate staff
Outdoor Christmas Wish Breakfast helps central Alberta families this holiday season

The coronavirus pandemic isn’t going to stop children from having a merry… Continue reading

Los Angeles Rams cornerback Jalen Ramsey (20) knocks a pass away from Tampa Bay Buccaneers wide receiver Mike Evans (13) during the first half of an NFL football game Monday, Nov. 23, 2020, in Tampa, Fla. (AP Photo/Mark LoMoglio)
Goff throws for 376 yards, 3 TDs in Rams’ 27-24 win vs Bucs

Goff throws for 376 yards, 3 TDs in Rams’ 27-24 win vs Bucs

New York Red Bulls midfielder Dru Yearwood, left, fights for the ball against Toronto FC midfielder Jonathan Osorio during an MLS soccer match in Harrison, N.J., on November 8, 2020. THE CANADIAN PRESS/AP, Eduardo Munoz Alvarez
Experienced Toronto FC ready to take on upstart Nashville SC in playoff action

Experienced Toronto FC ready to take on upstart Nashville SC in playoff action

Canada's head coach Dave Lowry during practice at the IIHF World Junior Championship in Helsinki, Finland, on Wednesday, December 30, 2015. The Winnipeg Jets have hired Lowry as an assistant coach. THE CANADIAN PRESS/Sean Kilpatrick
Former WHL head coach Dave Lowry joins Paul Maurice’s staff in Winnipeg

Former WHL head coach Dave Lowry joins Paul Maurice’s staff in Winnipeg

Felix Auger-Aliassime, of Canada, returns a shot to Dominic Thiem, of Austria, during the fourth round of the US Open tennis championships in New York on September 7, 2020. THE CANADIAN PRESS/AP, Seth Wenig
A steady if unspectacular season comes to a close for Canada’s Auger-Aliassime

A steady if unspectacular season comes to a close for Canada’s Auger-Aliassime

Sacramento Kings' Alex Len (25) collects a rebound against Brooklyn Nets' Jarrett Allen (31) during the first half of an NBA basketball game Friday, Aug. 7, 2020 in Lake Buena Vista, Fla. THE CANADIAN PRESS/AP, Ashley Landis
Raptors continue to shore up frontcourt, signing Alex Len to one-year deal

Raptors continue to shore up frontcourt, signing Alex Len to one-year deal

Prime Minister Justin Trudeau speak to the media about the COVID-19 virus outside Rideau Cottage in Ottawa, Friday, Nov. 20, 2020. THE CANADIAN PRESS/Adrian Wyld
Freeland says Liberals will deliver economic, fiscal update on Nov. 30

Freeland says Liberals will deliver economic, fiscal update on Nov. 30

Canadian Joint Operations Commander Lt.-Gen. Mike Rouleau speaks during a news conference on the recent Canadian Forces helicopter crash, Tuesday, May 19, 2020 in Ottawa. The Canadian Armed Forces is preparing to formally apologize to victims of sexual misconduct. THE CANADIAN PRESS/Adrian Wyld
Canadian Armed Forces to formally apologize to victims for sexual misconduct

Canadian Armed Forces to formally apologize to victims for sexual misconduct

Alberta Liberal Party David Khan at a campaign stop in Calgary, Alta., Thursday, April 11, 2019. The Alberta Liberal Party says its leader, David Khan, is stepping down. A news release from the party on Sunday evening says Khan is accepting a new job in law. THE CANADIAN PRESS/Jeff McIntosh
Alberta Liberal Party says leader, David Khan, stepping down to accept new job in law

Alberta Liberal Party says leader, David Khan, stepping down to accept new job in law

Most Read