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Stay out of bankruptcy, then do your part to help the economy
By Linda Duguay
A young man and his wife have one child, a mortgage, some credit
card debt, a car loan and seven years seniority at their jobs.
One is an autoworker, the other a grocery store cashier.
A second car would be helpful but would strain their debt loan to
the max. The young couple knows the economy needs help and spending
money is one of the ways to keep it healthy. And they really want
that second car. What should they do?
This is a common scenario for many families in the Windsor/Essex
County area.
Do they spend to help avoid the recession some forecast? Or do they
pull in the financial belt and go without for a while?
According to financial advisers, there are ways to handle debt and
still be socially responsible. In some cases reducing debt to avoid
bankruptcy is the best thing for the economy.
This scenario happens all the time, according to Wendy Dupuis,
executive director of Credit Counselling Services of Southwestern
Ontario Inc.
“One life circumstance occurs and the ceiling will come
crashing down around this couple,” says Dupuis.
“In scenarios like this I would never recommend incurring more
debt,” she adds. “It seems good for the economy but defaulting
on your loans is bad for everybody.”
Dupuis says many people in debt trouble need to take a serious look
at their lifestyles.
“I always tell people I am not the bearer of good news,”
says Dupuis. “The first thing they have to do is distinguish
between a need and a want.”
A second car is probably a want, according to Dupuis. She says like
this couple, many people need a saving and spending plan before they
make any other decisions. After that, she says, they can work toward
getting their automobile.
“People think about the convenience of a second car,” Dupuis
says. “But what about the extra expense? Maintenance, gas and
insurance will be at least $1,800 a year beyond the price of that
car.”
Living on overtime
Dupuis refers to the work reduction in Windsor and says people who
have saved ahead will fare the best. She says many have been living
on overtime pay, thinking it would go on forever. That extra money
should have been considered a savings opportunity but Dupuis says
many are making their mortgage payment based on it.
“You should have three month’s worth of your expenses saved
at all times,” says Dupuis. “If your job is lost and you
default on payments, your credit rating will be affected for years.”
Another common problem Dupuis sees is people who have been overwhelmed
by school debt.
“We’re seeing more young people than before,” she says.
“People are graduating with a general B.A. they’ve financed
and are now unable to find a job. And they can’t default on student
loan.”
Dupuis understands most people have to finance some of their school
tuition but she says it’s crucial to realize the possibility
of not finding work after graduation. “Be aware of the financial
risk and offset your cost with part-time work and bursaries,”
she advises.
The Credit Counselling Service of Southwestern Ontario Inc. is not-for-profit
agency funded in part by the United Way. Counselling and workshops
are free and offered on topics like money management, budgeting, what
to look for in car buying, mortgages and handling credit card debt.
“People usually see us because of either misfortune or mismanagement,”
says Dupuis. “But most often its mismanagement. That can be avoided.”
What about the pressure to spend in order to get the economy moving
again?
“That comes from the assumption that people are in good financial
shape,” Dupuis says.
“If your spending and savings plan is in shape, then by all means,
help out the economy. But if it’s not, think about which creditor
will give you debt forgiveness for patriotism.” |
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