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We broke life’s expenses down into Monthly, Annual, Lumpy and Catastrophic expenses. In Part 2, we're going to deal with monthly expenses. Monthly expenses should be the most predictable of the expense categories. They happen every month. Some are fixed and some are variable. With your household income, you should be able to comfortably cover these expenses including covering seasonal variations. If you have nothing left over at the end of the month after paying monthly expenses, then you have no money to deal with the annual and lumpy expenses. This is not a good situation. Required monthly expenses are food, a place to live and transportation for work so you can earn income. This is basic living. Each of these expenses have a broad range of cost depending on how you manage them. For food expense, if you plan and cook your own meals, shop for bargains, use leftovers for lunch and stay away from pre-packaged and prepared foods, you will likely have the lowest cost for food. If you eat out a lot (including buying coffee and lunches), buy pre-packaged and prepared foods and give your kids lunch money instead of lunches, you will be at the higher end of the monthly food cost range. If your food management falls in the latter description, this is one of the easier areas to quickly reduce the monthly cost. You need to change things up but, you can do this quickly and have an immediate positive impact on your expenses. Living and transportation expenses can be more challenging to manage. The key here is to not get into too large of a commitment in the first place. Once the commitment has been made, it can be difficult and take a long time to manage the cost to a lower level. In the interim, your finances may be stretched. For example, buying a high priced vehicle when a lower priced one would do. As the axiom goes, the car is worth 20% less as soon as you drive it off the lot. So, if it is a fully financed or leased vehicle, it will be very difficult if not impossible to get out of the obligation once committed to. Buying a vehicle is a significant decision that should not be made quickly and must be well thought out. Be disciplined, take the emotion and impulse out of the decision and focus on the practicality; what do you really need for a vehicle and then what are the cost options for such a vehicle. The same goes for living accommodations. Having cash left over after paying your monthly expenses is very important to effective financial management of your life and, it will give you great peace of mind. Maybe you won’t have what the Jones’ have but you will sleep better at night. https://maritimetrustee.ca/blog/budgeting-101-part-2-of-5

If you have debt problems you also have options. A Consumer Proposal is "an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both" and, for some people, it can be a much better and more manageable solution than bankruptcy to resolve your debts, particularly if: - You want to pay your creditors more than they would get in a bankruptcy. - You have high income and could not manage the surplus income payment required in a bankruptcy. - You have equity in assets that would take too long to pay within a bankruptcy. - You have been bankrupt previously. - You want to take advantage of a potentially shorter impact on your credit score. Fair and Reasonable You can be as creative as you want in determining the terms of a settlement put forth in a Consumer Proposal as long as it is fair and reasonable and you can get more than 50% of your unsecured creditors (by dollar-value of claims) to accept it. As long as you get over this 50% threshold, it will be binding on all unsecured creditors whether they like it or not. That sounds harsh but it's why this method works for some. Most consumer proposals are structured as monthly payments over time at less than full payout. Generally, a consumer proposal should provide a higher return or recovery to the creditors than they would obtain in bankruptcy or there is no incentive for your creditors to vote in favour of it. Once the total amount of the settlement is determined and approved, you can pay it out early if you are able to do so and this would accelerate rebuilding your credit. Also, the fact that you filed a Consumer Proposal will stay on your credit bureau report for 3 years after you have completed all of the terms of your Proposal, which is a shorter period than with bankruptcy. How a Consumer Proposal Works In Canada In order to qualify to file a Consumer Proposal, you must have debts of less than $250,000, excluding the mortgage on your principal residence. If you are over this limit, there is another form of proposal that can be filed. When we review your individual situation, we will consider whether or not a Consumer Proposal (or other forms of proposal) makes sense for you and review the pros and cons of a proposal as compared to bankruptcy and other non-legislated options. The Government of Canada provides a great explanation of how Consumer Proposals work here. A Consumer Proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). Once you understand how this method works, an LIT can look at your personal situation and help you decide if this gentler method of dealing with your debts can work for you. https://maritimetrustee.ca/blog/2017/12/1/a-gentler-method-why-a-negotiated-consumer-proposal-can-be-a-more-fair-and-reasonable-debt-solution

Bankruptcy is usually the last choice for most individuals. It is good that this process is available because, without it, there might be no relief from the stress of unmanageable debt. Personal bankruptcy provides a financial reset when other options are not practical. Even if you don't want to use bankruptcy to resolve your situation, you should still understand how it works. Don't ignore the option just because of the "B" word. When assessing an individual's financial situation, we review all relevant facts about assets, liabilities, income, family situation, the cause of financial difficulty and outlook for the future. These are all considerations in determining what options are practically available so that you can choose the one that is best suited to you. Will I Have to Give Up My Assets? In most cases, you do not have to give up any assets (unless you want to) if you go through bankruptcy. If there is equity in assets, you will have to pay the equity with the trustee. If your income is above a certain threshold, you will have to make payments based on your income level. How your assets will be dealt with and how much you will have to pay will be reviewed with you before you file for bankruptcy so you understand exactly how bankruptcy would work for you. Counselling and Support For a Better Future The bankruptcy process also provides individuals with two (2) mandatory counselling sessions to help you understand how you got into financial difficulty, improve your basic budgeting skills and provide you with information on understanding and starting to re-build your credit. Sometimes, bankruptcy can actually be the most efficient way to get back on your financial feet and start to rebuild your credit. Try not to be afraid of this or any other option. Whether bankruptcy or another method is best for dealing with your debt, the goal for everyone involved is to give you a new beginning and a better future! https://maritimetrustee.ca/blog/2017/12/1/personal-bankruptcy

If you want to make a budget, you need to understand your expenses, short-term, medium-term and long-term. When I think about life’s expenses, I break them down into 4 categories. Monthly- these can be fixed or variable. Fixed expenses can include rent, mortgage, car loan, insurance, cable, telephone, internet. They are pretty much the same every month. Also included here, for the planners, might be regular RRSP and RESP contributions. Variable monthly expenses may include oil, electricity, cell phone, vehicle fuel, food. These types of expenses generally occur every month but may have some variability as to amount. Some are seasonal in nature such as heating. Annual - some are fixed and some variable. We know that we are going to incur these expenses and may know roughly when they are going to be incurred but not necessarily how much they will be. Think of the annual vehicle inspection and registration as fixed. The variable component would be the cost of repairs in order to get the inspection completed. Also included here would be Christmas and birthday expenses, and perhaps annual vacation expenses. Lumpy - these are expenses that we know (or should know) are coming down the track and will have to be incurred but only happen once in a lifetime or only once every couple, few, 5, 10 or 15 years (or so). Examples of these types of expenses include new tires for your car, helping your kids fund their post-secondary education, children’s weddings, significant dental or other medical procedures that are not covered by insurance, significant home expenses (roof, windows, siding, septic, well). Lumpy expenses might also include goal expenses such us a down-payment for a house or cottage, the dream vacation or buying a car for cash. Catastrophic- these are the really nasty ones. You don’t see them coming and the impact can be financially crippling. Examples include uninsured or underinsured damage to your house or vehicle, non-covered medical expenses / medication, litigation costs. I would also include here the implications of loss of income where employment or level of income cannot readily be replaced. The first 3 categories of expenses can be budgeted and planned for. The last category of catastrophic expenses cannot be planned for but, measures can be taken to lessen or mitigate the impact of these expenses. Understanding these categories of expenses is the first step in budgeting and I am going to talk about these categories and what you should consider in subsequent articles (4 more parts). In the meantime, try to break-down your expenses into these categories and start to think about the Monthly, Annual and Lumpy expenses in your world. https://maritimetrustee.ca/blog/budgeting-101-part-1-of-5

On February 28, 2018, the Office of the Superintendent of Bankruptcy released its most current statistics on personal bankruptcy and consumer proposal filings for Canadian debtors. Canada - there were 57,969 personal bankruptcies and 64,229 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 8.5% and consumer proposal filings were up 2.8% as compared to the 12-months ended December 31, 2016. There were 4,142 personal bankruptcies and 4,449 consumer proposal filed in Canada in the month of December 2017. New Brunswick - there were 2,457 personal bankruptcies and 1,904 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 15.4% and consumer proposal filings were up 23.8% as compared to the 12-months ended December 31, 2016. There were 189 personal bankruptcies and 162 consumer proposal filed in New Brunswick in the month of December 2017. Nova Scotia - there were 3,807 personal bankruptcies and 1,917 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 9.2% and consumer proposal filings were up 9.1% as compared to the 12-months ended December 31, 2016. There were 259 personal bankruptcies and 113 consumer proposal filed in Nova Scotia in the month of December 2017. Prince Edward Island - there were 387 personal bankruptcies and 286 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 22.6% and consumer proposal filings were down 5.3% as compared to the 12-months ended December 31, 2016. There were 21 personal bankruptcies and 21 consumer proposal filed in Canada in the month of December 2017. https://maritimetrustee.ca/blog/2018/3/14/december-2017-personal-bankruptcy