The Effect of Rising Inflation and Interest Rates on your Personal Finances

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What should one do if facing financial challenges? Now is the time to review your finances and understand your own reality. Look at where you are monthly with your income, your current cost of living and debt servicing payments.

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Are there areas of spending where you could trim in order to free up money in your budget? It is also good to stress test your debt by estimating what your monthly payments might increase to, when interest rates go up. Will those payments remain affordable?

Are there variable rate loans you have that you can consolidate or lock into a fixed rate in order to protect yourself from a future interest rate increase? Is refinancing an option?

Another area to look at is your debt-to-income ratio. Divide your monthly debt payments into your monthly income to determine that percentage. If that ratio is 40% or more, you should be considering options and alternatives to reducing your debt.

If you find you are only making your minimum payments, you should know it will take you years to pay down your debt at a significant cost.

Making only minimum payments is a warning sign that you may need assistance with your finances. Other warning signs may include using one form of credit to pay another, not being able to make all your payments, running out of money before payday, and looking to friends or family to borrow money.

The bottom line is that now is not the time to be incurring additional debt. It is a time when you should be very cognizant of your budget and your spending. If you are already struggling, it is important to seek advice sooner rather than later. The sooner you speak to a professional about your finances and options, the more solutions you may have in terms of dealing with your debt.

Michelle is a Licensed Insolvency Trustee, and a Chartered Insolvency and Restructuring Professional. She is a Vice President with BDO and works out of the Regina office. She has been in the industry since 2001 and believes in the system that allows individuals to find solutions to their financial challenges so that they can take charge of their finances once again.

If you find you are struggling or are overwhelmed by your financial situation, we can help you find the right solution. Call 1 855 BDO DEBT to book a free, no obligation consultation with a BDO debt professional.