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Tips from a financial planner

Kenneth Asselin, a financial planner with Desjardins Financial Services Firm, Inc., shares his list of best credit practices.

Develop good habits

Draw up a budget.
This is the basis of sound financial management. Find out more about budgets.
Pay your credit card balance in full each month and always pay all your bills on time.
If you don't pay your credit card balance in full each month, you are artificially inflating your income and deceiving yourself about how much you really make.
Be very careful and avoid getting into credit card debt at all cost.
If this is the already case, apply for a loan or line of credit to pay off your balance. You'll pay less in interest and maintain your good financial reputation with your financial institution. Credit cards should only be used when you know you can pay off the entire balance right away.
Don't have more than 2 credit cards.
This makes it easier to stay in control of your personal finances.

Don't be tempted by offers of free gifts or rewards for taking out store credit cards. These have much higher interest rates than credit cards from financial institutions.

Even if you don't use your credit cards, keep in mind that credit limits are considered potential debts and can impact your request for a mortgage from a financial institution. When qualifying you for a loan, these take into consideration both your actual and potential debt loads.

When you stop using a credit card, write to the lending institution and ask to it to cancel your credit card contract.

Know what your debt capacity is.
Never borrow more than what you can repay. To determine your repayment capacity, you need to know exactly how much you spend on all your monthly expenses and debts.
Stop comparing yourself to people who look like they can afford everything.
They may be up to their ears in debt!

Before buying on credit or borrowing

Before buying on credit, ask yourself these questions:
  • Would I be buying this if I had to pay cash for it?
  • Do I really need it?
  • Is this something I can do without?

Find out more

See Ask yourself the right questions before you buy.
Before you borrow, check the loan interest rate and length of the repayment term and calculate the total amount you'll have to repay.

Calculate

To find out more about your borrowing capacity and what size payments you can afford to make, use the following tools:
How much can I borrow?
What are the payments on a personal loan?

When buying something costly, make sure you make the largest deposit you can on it before borrowing.
This will reduce the number of payments you'll have to make, and therefore the interest you'll pay. Don't forget to keep some money aside for emergencies.

Find out more

See How to save.
Get cash advances only in case of emergency.
Use cash advances only for short-term needs or in case of emergency, because interest starts on the date of the advance and continues until the entire balance has been repaid.

If you have financial problems, you can:

Meet with an advisor to discuss your debt load.
You can get help from a number of Canadian non-profit organizations specialized in budget counselling. For a list of these organizations, see Desjardins Mutual Assistance Funds.
Apply for a personal loan to consolidate your debts.
You’ll save a lot of money by doing this.
Contact your creditors.
Work out a payment schedule with them to pay off your debts.
Once the storm has passed, keep no more than 2 credit cards and reduce your credit limits.
A tried and true strategy is to use credit only when you absolutely have to and to buy something only when you have saved up enough to buy it.

The next step

See Reasons to save and How you can become rich.
Some people may feel so overwhelmed by their debt load that they might be tempted to consider bankruptcy as a solution.
Meet with a financial advisor before you make this decision.

Find out more

See Manage your daily finances

Students

Find out about student loans and options.
See School loans, bursaries and debts: a survival guide.
If you are a student in Quebec and unable to repay your loans:
Visit the Aide financière aux étudess Web site.
Find out about the Deferred Payment Plan, which allows you to defer payment of student loan.
Also find out about the Loan Remission Program, which can help you reduce your student debt by 15%.
If you are a student in Ontario and would like to get government financial aid:
Visit the Ontario Student Assistance Program Web site for information.


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