Non-Budgetary Causes of Financial Problems

At Hoyes, Michalos we understand that there are many reasons people may find themselves facing financial problems. In fact a recent study by our firm found that:

  • more than 1 in 3 insolvencies were due to job loss or income reduction
  • 1 in 5 insolvencies were caused by financial problems arising after a divorce or relationship breakdown
  • almost 1 in 6 insolvencies followed a period of illness, an injury or other health problem.

Understanding these causes, and taking corrective action, can help you avoid financial traps and unnecessary debt.

Here are some common triggers and what you can do to avoid them:

  • Set aside some money in a rainy day fund to avoid using credit for emergencies.
  • Be a good financial role model for your children.
  • If you are uncertain about a financial choice, talk to an unbiased professional like a credit counsellor.
  • Talk with your spouse or partner about money. Open communication and joint decision making about money is important.
  • When making a major purchase, like a vehicle or home, consider all the costs not just the initial purchase price including taxes, on-going maintenance, repairs and insurance.
  • Understand the impact alcohol or substance abuse, gambling or compulsive spending can have on your finances. Seek counselling if any of these issues are affecting your ability to balance your budget.
  • Don’t take on more credit than you can pay given your income. Consider the impact of a job loss or income reduction on your future ability to keep up with your payments.

Never use credit to supplement your income. Keep and maintain some form of budget to ensure that you spend only what you make.