How Underemployment Starts The Cycle Of Debt

The Niagara region, like many others communities across Canada, is struggling with a lack of adequate employment. That is not to say that individuals are unemployed (though many are), but that of those who are employed, many are in positions where they either make insufficient income or are given insufficient hours to meet the needs of their household expenses.

When underemployment is present in a household, the danger of relying on credit to meet your basic household needs becomes a real risk. Initially, the credit is used with the idea that this state of underemployment is a temporary situation and an individual will be able to pay down their debt as soon as their hours increase or they are able to find a higher paying job. Using credit to pay for one bill, then another and suddenly most if not all living expenses can add up quickly while you’re waiting for the employment tide to turn.

The reality is, those types of good job situations are increasingly more difficult to find and once found, the damage has often already been done. Even with a higher paying job or an increase in hours, the cost of carrying that debt creates an inability to move forward. Each month, more of your income is being used to maintain your credit and the household may still not able to afford to put money away for a contingency fund to cover expenses like unexpected car repairs or household repairs. Often as a result of the debt level, the household still has a reliance on credit. The period of under employment has started a cycle of debt that is difficult to stop, even with an improved income level.

Creating a comprehensive budget can go a long way to reducing credit reliance. Write down every monthly expense, from groceries to mortgage and phone payments. Then start detailing additional expenditures such as coffee runs, lunches out, online shopping or movie nights. Once you know exactly where you are spending, you can start to create a plan to cut spending, while still leaving room to live a little. Once everything is all laid out, it’s easy to see how small, unnecessary spending can really add up – which will make prioritizing your spending very easy.

If underemployment is a situation familiar to you and debt has already taken it’s hold, then it is time to seek the services of an experience debt advisor. A Licensed Insolvency Trustee can assess your unique financial situation and assist you with reducing or eliminating the debt you have incurred in the most manageable way possible - so you can get a fresh start and learn how best to manage your money as you work towards a debt free future!