But making a budget is hard.  Keeping it up is even harder.

So, don’t budget.  If you are not mathematically inclined, and you think you won’t succeed at budgeting, don’t.

Read our article on how to NOT make a budget for the secret to money management without budgeting.

That’s a difficult financial position to be in, so if you are under that level of stress, the starting point is to make a very detailed household budget.

If you know exactly where your money is going, you have the best chance to deal with this added financial stress.

Banks want you to get a debt consolidation loan, and payday loan companies, of course, want you to get a payday loan.  Of course payday loans are not the answer to your financial problems, and a debt consolidation loan may or may not be the answer, but when you talk to a bank or payday loan company, that will be their advice.

Credit Education Week is sponsored by banks, credit card companies, and payday loan companies, so they will generally try to “sell” you the solution that works for them.

Of course bankruptcy trustees are also biased.  They will want you to file a consumer proposal or file personal bankruptcy in Canada.

So today’s tip: before you talk to anyone, be sure you understand what they are selling, to ensure you are getting unbiased advice.

Gail Vaz-Oxlade, host of the TV shows Till Debt Do Us Part and Princess, is suggesting that it’s time to School Lenders, meaning they need to learn that, in her example, giving a 21 year old person who makes just over $20,000 per year $15,000 in unsecured credit is crazy?

So, today’s tip of the day: think before you borrow.  Just because the bank offers to lend you lots of money doesn’t mean you should take it.

Avoid Debt Settlement companies unless you fully understand how they work.

For the program to work, you have to stop paying your creditors – you then fall behind, compromise your credit rating, and run the risk of having your income garnisheed. Worse yet, the creditors may not agree to the settlement that the Debt Settlement Company offers to them. Wouldn’t it be awful to pay all of that money to the Debt Settlement Company, have your credit ruined in the process, and still owe the money?

Research your debt consultantbefore you sign anything, and be aware of your options.

Don’t take money out of your RRSP unless you calculate the amount of tax payable and set that amount aside to give the government at tax time – RRSP withdrawals are taxable, and even though your financial institution will withhold some tax, it is most often not enough. You don’t want to pay off a credit card only to have a tax liability next year that you can’t afford to pay.

Here’s the problem: if you take out $1,000 from your RRSP, the bank withholds 10% tax.  However, when you file your tax return, that $1,000 gets added to your income, and if your marginal tax rate is 40%, you owe an additional 30% in taxes.

So, if you do cash in an RRSP, calculate the full tax owing, and pay it now.

Don’t take a loan from a family member unless you know for sure that you can pay it back. If you fall behind, holiday gatherings are likely to be stressful.

If you have a family member who is a good money manager, ask them for advice; don’t ask them for money.

Don’t apply for another credit card to pay for the one you can’t pay off now – true, the new one may offer you 3% interest for 6 months, but what happens after that?

You could well end up in the same position as you were when you applied for the new one.

Pay off the cards you’ve got, keep one, pay it off every month, and cut the rest up.

Don’t re-mortgage or obtain a second mortgage on your house if you can’t afford the increase in mortgage payments. True, your credit cards may be paid off, but if you can’t afford the mortgage(s), you could have a new set of problems to contend with.

Make a budget first, to be sure you can afford the payments.

They have lots of ads on the radio promising to cut your debt, but there are lots ofdebt consultant horror stories out there as well, so know who you are dealing with.  Do your research before you agree to pay anything to an unlicensed debt consultant.