The domino effect: how one unexpected event can lead to debt

One unexpected event can upend your finances and cause you to fall into a debt spiral. Car repairs, loss of employment, medical bills... These can all have a domino effect on your finances. Find out how to handle a one-off expense and avoid a budget crisis!

In short

An unplanned expense can quickly upend your finances and lead to debt. Here are a few possible solutions to avoid the domino effect:

  • Build an emergency fund. Even a small amount can help.
  • Reduce any non-essential expenses to free up funds.
  • Prioritize your housing costs, food and electricity bills.
  • Track your budget regularly to avoid overspending.
  • Act fast if your debts accumulate.
  • Contact the experts at Raymond Chabot to draw up an appropriate action plan.

No one is immune to the unexpected. This can include loss of employment, costly car repairs and medical bills, for example. At times, a single event is enough to wreak havoc on your budget. This is called a financial domino effect. A minor unexpected expense can lead to debt, stress and even a feeling of having lost control. The good news is that there are practical ways to break this cycle and regain your peace of mind.

How an unexpected event can lead to a debt spiral

Very often, people use their credit card or line of credit to cover an unforeseen expense. Interest starts to build up and then a second setback comes along. This is how debt can accumulate faster than you could ever imagine.
The result?

  • Late payments and penalties.
  • Constantly increasing debt.
  • Ongoing money-related stress.
  • Strained family or personal relationships.
  • Impacts on mental health such as increased anxiety, sleep disorders and reduced ability to concentrate at work. Over time, shame or a sense of failure can even lead to isolation.

As you can see, the domino effect has financial consequences and also takes its toll on self-confidence. When someone feels overwhelmed by debt, they can have the impression that every aspect of their life (personal relationships, upcoming projects, professional stability) is spinning out of control. This feeling makes it harder to ask for help so they end up trapped in a cycle of debt.

These simple actions can help limit the damage

Even if you can’t see a way out, you can regain control. If you’re experiencing this issue, you should:

  • Build an emergency fund. Even a small amount can make a huge difference.
  • Reduce any non-essential expenses to quickly free up money.
  • Prioritize your housing costs, groceries and electricity.
  • Track your budget every week to pinpoint which expenses are putting you in the red. Our free online budget tool can help you to do this.

 

Ask for help with settling your debts

If your debts have become unmanageable and you’re no longer able to make your payments, you must take action. The sooner you take that step, the simpler the solutions will be.

At Raymond Chabot, our Insolvency Counsellors are here to listen without judgment and work with you to find the best solution that’s tailored to your reality (repayment plan or consumer proposal, for example). One phone call can be the first step towards a future without financial stress.

Share

Meet with one of our counsellors

It's free, confidential and non-judgmental.

Book an appointment Find an office