Save for a emergency funds rainy day to weather the storm
A recent survey from BMO shows that, while the average amount that Canadians have in their emergency funds has increased (up to $41,694 on average, up nearly $6,500 over last year’s numbers), the majority of Canadians have a long way to go:
- 44 per cent say they have under $5,000 in emergency savings.
- 21 per cent have less than $1,000.
- 29 per cent admit that their savings would last only a month or less.
“As a rule of thumb, you should have at least three to six months of savings set aside, as a cushion in the event of an emergency,” says Jeff Schwartz, executive director at the Consolidated Credit Counseling Society of Canada. “Though many Canadians recognize the importance of having emergency savings, they are stretched too thin by their debt and other household obligations every month.”
“Sadly, if an emergency (like car or house repairs) or a life event causes extra expenses or income interruption, many have to turn to debt to cover their costs,” adds Schwartz. “It’s well worth re-examining your budget and spending to see how you can accumulate savings to avoid a potential debt disaster.”
The first step towards boosting emergency savings? Get organized!
Gather the facts
Feel like your paycheque is gone before it even hits your account? Maybe the answer is to figure out where it is going- in detail. Gather all of your expense information, including necessary expenses, debt payments and discretionary spending on “extras”. Lay all of this information out on the table (literally) and see if there are any issues that jump out. Are you overspending in some areas (i.e. groceries, gas etc.) that could be reduced if you used a different strategy?
Are you only capable of making minimum payments on your cards? A debt consolidation plan might free up some cash that can help you regain control.
Are you balancing your chequebook, or is it balancing you? Sign up for automatic pre-authorized payments from your account to cover your debts. Also sign up for e-statements, which means less paper, less clutter and more focus.
Use the same principle to get saving. Decide on an amount (even a small amount will work to get started) and set up automatic savings to be deducted from your account every month. You’d be surprised at how quickly it grows once you get the ball rolling.
Simplify your (financial) life
Make a habit of cleaning out your wallet on a regular basis. If you use more than one credit card, choose one (or at most two) to keep and cancel the rest. You’ll have less to track, and you’ll be able to stay on top of the debt more easily.
Deal with one financial institution. Not only will your information be centralized, it gives you a chance to build a relationship with staff that might be able to help guide you towards savings and debt solutions that best suit your goals.
Do you have enough emergency savings? Are you feeling challenged to stay on top of your debt and accumulate some savings at the same time? We can help. Call one of our trained credit counsellors or check out our free online debt analysis tool to get started!