Homeownership and living paycheque to paycheque don’t mix

A recent survey from Manulife shows that an alarming number of home owners have very little put aside in emergency savings.  Also, more than a third of homeowners admit that it’s a challenge to pay their mortgage, utilities and maintenance on a monthly basis. As a homeowner, living paycheque to paycheque can be a recipe for debt disaster.paycheque to paycheque

Findings from the survey include:

  • Three in 10 homeowners spend more than 30 per cent of their net income on mortgage payments
  • One in six respondents would encounter financial difficulty with any increase to their mortgage payment.
  • Homeowner debt loads are so high that more than a third of respondents would struggle to make their mortgage payments after three months in the event of job loss, because of insufficient savings to draw on.

“As a homeowner, it is essential that your monthly budget include a savings strategy to help cover home expenses, whether it is for maintenance, renovations or to have cash on hand to be able to continue to cover the mortgage in the event of a job loss,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

As a homeowner, maintenance costs are inevitable at some point. As for job stability and being able to pay the mortgage? You never know, which is why you need to include savings.

Living paycheque to paycheque makes a slippery slope more dangerous

Living paycheque to paycheque is a lot like treading water. It’s manageable for a while, but eventually it won’t be enough to stay afloat. You need to plan for that moment that you’re going to need a lifeline, financially speaking.

“If you are living paycheque to paycheque, it may be hard to find or even to justify putting money into savings, when there are so many other areas of your budget needing attention. If you find yourself in that situation at the moment, you’ve got to actively build yourself a financial cushion to shoulder the blow from any change in your situation or major repair bill,” says Schwartz.

The relationship between savings and debt management

If you are trying to keep your debts under control, conventional wisdom would declare that you should put as much as you can on your debts, right?

Well the answer is yes and no. By all means, you need to put down as much as you can on debt, but you also need to take steps to ensure that you don’t end up racking up even more debt. This is often the case as a homeowner. Depending on the age of your home, the costs of home maintenance and repairs can range from a few hundred dollars to thousands. And they often appear when you aren’t expecting them, as emergencies do.

That’s where savings comes in as a crucial part of debt management. If your debt payments are about paying down debt, your savings are about making sure that you don’t end up in debt again.

Build the financial cushion

So, how do you create that financial cushion that all homeowner should have? If you are shopping for a home, you can increase that cushion right out of the bat by taking a lowermortgage loan.

If you are a homeowner and are carrying multiple debts, consider consolidating. Part of the problem in living paycheque to paycheque is a lack of cash flow. Consolidating debt can improve cash flow, which can help you build up your savings.

Does living paycheque to paycheque have you treading water? Don’t wait until it is too late. Plan to pay down your debts today. Call our trained staff at 1-888-294-3130 for help or visit our free online debt analysis.

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