With personal debt levels for the average Canadian consumers reaching some of their highest levels in the last 10 years, recent trends have shown an increase in long-term car loans, given the allure of lower monthly payments. New mortgage rules in Canada have increase debt …
Month: February 2024
An emergency fund is an essential part of every family’s financial plan, yet so many people don’t seem to have one set up.
Wouldn’t it be nice if you no longer had to worry about what would happen if a financial emergency came up? That’s exactly the kind of security you can get with an emergency fund and exactly why you should have one in place.
What is it?
An emergency fund is pretty much what the name implies – a pre-determined amount of money set aside for you to use in case of an emergency. A real emergency, such as your car breaking down, job loss or a death in the family. Not a pretend emergency like a pair of pants for a new job or a dinner out because you’re too tired to cook.
How much should you save?
The amount of money in your emergency fund will vary from person to person and family to family. If you have quite a bit of debt to pay off, I suggest an emergency fund of $1,000 to get you started. Once your debt is paid off, it is recommended that you put aside 3-6 months worth of basic living expenses.
Basic living expenses means only the necessities. Housing, food, transportation, etc. Don’t include things such as new clothes and entertainment. Figure out what that amount is every month and try to save at least 3 months worth to put into your emergency fund.
Where should you keep it?
Don’t keep your emergency fund in a regular chequing account at the bank. Stick it into a high-interest bank account so that you can earn a bit of interest on it while it sits there (since you won’t need to touch it often). ING Direct is a great bank for this, since it can all be done online and is free.
Whatever bank you choose to use, make sure that the money is fairly easy to access if you need it. You also don’t want to put it into any account that will penalize you when you make a withdrawal.
Once you have determined how much you would like save and where you are going to save it, you need to move on to the most important step of all – actually saving some cash for emergencies!
Since I believe that an emergency fund is a crucial step in building a solid financial future, I always suggest that people make that their main goal when planning where their money should be going. Squirrel away as much money into your emergency fund as possible, until it is fully funded. Then you can start focusing on other goals, such as debt repayment and planned savings (down payment on a home, vacation, etc.).
Don’t touch it.
Once you have created your emergency fund and saved an amount of money that you are comfortable with, you need to leave it alone. It sounds easy enough, but this is one mistake I find many people making – using money in their emergency fund on things that are not true emergencies.
Don’t do it!
This is why I like to keep our emergency fund in a different bank (ING Direct) than the one we use for regular banking. If I can’t see that the money is there, it is much less likely that I will spend it.
The only time you want to reach into your emergency fund is when you are faced with a real emergency. Otherwise, don’t touch it.
I hope that this post has encouraged you to create an emergency fund (if you don’t have one already). I really do believe that they are a must-have financial tool for everyone.
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Being refused for a credit card application can be a frustrating experience and it’s most likely your credit rating is behind it.
A low score can be caused by everything from previous missed payments to having a lack of credit history. The latter can be confusing for some, but – believe it or not – some lenders prefer to see that you’ve asked for credit and made repayments on time in the past.
Improving your position can take time, so patience is key. But if you want to boost your credit rating then why not try some of these simple and effective ways to get back on track?
Check your file is accurate
Your score could be harmed if some of the details on it are inaccurate. Mistakes can happen, so it’s well worth checking everything is as it should be, if it’s not get it corrected as soon as possible.
Get a card with higher interest rate
If you’ve previously found yourself struggling to make repayments on time then opting for a card with a high interest rate might be something you feel a little bit unsure of. However, if you use it responsibly it’s a great way to build up your score and show you can be trusted to borrow. The way to make them work is to make a purchase on them – perhaps monthly – and then clear the balance in full on time. There are a number of options designed to give people with a poor score a second chance, so compare credit cards to find the right one for you.
Never miss a payment
If you’ve been known to be forgetful in the past then it might be worth setting up a direct debit to ensure you’re at least covered for the minimum repayment due on a card each month. However, it’s preferable to cover the full bill, ensuring payments are never missed. It’s also worth making sure you stay on top of your spending to ensure your credit lending is never exceeded.
Don’t max out your card
While it may seem better to show you can comfortably repay larger sums each month it’s actually better to avoid doing this as it gives the impression you are close to maxing out your card. Instead stick to smaller, but regular repayments to help – rather than hinder – your rating.
After a college graduation you probably knew things were supposed to be more challenging, than they were before. Becoming an independent person, who solves problems on his own, is a huge step into an adult life. Finding a good well-paid job and renting a place to live – that’s what a lot of people go though in their middle 20s.
Sometimes there are things you don’t have enough money to pay right away, that’s when you start using credit cards. Surprisingly, they are a good way for a healthy financial plan, and if you use a card wisely, it can help you make larger purchases.
However, you’d better read some simple and useful tips before swiping your card here and there:
1. “Get rid” of your old debts
The number of young people, using credit cards has decreased over past few years, BUT the fact, that students start using them more often after actual graduation remains: plastic is used over by 60 percent of them. Besides, graduates think it’s really nice to pay down all of their debts as soon as possible. Would you agree, that paying an interest, which can go pretty high after a while, is just a stupid waste of money? You don’t want that to happen. Moreover, this is a very smart way for holding your credit score healthier.
2. Follow your budget!
To not lose your mind from spending too much in one moment, sticking to a certain budget will be necessary. Nobody guarantees that your job would be permanent forever. Instability at this period of time is usual, so creating a right budget plan will make it easier.
While looking for a full-time job, it’s kind of hard to limit yourself in lots of things, especially when you own a credit card, however try to stay away from overspending. Think two steps ahead: by doing that you won’t have too much debt giving away afterwards.
3. You don’t always need your credit card
Temptation will always follow you everywhere. Unfortunately, not a lot of people can handle not buying stuff with a plastic in their wallets. So leave it at home! Buying an extra pair of shoes or having a drink at Starbucks sometimes isn’t affordable for you, even if they don’t cost a fortune.
4. Build up a good credit history
It doesn’t mean that you have to totally forget about your credit card. A good history of you paying all your debts in time will only make it better. All in all, some day you will need take out a loan for a car or anything like that.
However, think about that kind of expenses, you are sure of paying them all every month. It could be just simple everyday things as food products, insurance or gas. The more often you pay off total amount of these expenses throughout 30 days or so, you won’t have to pay any interest. That would be a great credit history, don’t you think?
5. Be attentive
Sometimes there are great opportunities for your credit card rewards. Just do a little research on that, like ask your bank consultant or use internet. Read all the papers, before signing up for a new credit card: this is really important.
You can always get away finely with using your plastic and build up a nice credit card history for your future loans, that are going to get quite big. All you need to remember is that everything starts with a young age and then it becomes a habit. Have only good ones!
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