During times of crisis, how do you manage your finances? How do you maintain your savings habits? Paying down debt remains the top financial priority for Canadians. In 2021, the mortgage debt ratio reached a record high of $34.9 billion as the real estate market boomed. For Canadian households, debt as a share of disposable income increased from 170.8% to 175.0%,
On a broader scale, $378 billion in federal public debt is the result of the pandemic’s financial impact.
Tax season is upon us. While the Canadian government has been very generous in providing assistance and financial support to limit household debt, some may have to pay it back.
This year has probably been a pivotal year for your personal finances. A CIBC study shows that paying down debt remains the top priority in 2021.
In this climate of uncertainty, it's good to make wise choices today to keep your family financially safe tomorrow.
We don't know what life will throw at us. Good budgeting and a personal financial plan are essential to being prepared for the unexpected.
So, here are our three tips for setting up saving habits and sticking to them for good.
Write down all sources of your income:
- Paychecks,
- Government benefits and assistance,
- Rental income,
- Investment income.
Next, track your expenses to have a realistic idea of what you can reduce: often, it will be food-related and other small daily expenses (drinks and take-out meals, subscriptions that you no longer use).
You can organize this with a simple excel sheet with two columns or, if you prefer, just write everything down on a sheet and keep it on the fridge or somewhere where you won’t lose track of it. No need to complicate things!
Try to spread your payments over several months. When you have a significant one-time expense, your subconscious suggests that you can afford another considerable expense next month. By staggering payments, you remove the temptation.
Create this document for yourself for the next six months. Think of it as a roadmap, a budget planner to help you, not lock you in.
Have you paid off a car or other large purchase like a TV or piece of furniture in the past? Do you remember the feeling of finally being done with payments? You did that through a habit of slowly paying down your debt. Now, transform this payment habit into a savings habit. After all, you've already learned to live on less as you managed that debt. So now, put the money from that expense into your savings account.
The past year was a wake-up call on making financial changes since we were all forced to live a little differently. You can continue to adopt these different spending and saving habits that we’ve grown accustomed to due to the COVID-19 pandemic into 2021 and onward.
- Cooking at home instead of eating out.
- Reduce the number of expensive outings and look for cheaper options.
- Choose second-hand objects and accessories (clothing, furniture, etc.)
- Take the bike instead of public transportation.
- Put your bonuses and salary increases and tax returns on a side-by-side basis.
- Look at coupons and discounts available for food.
Also, during the pandemic, you may have had to find ways to generate extra cash: whether it was by reselling certain items or taking a second job. Why not hang on to this habit? Having an extra source of income is money you can use to live better, take care of your family or invest in life insurance protection.
Life presents challenges every day. Focus on your financial goals and stay open to the idea that misfortune can happen quickly.
A good way to stay ahead of any pitfalls is to automate your savings. Start with 10% of your income automatically transferred from your salary to a saving account. This is the basis of all personal budgeting, and the easiest way to make saving more of a habit. This small, painless gesture will make your life much easier in a few years.
In case of unexpected expenses, dip into your emergency fund or try to spread out the payments.
But in the end, a solid savings plan may not be enough to take care of the people who matter most if something happens to you. The people who do best in life financially are those who are honest with themselves. So be honest: if you died tomorrow, would your family be safe? Would they be able to keep the house? Would your children's education be paid for? In 2017, a study by the Payroll Association found that 47% of Canadian workers live paycheque to paycheque without an emergency fund or savings. 32% report that they are struggling to pay their mortgage. What about you? Where would your family be if something terrible were to happen to you?
Maybe the pandemic has helped you financially or, on the contrary, proved that you need to keep a tighter rein on your budget. You have undoubtedly become aware of the precariousness of life itself. But if you are sincere, you know deep down that a plan B is always better. That's why we offer affordable plans for everyone that will make a difference in the event of a problem.
If you are interested in seeing your term life insurance options, please feel free to complete our short free quote form. That will get you connected with a helpful advisor who will be more than happy to help you find a plan that suits your lifestyle.
Written by Diane Taes
