Tag: emergency fund

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BUILDING AN EMERGENCY SAVINGS FUND: WE ALL NEED AN EMERGENCY FUND TO PROTECT OUR RETIREMENT

BUILDING AN EMERGENCY SAVINGS FUND 0
building an emergency savings fund

Building an emergency savings fund: Introduction

Many of us go about living our lives without giving any thought to building an emergency savings fund. After all, we live in the land of socialized medicine, so unlike our American neighbours, we won’t be ruined by medical expenses. If we need to come up with some cash for the plumber or car mechanic or roofer, there’s always a credit card, payday loan or retirement savings.

Building an emergency savings fund: Surviving a major life event

But what would happen if you lost your job, became disabled or got divorced? A credit card or payday loan can’t fix this kind of catastrophic situation. And, potentially, you could wipe out all of your retirement savings just trying to stay above water. How many ex-employees of Sears (and other companies like Sears) do you think are now living off their retirement savings?

Building an emergency savings fund: Canadians are not saving

Canadians are not saving. According to a Canadian Payroll Association survey:

  • Almost 50% Canadians are living paycheque to paycheque
  • 48% rely on payday to make ends meet
  • 25% couldn’t pay $2,000 bill if it popped up within the next 30 days

And a CIBC poll by Harris/Decima found that 45% of Canadians did not have an emergency savings fund at all.

Building an emergency savings fund: Protecting your retirement income

The lack of emergency savings can cause financial problems far beyond a short-term cash crunch, new research shows. Some people without cash reserves end up drawing on their retirement accounts, putting them at risk of shortfalls later in life, according to an analysis by the Pew Charitable Trusts.

Don’t think of an emergency fund as just a way to tap into some cash for an unexpected expense; think of it as a way to protect your retirement income.

Building an emergency savings fund: Some simple saving tips

Many people have said that they just can’t afford to save but saving doesn’t have to be large sums of money. Put away whatever you can afford, but do it regularly and diligently. If you still think you can’t afford to save, then drop an expense and save that money.

  • Bring your lunch to work
  • Stop buying designer coffee
  • Use public transit instead of your car
  • Put a limit on how much to spend on Christmas gifts or only buy for the children
  • If you smoke, stop now
  • Go out less to bars and restaurants

Building an emergency savings fund: Do you have more immediate financial problems?

Your retirement savings are not your emergency fund. Set up an emergency fund (if you don’t already have one) and commit to save. If you’re living paycheque to paycheque or already dipping into your retirement savings to make ends meet, give us a call today.

The Ira Smith Team has a successful track record of helping people just like you solve their financial problems and get back on track Starting Over, Starting Now.

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EMERGENCY FUND SAVINGS STRATEGY: ARE YOU SPLURGING INSTEAD OF SAVING?

emergency fund savings strategy
emergency fund savings strategy

Emergency fund savings strategy: Introduction

All of the financial experts stress the importance of saving, and they’re right. We’ve frequently blogged about it. We have also talked about the need to maintain an emergency fund savings strategy. Saving creates a solid foundation for living and for securing a comfortable retirement. In fact saving can even be taught to pre-school aged children.

Emergency fund savings strategy: Angus Reid Forum and Capital One survey

Sadly all this talk seems to be falling on deaf ears. According to a survey conducted by the Angus Reid Forum and Capital One, 33% of Canadians admit they don’t put anything into their savings on a monthly basis. And, instead of saving, they’re splurging on non-essentials.

Emergency fund savings strategy: What are Canadians splurging on?

The Angus Reid Forum and Capital One survey found that Canadians seem to really enjoy indulging themselves. And the amount of money they spend on these non-essentials really adds up.

  • 72% dine out several times/month
  • 71% regularly order takeout
  • 50% buy daily coffees
  • 44% are online shoppers
  • 33% indulge in clothing purchases
  • 23% spend on beauty services

Emergency fund savings strategy: Why is it so easy to splurge?

We now live in an almost cashless society. “It’s easier than ever to order in, hail a ride and shop online without ever opening your wallet, but you can lose sight of where your money is going if you’re not careful,” Capital One Canada CEO Brent Reynolds said in a news release. Years ago it was easy to keep track of what you spent because every time you made a purchase you had to pay with cash; if you didn’t have the cash, you didn’t make the purchase.

Emergency fund savings strategy: How can you get back on track if you’ve been overindulging?

There’s nothing wrong with splurging once in a while, as long as you’re saving. Make a budget and stick to it. Save before you splurge. Create an emergency fund for unexpected expenses or changes in your employment situation. Have a plan for your retirement.

Emergency fund savings strategy: Do you have too much debt?

If you’ve really overindulged and you’re at the stage where you can’t make your monthly payments, you need professional help; and you need it now. Contact a professional trustee.

The Ira Smith Team has a cumulative 50+ years of experience helping people who are facing a financial crisis and we deliver the highest quality of professional service. Make an appointment for a free, no obligation appointment today and Starting Over, Starting Now you’ll take your first steps towards financial freedom.

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DEBT ELIMINATION: ARE YOU SABOTAGING YOUR WEALTH BY SAVING AND REDUCING DEBT?

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debt elimination

Debt elimination: Introduction

What’s more important – saving or reducing debt? Should I focus on debt elimination or invest excess funds? Should I invest or reduce debt.

These are age-old questions that I’m frequently asked and there isn’t a one-size-fits-all answer. Let’s get back to basics and figure out what your income and expenses are before I can answer whether it’s better for you to save or reduce debt.

Debt elimination: Create a budget

Everyone should have one. The reality is that many people spend what they earn but don’t really know what they’re spending their money on. A budget will find how you’re currently allocating your money – which may be very different from how you should be allocating it.

  • Detail your income
  • Itemize your fixed expenses which are the same each month – housing, insurance, payments on loans, etc.
  • List your variable expenses which are flexible and will vary from month to month – groceries, gas for the car, cell phone, etc.
  • Identify your optional expenses which are non-necessities – meals out, clothing, vacations, etc.

The good news is that to ask “Should I invest or reduce debt”, that means your budget should confirm that you have an excess of income over expenses each month. It also means that you can see that monthly cash excess in your bank account.

Debt elimination: Determine what type of debt you’re dealing with

The reality is that not all debt is created equal. Credit card debt could be costing you 20% interest or more per annum. And, if you have any payday loans, the interest rate could be over 500% (no, this isn’t a typo). High interest debt costs a fortune; pay it off as quickly as possible.

Debt elimination: Create an emergency fund

I always recommend that you have an emergency fund of three to six months worth of living expenses. Job loss or an unexpected expense can put you in a financial danger zone if you’re not prepared.

Debt elimination: Where can you find the money to pay off high interest debt and create an emergency fund?

Go back to your budget and have a good hard look. How many of your optional expenses can you cut or cut back on? E.g. Forgo the vacation for now, don’t buy those really cute shoes, etc.

How much of your variable expenses can be reduced? E.g. Shop at a discount supermarket and price match/use coupons, comparison shop for better cell phone plans, drive less/take public transit more, etc.

You’d be amazed how much money you’ll be able to save and put toward paying off high interest debt and creating an emergency fund.

Debt elimination: Should I invest or reduce debt?

The answer to the question about what’s more important – saving or reducing debt, lies in your budget. If you have high interest debt, pay it off first. If you don’t have high interest debt then you can work on both reducing debt and saving and investing at the same time.

Debt elimination: Are you struggling with debt elimination?

If you’re struggling with too much debt, give the Ira Smith Team a call. We can help with budgeting and credit counseling so that you can get back on track Starting Over, Starting Now.

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