Want to Reduce Your Debt? Focus on SavingsAug 29, 2018
September is here! For many Canadians, September brings with it that sense of renewal, of second chances, and motivation to tackle your biggest goals. It’s a good time to focus on a new savings goal, and in the process, reduce your debt.
We’re looking at the four financial resolutions to make in September in this podcast:
- reducing you lagging consumer debt;
- setting and working towards a new savings goal;
- mastering a new money skill;
- and making a commitment to start talking about money are on the menu.
One of our LITs, Jasmin Brown, talks about setting those new savings goals. Let’s look at that a bit closer—in particular, meeting your emergency fund goals for your family.
Making your emergency fund a priority
Emergency funds should be a priority in every budget, but they can feel daunting when you consider the rule of thumb is to have three-six months of expenses saved.
But emergencies that affect your finances don’t often come with much warning. Sudden health crises, job loss or the threat of income loss that is out of your control, utility or living cost increases, or changes to a family structure can put strain on your finances and lead to debt.
Set a realistic timeline
Saving three-six months’ worth of expenses can take time. Set a realistic timeline to achieve your goal so you don’t give up on it altogether. Think long-term, and give yourself a year or two.
Make your emergency fund a part of your monthly budget. It should be a line item that you contribute to each month. In cash-strapped families, that might be a small amount, but with consistency it adds up. Then, if your furnace goes in the middle of winter, you’ll already have cash saved, and you won’t have to take on debt. What a relief!
The Financial Consumer Agency of Canada has a guide to setting up an emergency fund.
If you’re having trouble seeing where you can find money each month to put in your emergency fund, check out Young and Thrifty’s blog on frugal living. They have links to articles about how to reduce costs monthly that can free up money for your fund (and give you debt relief in the process).
An emergency fund is critical to every household, because at some point, everyone will have unexpected expenses. Don’t let those surprises cost you more because you had to take on debt to afford them.
Listen to our Podcast for more tips and tricks from our LITs.