If you are in debt, you may be surprised to learn that debt relief ideally involves more than just paying off the money you owe. While this is a good place to start, it is also important to incorporate the establishment of an emergency fund into your strategy.
The biggest advantage of an emergency fund is that it allows you to set aside money to help you financially cope with unforeseen events, such as job loss, long-term injury or damage to a house or a car. If you don’t anticipate the unexpected, you may have to use lines of credit, credit cards, or high interest payday loans. These types of debts are risky for those whose debt burden is already a burden.
Are Canadians Prepared to Respond to Financial Emergencies?
According to a 2016 CCO survey, many Canadians would be hard pressed to keep up if their monthly debt payments were to increase. An increase of just $ 100 a month would be difficult for 29 percent of respondents to overcome. The statistics point in the same direction, since half of Canadian workers live from day to day, from one paycheck to another, on a very tight budget.
If you are one of them, it is important to review and update your budget on a regular basis to find opportunities to save.
Are you able to take advantage of lower living expenses?
Although insolvency cases are on the rise in other provinces, Livebecers may be better able to save today. The cost of living is relatively low in Livebec. For example, the average cost of child care in Montreal is $ 164 per month. In Toronto, this cost is more than ten times higher and can be as high as $ 1,649 per month.
Residents of Sept-Îles can also take advantage of lower living expenses; for example, one-bedroom accommodation in the city center costs an average of $ 700, much less than in most urban centers. The bottom line is that lower costs can help you find the money you need to save. The next step is to set a goal for your emergency fund.
How much should an emergency fund be?
CIBC will tell you that an ideal emergency fund should cover three to six months of monthly expenses. While this goal may seem unattainable to those living from one paycheck to the next, there are ways to contribute to your fund gradually.
Look for ways to track your debt payments.
Debt solutions can help you pay off your debt faster or reduce your monthly payments. For example, a debt consolidation loan can combine several high-interest debts into one more manageable monthly payment. Generally, the interest rate on such a loan will be lower than the overall rate of all of your debts.
Take a look at our online repayment options calculator, which allows you to enter the amount of your debts and see what your monthly payments would be as part of a debt consolidation, consultation in credit or a consumer proposal. When you have paid off your debts or reduced your monthly obligation, you will have more money for your emergency fund each month.
Saving for emergencies is an important part of any debt relief strategy. This helps ensure that you are financially prepared for the worst-case scenario, whether or not it happens. Even better, your emergency fund could help you avoid debt.