Debt Solutions: How Do You Rate Your Financial Readiness?Oct 14, 2018
Do you use credit cards as extra income to cover your expenses, or do you have enough money to afford all that you need? Financial readiness is a way to gauge how well you’re managing your money; paying off your debt, saving for the future and covering your day-to-day expenses. Each family has different expenses and priorities, but it’s important to know how you’re doing and what changes you can make to do better.
How do other Canadians compare?
Our recent Affordability Index poll questioned Canadians about their financial readiness. Here are some highlights:
- Only 2 in 10 Canadians agree that they have enough money to cover all their expenses.
- 34 per cent of Canadians with children say their debt is so overwhelming, they don’t know what to do about it.
- Three-quarters of Canadians have delayed expenses such as paying off credit card debt, buying a home or retirement due to lack of affordability.
- Those struggling with affordability the most are homeowners with kids who earn under $100k and have no retirement savings.
Raising a family seems to be the biggest affordability challenge for Canadians. 42 per cent of parents say they find it hard to afford essentials such as groceries, utilities and clothing due to a lack of affordability. Parents are also the most likely to carry the heaviest debt load, making it that much harder to afford those essentials.
How do I know my financial readiness?
To get a picture of your own affordability strengths and challenges, ask yourself these questions:
- Do I spend within my means? Using a credit card to finance a big purchase is one thing, but turning to debt to pay for everyday costs can spell trouble over time. If you’re consistently using credit over cash, it might be time to deal with your debt.
- Do I carefully track my money and how it’s spent each month? Following a budget is the best way to stay on top of your spending and predict your upcoming expenses. Use an app or a worksheet to help you track your money.
- Do I have an emergency fund that will cover me if I need it? Putting extra money into a savings account each month will give you a buffer in the event of unexpected expenses or any type of emergency. Aim to save 3-6 months worth of expenses.
- Am I satisfied with my retirement contributions? 69 per cent of Canadians find it challenging to save for retirement. For parents, it may be even harder to delegate funds for your future when they are focusing on their children and their future. Speaking to a financial advisor may help.
- Am I managing my debt load? Average non-mortgage debt in Canada is just below $20,000. Depending on your other expenses, you may be managing your debt well or feeling overwhelmed. It’s a good idea to check in with yourself every six months to see how you’re coping. Know the signs of financial trouble so you can protect yourself or take action.
How can I get my debt under control?
Half of Canadians polled said they simply don’t have enough income to live debt free and cover all their costs. This is why it’s important to know your debt relief options. Dealing with debt will not only free up extra money each month, but it will allow you to reach more goals and plan for your future. Compare your options online using this debt repayment options tool or speak to a Licensed Insolvency Trustee who can go over your specific needs and make a tailored debt relief plan with you.