4 scary things for your finances
Does your money scare you?
Your first response may be no, but just take a moment and think about it. Does the thought of your outstanding credit card balance make you cringe? Does that weird noise in your car make your heart skip a beat? If so, the your finances might be scary for your money and your financial health.
Making small changes to your daily habits can significantly increase your overall financial wellbeing. It won’t happen overnight, but it will happen over time.
Here are four scary things for your finances that you can start fixing today:
1. Not having insurance coverage
If your car broke down tomorrow, do you have enough cash savings to cover the repair and replacement costs? Most people would probably say no – and that’s why we have insurance.
The key to letting insurance work for you is to purchase what you need at the best price. Neglecting certain types of insurance (such as collision on your auto insurance policy) is one-way people save money on their insurance costs. However, if you have an unfortunate event, the repair costs could have long lasting financial affects. To ensure you have the insurance coverage you need, review your policies and add additional coverage if needed.
2. Having too much debt
Debt sucks. There’s no other way to put it. If you’ve ever been in debt you know it’s true. It takes a lot longer to pay off debt (thanks to interest costs) than it does to accumulate it. Debt accumulates for a variety of reasons, but one of the most common culprits is living beyond your means. Setting and living on a budget is so important for your overall financial wellbeing.
If you don’t stick to your budget, you’ll find yourself using credit to live. No one wants to live with debt because it’s expensive, stressful, and it can take a long time to pay off. Create a plan to live within your means and pay down your debt, and things will seem less scary.
3. Not having an emergency fund
If you had a financial emergency tomorrow, could you afford it without getting into debt? The answer for a lot of people is no. According to CBC, 51% of Canadians live paycheque to paycheque. That means people need to borrow money if they have a financial emergency – and that’s scary.
Open a savings account and start putting money aside with every paycheque. If you have an emergency, you can use it. If don’t need it for an emergency, it will stay in place, earning interest.
4. Neglecting your spending budget
If you have a fixed income, you also need to have fixed expenses. Your budget should include costs for daily necessities such as housing, transportation, and groceries. Don’t forget to budget short-term and long-term savings. You can even budget fun money that can be used on a rainy day to cheer yourself up. One of the most common budgets is the 50/30/20 rule.
Popular personal finance website LearnVest says that 50% of your after-tax income should be spent on fixed living expenses, 30% should be spent on yourself, and the remaining 20% of your monthly budget should be saved.
Once you confront these scary things for your finances, and work to fix them head-on, you might be surprised at how much better you feel about your money.