Are You Financially Prepared For the Uncertain Future? (3 Minute Debt Break)

It’s always been difficult to plan for future financial challenges. But these days, the unforeseen seems to be a regular occurrence. No one has a crystal ball for global events let alone circumstances that are unpredictable in your personal world. Like… what if your car breaks down and needs major repairs? What if you’ve been laid off or lost your job? What if you’ve become ill and are now unable to work? What if you’ve recently separated or divorced?

person reading a budget at home

With rising costs of living and unstable job markets, how do you prepare yourself for unexpected situations? We have all heard about the rising debt of Canadians and how so many are within “$200 or less per month away from not being able to meet all their bills or debt obligations each month.” In a perfect world, the best way to plan for your financial future is to stay away from debt – to save for those big purchases, to minimize the debt you take on. But, in today’s economic climate, that may not always be practical.

The best place to start is by preparing a detailed budget. It’s important to know what your monthly income is and what your living expenses are. This is so you know what discretionary income is available in order to help determine if you can support debt payments in your budget. Don’t forget to plan ahead for those purchases that you buy now and can pay for later. 

Putting funds away each month will allow you to pay for the purchase before the due date and avoid the high interest cost of carrying the debt for a longer period of time. Budget to “pay yourself” each month in order to have savings to help tide you over when your income is reduced or you have an unexpected expense.

In order to prepare for unexpected events, it’s best to have savings equal to at least two-to-three months’ living expenses. This will get you through the short term while you’re seeking new employment, getting benefits in place, working through a revised financial plan or paying for that unexpected expense.

At the end of the day, it’s always best to plan, plan, plan. When purchasing an item, ask yourself whether you need it or just want it. It’s alright to buy something you just want – but be careful to ensure you aren’t sacrificing the things you need to do so. Practice to live within your means so you don’t incur high debt. This way, when something unexpected happens, you can weather financial storm.

 

Subscribe to MNP 3 Minute Debt Break on your favourite streaming service.

 Listen on Apple Podcasts  Listen on Spotify  
 Listen on Google Podcasts  Listen on tune in  Listen on SoundCloud