The average British Columbian is in debt to the tune of just over $23,500, not including their mortgage, beating out the national average by $1,500.
Maybe that’s because Vancouver and Victoria residents have significantly higher costs than most in the country. Victoria has actually been named the least affordable smaller housing market in Canada.
And yet most of us don’t consider carrying this debt to be a problem.
That is, until we hit one of life’s unexpected events.
Think of it this way. If you were to:
- Get laid off;
- Lose work hours or your relied-upon bonus;
- Experience long-term medical issues that put you out of work;
- Encounter emergency home or car repairs;
- Encounter unexpected expenses (unplanned child, funeral, divorce, etc.)…
Would you have enough savings in the bank account to get your household through the stretch?
If not, you’re not alone.
Most Canadians are financially unprepared for emergencies
More than half of Canadians have less than $10,000 in the bank to cover them.
In fact, a quarter of homeowners don’t even have $1,000 in the bank saved up.
It’s exactly these Canadians that turn to credit cards in times of need. And that misstep puts them right on track to bankruptcy.
An emergency fund helps your household get through tough times
When you find your next means of gainful employment?
When will you be well enough to get back to work and start earning income?
When can you start paying back the debt you owe?
It could be one week, one month, or one year.
That’s why it’s widely recommended that we have on hand at least 6 months cash of net income.
This prevents you from relying on taking out more and more debt.
It’s never too late to start saving
For many of us, a 6-month emergency fund seems impossible to achieve since we feel we’re barely scraping by as it is, if at all.
But it’s never too late to start saving.
The below tips can help you find greater financial security for you and your family.
Tip #1: Open a savings account for emergencies only.
You should have a special, separate savings account for emergencies only so you don’t use it for other purposes. If you bank online, label your account “Emergency Fund” or “Emergencies Only” or something similar. It might make you less likely to dip into it for the non-essentials.
Tip #2: Set a goal.
You’re going to want to have at least 6 months of living expenses set aside.
Once you’ve reached that goal, give yourself a huge pat on the back and consider increasing it to 8 or 12 months.
And yes, reaching your goal may take you YEARS.
Let’s say you make $2,500 a month. A 6-month emergency fund would mean saving a total of $15,000. If you can save at least $300 a month, it’ll take you four years to get there.
But don’t be discouraged. Starting sooner will mean your safety cushion just might be there if and when you need it in the future. This is certainly better than not starting it at all.
Tip #3: Set up an automatic monthly transfer from your chequing account to your emergency fund.
This way, you’ll be less likely to either use this money for other purposes or “forget” to keep adding to your emergency fund.
Tip #4: Review your budget to find that emergency fund money.
Look at your cash flow and figure out where the money will come from.
Can you cut down your expenses on the necessities, like rent, food, or transportation?
Can you cut at least 10-15% from non-essential items, like entertainment, eating out, clothing, vacations, and so on?
Tip #5: Contact a Licensed Insolvency Trustee.
Though we put this tip last, it’s actually your most important step.
That’s because a Licensed Insolvency Trustee can help you figure out your budget with you, and prepare a savings plan that is realistic and works for you.
Not only that, these federally-regulated, licensed professionals offer a full range of options to help with resolving your debt.
Contact Us Today
In your initial, free consultation, we will review your financial situation and explore all options available to you. Remember, the sooner you get help, the more options you may have. A Victoria bankruptcy does not have to be inevitable. Contact us today so we can help you and your family on the road to better financial health. Don’t wait until it’s too late.