Question: I am leaving home for the first time after graduating in December. A good friend and I have rented accommodation and she is also moving for the first time. As we were talking about how to share our living expenses, we also started to think about all of our other expenses and bills. Neither of us have parents with a lot of money and we both had to learn a lot on our own. My older brother got into a lot of debt after moving and I’m really scared of ending up like him. Sharing living expenses with my friend will help me, but what else should I not do with my money? ~ Erine
A: Going alone is an important step, but figuring out how to manage your money and financial affairs is an equally important step. The habits you develop now will likely stay with you for the rest of your adult life, and your choices will shape the next decade or more. As you saw with your brother, being in debt is difficult. Being financially disciplined is also difficult, but in a different way. I encourage you to choose your direction based on where you would like to see yourself in five or ten years and then take steps to get there.
Making decisions based on your fears rather than your choices can lead to frightening results. Some of the more common ones rely on payday loans to get by, bet on rent or mortgage money, only make minimum payments on your credit cards, don’t save for emergencies, or contract. a car loan that you know you can’t afford. But there are other scary things people do with their money that are less common, but can also add to a lot of debt. Here are six and tips on what to do instead:
1. Pay late fees – on everything
Avoid late fees and the dreaded penalties by using a paycheck plan to make sure you make all of your payments on time. Late payments on credit cards mean your interest rate will go up to five percent and not go down until you make your payments on time for a full year. If you have a balance on your credit card, the increase in interest alone may be enough to spill your budget. Avoid being a zombie when it comes to paying on time. Use calendar or app reminders, stickers on your wall calendar, or automatic withdrawals from your bank account to make sure payments aren’t late.
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2. Not controlling bank account and overdraft fees
Paying a minimum amount or a reasonable fixed fee to do your banking may make sense. But paying more than you need or being charged for an overdraft on your account, even if it’s the monthly fees that drop your balance below zero, can be a lot of money unnecessarily spent over the course of a year. .
Take a look at your bank statement every month and find ways to cut costs. If you are disciplined, it may help to pay more often with a credit card if you have a high number of debit transactions. If you tend to overspend with credit, take out a lump sum, organize it with envelopes to prevent yourself from spending it any faster than you want, and keep it in a safe place to keep it safe. ‘have it when you need it.
Also watch out for ATM and interbank ATM fees, which can add up quickly. If you’re away and really need the cash, you can often avoid these fees by making a small purchase with your debit card and requesting cash back as part of the same transaction. Each store has a limit on how much money they will give you, and transactions can usually be as small as a packet of gum.
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3. Take financial advice from friends
Unless your friends have the expertise and credentials to advise you on your finances, don’t follow their advice about your money without first checking what they suggest. From the best way to pay off debt to investing you just have to make, there is no secret spell that brings frauds and scams to light. Check out what your friend is suggesting with a qualified person to guide you so you can make an informed decision. Qualified people have credentials that can be verified regardless of where they work. Your provincial consumer protection authority is a good place to start to find out more.
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4. Register to buy now, pay for plans later
This is a case where it is worth scaring yourself straight at your budget. Buy now, pay later, the plans can end up looking like a curse as it feels like you’re always paying for what you’ve bought in the past. Over the years, retailers have expanded buying now, pain later plans to make them more attractive.
Previously, it was just the store-branded credit card that allowed you to buy household furniture, for example, with minimal upfront payment and no interest until the end of the promotional period. Some merchants now allow purchases to be split into a series of four or six equal payments to reduce the initial cost. No interest is charged unless you miss one of the payments. And then for larger purchases, like a vehicle, your first payments may be waived.
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But the devil is in the details. “No payment” is often just another way of saying that payments will be transferred elsewhere and interest will continue to accrue. Take a close look at your cost of borrowing paper if you plan to buy now, pay later, and then budget carefully to make the most of an interest-free, payment-free period.
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5. Make early withdrawals from retirement savings
Retirement savings are for retirement. Unless you have no other way to make money or to make ends meet, you don’t want to touch it until you retire. Making withdrawals from an RRSP, for example, has tax consequences. This could make you pay more income taxes or receive less income-dependent government assistance. Receiving CPP benefits or a work pension before age 65 while you are still able to work will force you to stick to lower payments when you are older and younger. able to continue earning income.
It is always more difficult to save than to spend. Rather than robbing yourself of your future financial stability, look for ways to cut costs now to create a little wiggle room in your budget.
6. Finance a big purchase without first testing the payments
If you think you can afford a big payment on top of your budget, spend the next three to six months making that big payment to a separate bank account. This will help you see if you are truly ready to make the lifestyle choices that come with the big payout. For example, if you are planning to trade in your car for a newer model and your payment will increase by $ 400 per month, put that extra $ 400 aside for a few months to see if the new model is really worth it.
There is no trick for this kind of test drive. Either you’ll learn a lot about how you manage your money and the spending choices you make, or you’ll end up with a treat: extra money in your savings account to spend on a down payment or on other expenses.
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The bottom line on the scary things we do with our money
When it comes to the scary things we do with our money, wasting it tops the list. This is because wasting money is more than spending money. It also means wasting the time and energy it takes to make money. Considering what you are buying in terms of the number of hours you spend working to make money will help you change expensive money habits and give you more time to have fun with your friends and family. Then throw in the cobwebs of your savings account and budget your life, not just your money.
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Scott Hannah is president of the Credit Counseling Society, a non-profit organization. For more information on managing your money or debt, contact Scott by E-mail , Check nomoredebts.org or dial 1-888-527-8999.
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