4 steps to getting your budget and debt under control

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Parenting

1. Lay it all on the table

Sit down and finally figure out all the money that’s coming in every month and everything that’s going out. Fixed expenses—the ones that don’t change month to month—typically include rent or a mortgage payment, hydro, cellphone bills and the like. Variable expenses, also called discretionary spending, vary a bit from month to month and include things like clothes, food and gas (not to mention baby music classes, diapers and takeout). By separating them, you’ll see exactly how much room you have to play with each month, which will help you make smart financial choices and not overspend.

2. Plan for emergencies

The pandemic has really hammered home how important it is to have an emergency fund, says Julia Chung, CEO and senior financial planner at Spring Planning in South Surrey, BC. “It was amazing, the sheer number of emails and phone calls we got from people last March and April who were like, ‘Oh my god, thank you for telling me to do that; I never believed it would be useful,’” she says.

The general rule of thumb is that you should aim to have three to six months’ worth of spending set aside. To build up the fund, use automatic transfers to put a little bit of money into a savings account once a month. Then, when the car needs to be repaired or the hot water tank goes, you can pull from the fund to pay for it, then repay those funds back when you’re able to.

3. Get real about debt

It’s been drilled into all of us that debt is bad. That’s not wrong, but it’s not helpful to beat yourself up about it, especially when you’re building your family. “I appreciate that lots of people have debt aversion and I think that’s great,” says Chung. “But parenting is already hard enough—don’t add this extra strain on yourself. Maybe you’ll have to carry some debt for a bit longer than you’d like in order to ensure you have enough money in your pockets to have a date night with your spouse, or just with yourself, so that you can maintain your mental health. You can take a couple years to just be OK, and then start reaching for the stars a little later.”

Having a baby can be overwhelming in many ways—including financially. Cut yourself some slack, says Chung. If paying for a house cleaner or ordering takeout more than usual is the only thing keeping you sane right now, Chung says do it. “Don’t go bananas, but keep in mind that divorce is one of the most expensive things you can encounter,” she says. “It’s important to take care of the mental health and emotional well-being of your family.”

4. Save strategically

If you’re in a position to save some money each month, it’s a missed opportunity to keep it in your everyday bank account, which earns very low interest and offers no real benefits. Instead, consider a Tax-Free Savings Account (TFSA), where you won’t pay taxes on the interest you earn. Or opt for a Registered Retirement Savings Plan (RRSP), which lets you put money in before income tax is taken off. The money is taxed when you withdraw it, at which point you’ll be in a lower tax bracket because you’ll be retired. Some employers even offer matching programs when you put money into these accounts, says Chung. More free money!

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