In today’s economy, one with continued high inflation, rising interest rates, and consumer and student debt, it is more important than ever to create a budget to manage, reduce and ultimately pay off debt.
The rising cost of living is starting to have an impact, as news reports show polls indicating 59 per cent of Canadians are concerned it will negatively impact their financial future.
MNP, a professional accountancy and business advisory firm, found a record 47 per cent of Canadians are also concerned about their current level of debt. And many are worried they may need to incur additional debt just to cover their living expenses.
But there is good news for some.
Late last year, Employment and Social Development Canada stated that changes to the Student Financial Assistance Program’s Repayment Assistance Plan will provide important financial relief to young Canadians as they begin their careers.
Effective November 1 of last year, student loan borrowers earning less than $40,000 will no longer have to start repaying their student loans until they make at least that amount. Previously, graduates were required to begin paying off their student and apprentice loans once their annual salary reached at least $25,000.
The change in terms better reflects the rising cost of living and provides some welcome room in personal budgets.
Financial help in an increasingly difficult economy is also being provided by iCASH, a leading short-term loan provider in Canada.
The company suggests that when creating a budget, you subscribe to the 50/30/20 budgeting rule.
The numbers suggest the optimal percentage of your earnings to dedicate towards various categories. Leading the way at 50 per cent are living expenses (mortgage, rent, food, utility bills, etc.). Next is 30 per cent for your wants (a vehicle, entertainment, or vacation). And 20 per cent is effectively paying yourself with a contribution to savings.
If you can stay on track with that, you should be able to move forward with a steadily improving financial plan while making sure your bills are paid in a timely manner, which will ultimately keep your all-important credit score healthy.
But sometimes, life’s unexpected expenses do come up and upset even the most carefully established budget.
That’s when you may have to consider using some financing to bridge a gap. If you consider that, it’s best to examine all parts of your budget to see where you could shift funds from before taking on the responsibility of paying back a loan.
In short, before you borrow, make sure it’s for a vital reason - one that may help you improve your finances - and not a frivolous desire.
For more information about what iCASH can do for you and your personal budget to weather the changing economy, visit icash.ca