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It’s time to get serious about saving for that ‘rainy day fund’

The global pandemic has reinforced the need for Canadians to take a more responsible approach to managing spending habits. The need for a savings pool that is not earmarked for a vacation or future spend has become an imperative because, we just don’t know what we don’t know. Strange things (like a worldwide pandemic) happen and we must be ready with extra money to make us safer in a changing world.

Here is the picture: As a nation, approximately 20 per cent of all mortgage holders have taken mortgage deferrals during this challenging time, representing $180 billion dollars in additional debt. The average consumer carries $25,000 in non-mortgage debt on a month-to-month basis, suggesting little in the way of savings.

So why are we in this mess? Why are we not able to manage our financial obligations?

From my perspective we have become a society that is comfortable living beyond their means, not within their means. The prevalent mindset today is to purchase items on credit for immediate gratification. Contrast this to past generations who saved for items before purchasing, so as not to incur unnecessary debt. We see plenty of examples of questionable spending: buying a car worth one year’s salary; purchasing a home where the ‘wants’ are greater than the ‘needs.’ Exactly how many bathrooms do you need in a home? I grew up in a family of six with one bathroom, and we all managed just fine.

My advice is to review your spending habits and develop a strategy to contribute towards a “rainy day fund” every month. Your emergency fund should ideally cover three to six months of expenses. Plan for the job loss, illness, major expenses, etc. Make saving a priority over unnecessary consumer purchases. Have a monthly budget factoring in savings and stick to it. If you run out of money before you run out of month, so be it. A few days of eating mac and cheese at the end of the month will not kill you and might motivate you to make better choices.

Ultimately this comes down to planning, living within your means and making better financial decisions. Being financially prepared for what no one thought could/would happen is one of the gifts that COVID-19 has given us.

Next blog: details on the ‘how,’ now that we have been reminded of the ‘why.’

At CASB Management Group, we have ideas surrounding how to make money, save money or having a “winning” money mindset. Check our website www.casbmanagementgroup.com and social media to learn more. Your thoughts and comments are always welcome.