How to Stop Reno Debt From Overshadowing Your GoalsMay 23, 2018
It can be hard to avoid the “renovation bug” once the summer weather is here. But renovations can be surprisingly costly, and can quickly lead to debt. In this podcast, we talk about four things you should know about your personal finances before jumping into a reno. One of the important things to consider is how, or if, a renovation (and the cost) fit into your financial goals.
Knowing your limits
It’s fair to say that most Canadian households have their own financial limits. And when it comes to families, the limits could be reached even quicker.
It’s no wonder so many families are pinching pennies. This is why it’s so important to know your family’s financial limits. Some repairs are necessary such as leaking pipes or broken windows. However, renovations for aesthetic purposes, or even to make a space more functional, might not meet your criteria for spending.
Setting priorities that are right for you
When there are kids involved, there seems to be no end to the short-term financial goals you find yourself setting.
They outgrow clothes, and sports equipment, they find a new interest or hobby at the drop of a hat and as a family, there are a lot of things you want to explore and experience together.
Paying off your current consumer debt, reducing your mortgage (or paying it off entirely), and putting money away each month for gifts, holidays, and birthdays all take their toll on a budget.
And the long term goals? Those aren’t going anywhere, either. Savings for post secondary education, retirement and emergency fund (even emergency preparedness) all scream for attention.
We even discovered in our Home Renovation poll from last year that many Canadians will sacrifice saving for retirement and paying down debt to renovate their home,
Reno season might not be this season
Don’t get discouraged if this season is not be the right season for your family to renovate.
With rising interest rates, that affect lines of credit and Home Equity Lines of Credit, taking on unnecessary renovation debt with so many other priorities in your life could make it more difficult to make ends meet.
Take advantage of the Financial Consumer Agency of Canada’s (FCAC) goal calculator. Use it to set out all your short and long term financial goals, and include the reno you want.
Once you know what it’ll take to make the reno happen, add it to your short (or long) term priority list, and start saving.
Put yourself in a position to pay for your renovation with cash, and keep your other priorities on track at the same time. You can avoid taking on any more debt, and even reduce your current debt at the same time.