Gen X Debt: How to Budget for Unexpected ExpensesNov 07, 2018
What makes you add to your debt? Is it those everyday expenses, or the ones that sneak up on you, like house or car repairs?
Unless you’ve got money set aside for such occasions, you’ll end up racking up your credit card balances pretty quickly and having a hard time paying them back. I know it can seem overwhelming when your budget is tight to find extra money, but there are a few simple steps you can follow so that you’re always prepared, no matter what life throws at you.
It’s not just you…really.
Feel like everyone is doing better financially than you are? Think again. Gen Xers are the one demographic in Canada juggling the most expenses. Take a look at these results from BDO’s Affordability Index survey:
- Eight-in-10 Gen Xers are carrying some form of personal debt, but many are carrying far more than the national average. Homeowners, and soon-to-be homeowners carry nearly $25,000 in non-mortgage debt.
- One-in-three Gen Xers have no retirement savings to speak of and 73 per cent say they will need to work longer in order to retire.
- 34 per cent of Canadians with kids say they’re overwhelmed by their debt and don’t know what to do about it.
- Only 20 per cent of Canadians strongly agree that they have enough money to cover all their expenses each month.
- More than half of Canadians say they are living paycheque to paycheque with little to spare once expenses are paid.
The survey outlines that many Canadians are having issues with affordability, and it’s not just because of high expenses. High personal debt can be a roadblock, standing in the way of your goals and your personal success. Planning ahead for these expenses, on the other hand, can keep you from turning to debt and derailing your finances every time something unexpected comes up.
3 ways to plan for expected and unexpected events
- Rework your budget. If you’re coming up short each month or feel swamped every time an expense comes up, your budget needs work. Go over all your current monthly expenses, and then add a line in your budget for unexpected or miscellaneous events. You can keep it separate by adding it to a high-interest savings account so it’s there when you need it, but not available for everyday spending.
- Bulk up your emergency fund. It’s meant to carry you when those unforeseen things happen. Start adding a little at a time to your emergency fund so you won’t need to turn to debt in a pinch. It’s best to have three to six months’ wages saved up, just in case.
- Plan ahead. You’ve got a lot of expenses between paying a mortgage, raising a family and dealing with those day-to-day costs. That’s why it’s easy to forget about those long-term goals such as saving for your child’s education and your own retirement.
Take some time to sit down with your spouse and talk about your combined long-term goals. You may need to shift some current priorities in order to accommodate an additional expense, but sacrificing in the short term to ensure your future is secure is always a good bet.
What to do if debt is holding you back
Debt payments can suck up your hard-earned income and keep you caught in a never-ending loop. If you want off the roller coaster, now is the time. November is Financial Literacy Month (#FLM2018) which means it’s a great time to assess your debt and go over your options:
- Use this debt repayment calculator and use it to see which options would work for you.
- Book an appointment with a Licensed Insolvency Trustee to talk over your specific concerns and find a solution.
- Stress test your finances to see how well you’re coping with your current debt load.
- Choose a plan that you can stick to, such as the debt snowball method so you can squash those balances quicker.
- Follow a personal finance guru on social media who motivates you, such as Kerry Taylor from Squawkfox.