Signs that you are spending too much

We can never repeat it: Indebtedness comes in. And by the time you realize this, it’s often already too late to raise the bar. Here are some red flags to watch for.

As inflation gradually eroded the purchasing power of Quebecers, many of them began to borrow to make ends meet. The following evidence shows without a doubt that you are spending too much and are on a slippery slope.

Could not save

There are many good reasons to save: firstly to put money aside for your old age, but also to deal with the unexpected.

“You should save 10 to 20% of your gross income to plan for retirement,” recommends Véronique Lalonde, a licensed bankruptcy trustee at Raymond Chabot.

She adds that it’s also essential to set up an emergency fund, which can cover a tough blow, job loss or illness, or unexpected expenses.

“One should deposit the amount needed to cover current expenses per month, ideally three, in a separate account from one’s current account,” she recommends.

Do you ever go paycheck to paycheck without saving? Attention to danger!

Credit card balances never go down

By only paying the minimum amount on your credit card balances, you’ll pay higher interest charges and it could take you years to clear your debt. “A balance of more than 50% of one’s credit limit can adversely affect one’s credit file as it sends alarming signals to lenders. A simple file can have a negative impact on the interest rates granted when applying for a mortgage loan, for example,” states Véronique Lalonde.

Watch your credit score: If it drops below 600, it’s a sign that something is wrong with your finances.

Multiply purchases by installment payments

It’s tempting to buy now and pay later. Moreover, the offer of this type of payment continues to multiply even for purchases of a few tens of dollars. But by piling them up, you run the risk of missing out on what you owe, and many small payments add up to a large sum at the end of the month. “These payment facilities also increase the temptation to buy more and go into debt,” warns Véronique Lalonde.

It also cautions against buying recreational vehicles that are financed for long periods of time. “It is not unusual to finance a trailer or recreational vehicle for over 20 years. Not only did the property lose a lot of value when the loan matured, but we also paid a lot of interest. On a $25,000 to $30,000 loan, you can expect to pay $6,000 in interest, for example,” explains the trustee.

No budget

Budgeting is always like traveling by sight. Because while most people know how much they earn, there are many who have a very rigid idea of ​​what they spend. And without a budget, we end up spending more than we need to. “The first thing to do is to know your own reality and how much our variable expenses are like groceries, outings, clothes, etc. Too often, we forget the little things, such as a stop at a convenience store, a coffee or a meal taken outside the house. I recommend writing everything down for three months to have a clear picture of the situation,” says Véronique Lalonde.

• Prepare a comprehensive budget that represents your financial reality. In cash flows, don’t forget to consider family allowances, alimony, pension schemes, etc., along with employment income. If you are a couple, do this exercise together.
• Variable expenses are usually easier to deduct (vacation, groceries, vacations, clothing, etc.)
• When you’re tight on your budget, you often go to the grocery store to buy on the go. Be careful, it will cost more than going there weekly with a weekly menu list in hand.
• Say no to purchases with installment payments: If you can’t pay it off in full, you can’t afford it. Wait until you have the amount set aside before buying a coveted property.