Tag Archives: emergency fund

Canadian Impulse Spending and Debt.

The Globe and Mail published an article yesterday about the yearly cost of impulse spending using data from a BMO poll. Take a guess at what the average Canadian is spending on items they didn’t really need to pick up but did anyway. A thousand dollars a year?

Nope.

Ok, fine, two thousand?

Try again.

It’s $3,720/year.

Almost four thousand dollars. A year. $310 a month, to be exact.

At first I thought there’s no way I could spend that much per year on things I buy on a whim, and then I started doing math in my head and realized it’s entirely possible, and I probably spend even more than that a year on impulse buys. Do I feel bad about it? Yup. Do I regret it? Yup. Do I often take things back when I can’t handle the guilt anymore? You bet I do. But I’ve never gone into debt for it.

Careful – the actual phrasing in the article is “92 per cent said they’d consider borrowing to come up with some of the cash”

Which brings me to the next article that caught my eye, also from the Globe and Mail. Not only are we impulse spending to the tune of $310 a month, but as a whole, we’re going into debt more and more and us Canadians don’t really care about it. We’re not even sorry, and that’s our national stereotype (trust me, this is one case where I would not be upset if we apologized).

We’re overspending, we’re taking on more and more debt, and we don’t. care. In trouble? Just borrow more, it’ll be fine. Want renovations on your kitchen but can’t afford them? Take out a HELOC and go to town! Who cares if you won’t be able to afford to put food in those cupboards, the granite counter tops will look AMAZING.

Remember when I posted that few Canadians have emergency savings? That was bad enough, but a whopping 7% of those who would consider relying on debt couldn’t raise the $2,000 emergency regardless of the timeline in which they were given to do it. And that’s even more alarming.

Canadians are carrying record levels of debt and yet, surprisingly, 62 per cent of those surveyed are comfortable with their financial situation… That is quite a disjoint. It’s concerning to see that access to credit and taking on more debt has become an accepted part of financial planning. – Ted Michalos, Bankruptcy Trustee with Hoyes, Michalos & Associates

My question is why is this happening? How did the normalization of debt get to a point where it’s ok to use it for day-to-day spending? And how can we change this so that savings is the normal, and debt is the minority?

What the hell, Canada?! It doesn’t have to be this way!

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Thanks but no thanks, BMO.

I received this gem in the mail today from BMO, aren’t I lucky?

Sounds good, BMO! There’s nothing I’d love more!

I think the best part of the letter is that they’re going to give me $10K for planned and unplanned expenses and they’re encouraging me to deal with these in a way that suits [my] lifestyle and makes smart financial sense.

Hold the phone. Taking on a $10,000 line of credit is a useful alternative to an emergency fund of cash savings? Uh, no. See almost everything Gail Vaz-Oxlade has ever written. It’s an easy way out. It’s also an easy way to get into more debt while coping with a family emergency or job loss. After such a traumatic event, do you want to be worrying about paying your minimum LOC payment? No.

Combine that with the fact that consumer debt in Canada hit an all time high this quarter (since TransUnion started tracking the info in 2004), AND that a CIBC poll revealed that an alarming 45% of Canadians have no emergency savings, and you have a recipe for disaster.

There was a time in my life that I was seeking a line of credit to borrow from (& repay the week after, when I got paid), and I was denied by BMO (for a lower LOC limit) because I didn’t have enough assets to borrow against. Now they’re throwing it at me without the slightest knowledge of ANY of my assets. Seriously, they know nothing!

So, if you have an emergency fund set up with just $100 in it for unexpected expenses, you are already miles ahead of 45% of the Canadian population. Doesn’t that feel good?!

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June recap and July goal.

Yes, you read that right. I said goal. But more about that later.

There were a few failures in June, but I definitely breathed a sigh of relief when I added up my spending for the month and realized it was under $1000. That has not happened in a VERY long time.  Since before October, probably. So I’ve proven to myself I can do it, but I don’t think it’ll last because of the move and the expenses involved with that.

Here’s what I wanted to do in June:

Financial goals

  • Contribute $192.30 biweekly to my Emergency Fund – Success!
  • Put all “found money” toward the moving fund – Almost success.
  • No impulse purchases during the month – Fail.
  • Record all spending in weekly reports – Massive fail.

Personal goals

  • Prepare for the move as best I can without a firm move-in date – Success!
  • Post 2x/week on the blog – Fail.
  • Keep my nails in decent shape (no biting!) – Success!

Overall, June wasn’t a bad month. I reeled in my spending and managed to not freak out too much about the move (although I did give advanced apologies to both Mr. Dollars and his roommate for the crazy that will surely befall them in the coming month). I don’t think I’ll ever stop impulse spending (mostly because I forget what I need until I see it right in front of me), so I’m taking that goal off the list.

And now, my only goal for July:

To get through this move as frugally as possible. With my sanity intact.

Is that too much to ask?

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Mid-June Update: Math is hard, eh?

It’s hard to believe two weeks has passed since June started. I’ve been terrible with posting spending reports (mainly because I haven’t done them), and it’s mostly because I still feel a little guilty about my spending. However, I’m working on keeping the spending monster at bay and avoiding unnecessary purchases as much as possible.

What I realized today was although my goal is to maximize my TFSA every year for my Emergency Fund, saving $10,000 for the EF is not six months’ worth of expenses. It’s actually almost seven months’ worth of expenses (if my minimum expenses were $1500 a month). For so long I’ve been basing my percentage saved on the $10,000 figure rather than the actual six month figure of $9,000!

When I calculate how much I’ve saved toward my actual goal of $9,000 it’s about 83% of the way there, not 75% as previously thought. So that means I’m closer than I thought, but pretty terrible at math. I’ll leave my automatic savings plan as it is though, to make sure I maximize the amount allotted every year for the TFSA ($5,000), and the additional $1,000 will be a cushion.

Have you ever made a math error that worked out in your favour? What about one that didn’t? Did it cost you?

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June Goals and Spending Plan.

So after May’s disaster, I’m ready to turn over a new spending leaf for June (yet again). I’ve taken out and adjusted a few goals, just so I can really focus and keep in mind exactly what I’m saving for.

Financial goals

  • Contribute $192.30 biweekly to my Emergency Fund
  • Put all “found money” toward the moving fund
  • No impulse purchases during the month
  • Record all spending in weekly reports

Personal goals

  • Prepare for the move as best I can without a firm move-in date
  • Post 2x/week on the blog
  • Keep my nails in decent shape (no biting!)

My spending plan is as follows:

  • $400 groceries
  • $200 dining out (it’s patio season!)
  • $200 hair (I’m breaking my own rule and getting my hair done here)
  • $50 wedding gift
  • $150 savings for the move

Total: $1000

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