Our most common mistake? Overconfidence! We rely on the fact that everything will continue to go well and that no complications or roadblocks will appear.
Reality is often quite different
Six times out of 10, financial difficulties arise after a separation, a job loss or sickness. In other words, unforeseen situations to ruin our game plan…
Do you have a stable job and a good salary? It’s reassuring, but despite all this, reasonable debt can quickly become problematic. How do you protect yourself?
- Allow for an emergency fund to weather the storm (ideally, equivalent to 3 months of expenses); and
- Maintain a debt level below your financial capacities.
For many Quebecers, financial insecurity is sometimes not far away… The debt ratio reached 167% in 2016 and all it would take is a slight increase in the unemployment rate to expose a whole other category of workers who, thanks to good income, presently control their debt level but don’t have a financial cushion to face an unplanned event which could lead to a sudden drop in income.
Even for the wealthy, the decision to purchase luxury cars, to live in big houses and to have lavish lifestyles can quickly become an important source of financial problems.
We are solicited every day to consume more and more. Be aware of this trap and the fact that the decisions we make today may end up costing us greatly.
Don’t be a statistic!
According to the results of a survey conducted by the Canadian Payroll Association in 2017, 47% of Canadian workers say that they would have trouble honouring their financial obligations if their paycheck was delayed for even one week. This proportion is even higher with thirty-somethings (55%) and forty-somethings (51%).
Allowing for an emergency fund will help you avoid the stress linked to the idea of living paycheck-to-paycheck. You would therefore be able to face an unexpected event such as the temporary absence of work or emergency repairs.
No one is immune to a difficult situation. But being well prepared will help you better face it.
How to avoid financial difficulties
What is the best way to avoid financial difficulties? Prevention; we can never repeat it enough.