Ask the Experts: April 2021
Many people don’t like talking about money. Some people have been taught that conversations about money and finances should only happen in private with immediate family members. Others believe that it’s rude to have these discussions at all. There are also people who don’t like to talk about money, budgets, and financial issues because they’re worried about saying the wrong thing or making a mistake.
However, talking about money is important. When you have conversations about spending, saving, and managing your money, you learn new tactics and strategies. This allows you to make better financial decisions and to improve your financial situation going forward. It helps you put yourself in a stronger position in the future.
That’s why each month our financial experts answer a selection of the money questions we receive. We want to make talking about money and budgets less intimidating and more open.
The questions here have been condensed or rewritten for clarity and simplicity.
I’m having trouble paying off my credit card bill because the interest rate is so high. What can I do?
Paying off credit card debt can be very difficult for the exact reason you mention, high interest rates. Credit cards often charge a lot of interest, so if you’re not able to pay your full balance each month, you can quickly find yourself owing quite a lot of money.
This is why it’s always important to try to pay more than the minimum required payment. If you only pay the minimum, you’ll end up paying a lot more than you originally borrowed and it will take you a very long time to pay off your debt. Try to cut your expenses so that you can boost your monthly payment. Even a small increase can save you money and help you pay down your debt more quickly.
It’s also important that you stop adding on new debt while you’re trying to pay off existing debt. This means you’ll need to start living on cash or debit rather than using your credit card for purchases. When you’re doing this, you’ll need to track your spending and stick to your budget very strictly so that you don’t spend more than you have available.
Speaking to your creditors can also help. If you have a good history of making payments on time, you may be able to negotiate a lower interest rate. If your creditors agree to modify the terms of your loan, make sure you get these changes in writing.
Finally, if you have reduced your budget and you’re still not able to pay your credit card bills, speaking with a Licensed Insolvency Trustee can help. Most trustees offer an initial consultation for free.
I don’t have anything saved for emergencies. How can I solve this problem?
Having emergency savings is important because life is unpredictable. You never know when an unexpected cost will come up or you’ll be unable to earn an income due to an illness or job loss. If you don’t have money saved for emergencies, you may need to go into debt to afford your expenses.
Most experts suggest having at least two or three months of expenses saved for emergencies. Saving this amount can seem intimidating and even overwhelming, but you aren’t expected to save this much all at once. The key is to build your emergency fund slowly over time.
Start by looking at your expenses. Where does your money go each month? If you’re not tracking your spending, you can get a lot of information from your monthly credit card and bank statements. Once you know what you’re spending money on each month, look for places to cut. Even if you reduce your spending by a few dollars a week, those amounts will add up over time. Remember, having a small amount of money saved for emergencies is better than having nothing.
It’s also a good idea to place your emergency fund in a separate account from your regular funds. This will make it more difficult for you to spend it in non-emergency situations. Most financial institutions will let you set up a separate savings account easily. Add a category to your budget for emergency savings and “pay” money into this account each month. You can likely automate a monthly transfer to your emergency savings account, so you won’t need to do anything and, over time, your fund will grow.