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Ask the experts

Ask the Experts – October 2019

For a lot of people, talking about money is something that simply isn’t done. Some consider it rude, others just believe that money is a private topic, and there are also people who avoid talking about money because they’re worried about saying something wrong or making a mistake. Whatever the reason, the reality is that a lot of people hesitate to discuss money, finances, and budgets.

However, talking about money is important. When you discuss money, budgets, and strategies for saving, you discover new ideas that can help you improve your financial life. This can help you develop better strategies for budgeting and saving.

That’s why, every month, our team of financial experts answers questions about money, budgeting, and finances. If you have a question for our team, ask us online on FacebookTwitter or through our website.

The questions here have been condensed or rewritten for clarity and simplicity.

How do I pay off debt while still saving some money?

Paying down debt is important. The longer you have debt and the more you owe, the more costly it becomes. That’s because interest payments accumulate every month you have an outstanding balance. Over time, this balance grows and, if you let it grow too large, it could soon become more than you can afford. It can be very tough to pay your monthly expenses if a large portion of your paycheque goes to debt repayment. So, it’s a good idea to pay off your debt as quickly as possible.

That said, saving is also crucial, especially emergency savings. Life is unpredictable and you never know when you’ll need to buy a new appliance, pay for a big car repair, or worse. If you lose your job or become ill or injured and cannot work, you’ll need to have emergency savings to help you pay bills when you’re not earning your regular income.

So how do you do both at once? It’s difficult, but it is possible. The first thing you’ll need to do is to make sure you have a strong plan. List out all your debts, how much you owe on each one, when your payments are due, and how much each debt is costing you. Then figure out how much you’ll need to pay each month to pay off these debts in a reasonable timeframe. Work this into your budget. The next step is to see where you can make cuts in your monthly spending so you can put some money into a category called “savings.” Treat emergency savings like any other bill and budget for it each month. Over time, your savings will grow.

How do I know if it’s a good time to buy my first home?

Home ownership can be exciting, and it could potentially be a good way to build equity. However, if you borrow more than you can afford, you could end up with payments you can’t manage. This can be very difficult to deal with and it could even result in serious financial trouble.

If you’re thinking about buying a house, you’ll need to add up the numbers and see if they work.

The first thing to consider is the down payment. The minimum down payment for a house in Canada is 5%. However, if the home you want to purchase costs between $500,000 and $999,999, you’ll need to have a down payment of at least 5% of the first $500,000, and 10% of any amount over $500,000. If the home you want to buy costs $1,000,000 or more, the minimum down payment is 20%. It’s also important to know that, if you have a down payment of less than 20% on any home, mortgage default insurance is required, which costs money.

If you hope to buy a home, you should try to save up as much as possible for your down payment, as the size of the down payment will influence how much house you can afford. It will also influence how large of a mortgage you’ll need to get, and how much you’ll need to pay each month.

If you have enough for a comfortable down payment, you’ll then need to make sure that you can afford your monthly payments. Figure out how much you’ll need to borrow to buy the home you want, then calculate what your monthly mortgage payment will be. Is this something you can pay each month? Keep in mind that there are other costs associated with home ownership such as insurance, maintenance, utilities, and more. Estimate how much these will cost each month and see if this is something you can afford.

If you’ve done the numbers and they don’t make sense for you, don’t fret. Adjust your budget, save more money, and work towards putting yourself in a stronger financial position. It’s better to take your time and make sure you can afford a home instead of jumping in unprepared and potentially putting yourself in serious financial trouble.