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Ask the experts

Ask the Experts – December 2020

Talking about money is important. When you discuss money with family members and other people you trust, you learn that everyone’s financial situation is unique. This allows you to see that everyone is going through challenges, which can help you feel less alone. Talking about money also helps you understand it more, which makes it easier to develop new strategies for improving your financial situation.

Unfortunately, many people do not feel comfortable talking about money even with those who are closest to them. Some people believe that it’s not appropriate to talk about these matters. Others feel that it’s rude or impolite while some worry about making a mistake or saying something wrong. Whatever the reason, money, budgets, and finances aren’t discussed as often as they should be.

That’s why, each month, our financial experts answer a selection of the money questions we receive.

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.

My Employer Stopped Matching RRSP Contributions. Should I Still Be Contributing?

Saving money for retirement is important. It is projected that most Canadians won’t have enough money to retire at their chosen retirement age and will instead have to continue working for much longer. If your employer offers an RRSP option, it is often wise to contribute to it even if they are no longer matching your contributions. The sooner you start saving for retirement, the more time your money has to grow.

Putting money aside for retirement can make the rest of your life much easier and allow you to retire in comfort. It also reduces stress and anxiety.

However, there are some situations where you may want to consider using your money in other ways instead. For instance, if you currently have outstanding debt with a high interest rate, it may be a better decision to focus on debt repayment right now, especially since your employee will no longer be matching your contributions. High interest debt can be a serious drag on your finances.

Also, if you do not have an emergency fund (or if you do not have a fund large enough to cover three to six months of expenses), then it could be a good idea to make building your fund a priority.

I’m Worried About Losing My Job, How Much Should I Be Putting into My Emergency Fund?

The amount you put into your emergency fund will depend on your personal situation. In general, most experts suggest that people put aside enough money to cover three to six months of expenses. However, if you work in a field where it could be difficult for you to get a new job, or if you are the primary earner in your household, it may be a good idea to build a larger emergency fund.

An emergency fund can keep you from going into debt since it can cover your basic living expenses while you are looking for work.

If you determine that you need to put aside more for emergencies, take a look at your budget. See if there are areas where you can make cuts, even temporarily. Every dollar that you can cut from your budget now is one dollar that you can add to your emergency fund and therefore a dollar that you won’t need to put on your credit card if you end up out of work.

Some places where you may be able to find budget reductions are cable bills, cell phone plans, subscription services (such as movie and music streaming services, for example), money spent ordering takeout, and other such expenses.

It may also be a good idea to prepare a budget for how you will spend your money if you do happen to lose your job. Hopefully you won’t have to use this budget, but it can be a good idea to plan for how you’ll afford your expenses while you’re looking for work. That way, if something does happen, you’ll be able to quickly switch over to your new spending plan. Not only will this strategy help you cope financially, but it can also reduce any stress or anxiety that you may be feeling right now.