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Signs that you are spending too much

Signs that you are spending too much

We can never repeat it enough: indebtedness creeps in. And when you realize it, it’s often too late to raise the bar. Here are some red flags to watch out for.

With Quebec’s purchasing power gradually eroding inflation, many of them began to go into debt to make ends meet. The following clues show beyond a reasonable doubt that you are spending a lot and that you are on a slippery slope.

Can’t save it

There are a lot of good reasons to save: first of all, to set aside money for old age, but also to be able to deal with the unexpected.

Véronique Lalonde, a Raymond Chabot-authorized insolvency will, recommends, “You should save 10 to 20% of your gross income for retirement planning.”

She adds that it is also necessary to create an emergency fund that will make it possible to compensate for severe blows, job loss or illness, for example, or even unexpected expenses.

It recommends “one should deposit in an account separate from the current account the amount necessary to cover current expenses for one month, ideally three.”

Are you living from paycheck to paycheck without being able to memorize? Beware danger!

Credit card balances never go down

By paying off only the minimum balances on your credit card, you’ll be paying huge interest fees, and it will likely take years to settle your debt. “A balance in excess of 50% of an individual’s credit limit also negatively affects the credit profile, as it sends a worrying signal to creditors. A modest profile will also negatively affect the interest rates granted when applying for a mortgage, for example,” as Veronique Lalonde says.

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Watch your credit score: If it drops below 600, this is a sign that something is wrong with your finances.

Double your installment purchases

Buying now and paying later is tempting. Moreover, the offer of this type of payment continues to multiply, even for purchases of a few tens of dollars. But by accumulating it, you risk losing what you owe, and end up with several small payments amounting to a large sum at the end of the month. Véronique Lalonde warns that “these payment facilities also increase the desire to buy more and get more leveraged”.

He also warns against purchasing financed recreational vehicles over very long periods. “It’s not uncommon to see a trailer or RV being financed over a 20-year period. Not only will the property lose a lot of its value when the loan comes due, but we’ve also paid off a lot of interest. For example, on a $25,000 to $30,000 loan, you can You can expect to pay interest of $6,000,” the trustee explains.

no budget

Never set a budget like sailing with sights. Because while most people know how much they earn, there are many who have a very rough idea of ​​what they are spending. Without a budget, we risk spending too much. “The first thing to do is become aware of your own reality, and how much our variable expenses are, such as groceries, picnics, clothes, etc. Too often, we forget the little things, a stop in the store for example, a cup of coffee or lunch taken out of the house. I recommend writing down everything for three months in order to get a clear picture of the situation,” says Veronique Lalonde.

  • Prepare a comprehensive budget that represents your financial reality. In cash inflows, in addition to working income, do not forget to take into account family allowances, alimony, pension plans, etc. If you are a couple, do this exercise together.
  • Variable expenses are usually those that are easy to cut (leisure, groceries, picnics, clothes, etc.)
  • When your budget is tight, you tend to go to the grocery store more often to buy as you go. Be warned, it often costs more to go there on a weekly basis with a list of the week’s menus on hand.
  • Say no to installment purchases: If you can’t pay them in full, you can’t afford them. Wait until you put the amount aside before purchasing the desired property.
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