8 habits that will help you avoid getting into debt

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Starting a new life in a new country can be expensive. You will need a place to live in, furniture, appliances, and other things necessary to have a comfortable life. It’s easy for newcomers to fall into debt because of this. Some may not be familiar with how financial instruments work here or they may have not adjusted their spending habits yet.

To avoid this situation, here are eight tips to help manage your finances better:

  1. Don’t be in a rush

    We move to another country expecting to have a better life. Upon arriving, some would buy a house, a new car, appliances and furniture even before they have a stable job. While it is not wrong to have these things (especially if you can afford them), what is wrong is pressuring yourself to have a certain lifestyle. This leads to getting loans left and right or maxing out your credit card. You will find that the journey of getting out of debt will be much harder than sacrificing at the start and saving up for your goals. Go slow but steady, plan your expenses, and do your best to save money. Having a comfortable life is much sweeter without debt weighing on your mind.

  2. Set a budget

    Setting a budget is the first step in taking control of your finances. This requires living within your means, knowing your priorities and keeping track of spending. The video below from the FCAC will help you see that small changes in your spending habits will amount to a big difference in your financial future:

  3. Use your credit card wisely

    • Pay your credit card balance in full. Don’t pay just the minimum balance each month. If you only pay the minimum, it will take years to pay off your debt because of the interest.
    • Don’t get cash advance. Cash advances do not have a grace period similar to your regular credit card transactions. So, interest computation starts from the time you made the withdrawal. The interest rate is also usually much higher than you annual credit card rate. Banks can also charge additional cash advance and ATM fees.
    • Don’t get too many credit cards. Having too many credit cards will make you lose track of your spending. Limit it to one or two and make sure that you know the cut-off dates for your cards. This will help you schedule your expenses more cost-effectively.
    • Don’t charge things you can’t afford. Before you charge a purchase on your card, ask yourself: Can I afford this if I paid it in cash? If the answer is no, then you will be better off not buying it.
  4. Track your spending

    According to a survey, almost 1 in 3 Canadians are afraid to see their credit card bill come January. They also found that the majority of Canadians (61%) agreed with the statement “the holidays are the most stressful time of the year financially.” Aside from the social pressure of buying gifts during the season, Canadians incur a lot of debt because there’s Black Friday, Christmas and Boxing Day sales. These can make us focus more on the supposed “savings” and lose track of spending. To make the most out of these big shopping days, carry a list of what you need to buy. Do your best not to be distracted by other merchandise on sale. Don’t give in to impulse-buying. Remember, it’s not a good buy unless you need it.

  5. Avoid “buy now, pay later” plans

    Many companies offer “buy now pay later” plans for furniture, appliances and electronics. “Buy now pay later” is a financing plan that allows you to pay in installments, with low to even 0% interest. Some would even offer a grace period of six months to one year before payments start. Sounds like a great deal, right? It can be if you need the appliance urgently and you’re disciplined enough to make the payments on time. Just know that the consequence for late payments can be enormous. The interest rate can go as high as 29% if you miss it even by a day. There could also be hidden fees for delivery, administration, or environmental fees. Should you wish to avail of a “buy now pay later plan”, read the fine print and make sure to pay on time and within the interest-free period.

  6. Maintain an emergency fund

    Urgent home repairs and health emergencies are unexpected expenses that you cannot forgo. To avoid making a dent on your credit card, or worse, getting a cash advance or withdrawing from your retirement savings, start an emergency fund. Read Do I really need an emergency fund? to know how to start saving for a rainy day.

  7. Buy second-hand

    There are some items that are better bought second-hand than brand new. Examples are exercise equipment, some electrical goods, clothing, textbooks and furniture. Buying second hand can give you enormous savings. Check out garage sales in the summer and fall all over the city, join buy and sell groups on Facebook, or register with Kijiji and similar sites. Don’t forget to inspect merchandise carefully before you buy. Make sure that they are functioning and are pest-free. Read Looking forward to garage sale season for more tips. If you need a safe place to meet a seller or buyer, go to a Winnipeg Police Buy and Sell Exchange Zone.

  8. Invest

    Take advantage of secure investments for your savings like a Tax Free Savings Account and other Registered Savings Plans to make your money grow slowly but surely. These investment instruments have features that allow you to save for your future backed by the Canadian government’s benefits and credits. Ask your bank or credit union about these investment options.

Article updated April 1, 2020.

Sources: Five financial tips for newcomers, Dianne Nice, Globe and Mail; Holiday debt: Here’s how Winnipeg shoppers can avoid it, Alison MacKinnon, Global News; Survey:1 in 3 Canadians are afraid to see their credit card bill after the holidays – but are they prepared to pay it off?, Hyder Owainati, Ratehub; and How to shop Black Friday sales without overspending, Rubina Ahmed-Haq, CBC News. Retrieved November 23, 2018.

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Community Resources

Attend the Managing your Money Workshop from New Journey Housing. This is a free workshop where you can learn about budgeting, avoiding scams, types of credit, investing, retirement incomes and many more.

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