8 habits that will help you avoid getting into debt

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Starting your life in a new country can be expensive. You need to rent (or buy) a new home, furniture, appliances and other things. It is easy fall into debt just a few months upon arriving here. Remember these eight tips to prevent this from happening:

  1. Don’t be in a rush

    Save instead of taking out a loan. Take your time. Don’t pressure yourself into buying a new house, car or appliances if you can’t afford them. It is easy to use your credit card to get a loan. But getting out of debt will be hard.

  2. Set a budget

    Live within your means. Know your priorities and keep track of spending. Watch this video from about making small changes in your spending habits. It will help you learn how to set a budget:

    Video from the Financial Consumer Agency of Canada (FCAC)

  3. Use your credit card wisely

    • Pay your credit card balance in full. Don’t just pay the minimum balance each month. It will take you years to pay off your debt because of the interest.
    • Don’t get a cash advance. Cash advances have a bigger interest and added fees. They will cost more.
    • Don’t get too many credit cards. Too many credit cards will make you lose control of your spending. It will also affect your credit score. Limit it to one or two.
    • Don’t charge things you can’t afford. Ask yourself: Can I afford this if I paid in cash? Don’t buy it if the answer is no.
  4. Track your spending

    Be careful when going to Black Friday, Christmas Sale and Boxing Day sales. You can lose track of your spending. Make a list of what you need to buy. Don’t be distracted by other items on sale. Remember that it’s not a deal unless you need it.

  5. Avoid buy now pay later plans

    A buy now pay later plan lets you pay for items in installments. It has low to 0% interest when you buy. Some give you six months to one year before you start paying. It can be a good plan if you need something urgently (replace a broken refrigerator for example) and if you can pay on time. The late payment penalty can be big. The interest rate can go as high as 29% if you miss payments. There can also be hidden fees for late payment, delivery, administration, or environmental fees.

  6. Make an emergency fund

    Save money for expenses that you do not expect. These are emergencies like fixing a leaky roof or when a family member gets sick. Read Do I really need an emergency fund? for more tips.

  7. Buy second-hand

    Get good second-hand items at a lesser cost. Buy used items like exercise equipment, some electrical goods, textbooks and furniture. Go to garage sales in the summer and fall. Join buy and sell groups on Facebook or register with Kijiji. Inspect items carefully before you buy. Make sure that they are working and pest-free. Read Looking forward to garage sale season for more tips.

  8. Invest

    Get a Tax Free Savings Account and other Registered Savings Plans to make your money grow. Ask your bank or credit union for investment options.

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.

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