Canadians have a love affair with debt. In the first quarter of this year, Statistics Canada noted that households had more than $ 2 trillion in debt and that the debt-to-income ratio was 166.9% – almost a record level.
While mortgage debt accounts for almost two-thirds of household debt, the other third is consumer debt (for example, credit card debt and auto loans). While the household savings rate is a meager 4.3%. Saving money is important if you want to become a homeowner or have a comfortable retirement. Here are five reasons why you do not save enough:
You do not cook / you eat a lot outside
Going out for lunch or dinner can save you the time of preparation and you will not need to do the dishes afterwards. But eating out can accumulate. Take the case of a Toronto couple earning more than $ 200,000 a year. Each month, they spend more on restaurants ($ 1,200) than on their mortgage payments ($ 1,129). If they continue to spend so much money on a monthly basis, that amounts to $ 14,400 a year on eating out – nearly 7% of their combined gross family income. (In 2015, the average Canadian household spent $ 2.502 on food purchased from restaurants.) Interestingly, one of them is a financial planner / analyst. Go understand.
You use credit irresponsibly
Credit can be positive or negative. If you buy the things you need with credit and pay your bills on time, this can be a good way to earn reward points or cash back. But if you buy the things you want with a credit – a $ 1,000 jacket or an expensive car – and can not afford to pay your bills, you have a problem. There are differences between wants and needs. Food, water, clothing and shelter are all needs. But eating out, going to a bar, designer clothes and a big house are all desires. Basic necessities are everything you really need.
You do not have a budget
A budget is one of the most important financial tools you can have because it allows you to track all your income and expenses. Doing one does not take a lot of time and it is very simple to do. Once you are able to see where you are spending money, you can determine if spending cuts need to be made.
You do not have financial goals. If you want to buy something expensive, you will need to save money. You should determine what your goals are in the short, medium and long term. Some common goals include buying a car or a house, saving for retirement or repaying credit card debt. Once you have defined your goals, you will have to decide to allocate money to each of them.