Nearly half of Canadians live paycheck to paycheck. A recent survey by the Canadian Payroll Association has found that 47% of Canadians would find themselves in financial hardship if their paycheck was delayed by even one day. That is a staggering amount of people! And if you are one of the 47%, then you know the time, effort and stress that goes into budgeting and money-saving. So here, below, are 3 common financial pitfalls and what can be done to avoid them.
Unnecessary Bank Fees
Many people don’t even realize the amount of money that banks collect in different fees. Something as simple as using an ATM that is from a different bank can rack up fees – sometimes as high as 5 bucks each time! More often than not, the convenience of using a machine that is just around the corner is really not worth it!
Other unnecessary bank fees are, of course, those pesky NSF fees. Sometimes those banking fees can be as much as a whopping $40! Given that this blog is written to the 47% of the population that is living paycheck to paycheck, just about every single person reading this right now has, at one time or another, bounced a payment. Sometimes accidentally, sometimes because we simply ran out of funds, but in either case, the damage is quite enormous. Not only due to the hefty fees, but there is also the blip on your credit rating to worry about!
How to avoid: It is fairly simple to avoid unnecessary banking fees. In the case of the exorbitant ATM fees, ONLY BANK AT YOUR BANK’S ATM! I know that the convenience is sometimes tempting (especially when you are at a bar or a restaurant and then you find that it is cash only and they point to that non-bank ATM machine!) But don’t do it! Borrow the money from a friend until you get down the street if you have to!
And in the case of the NSF fees, again, the answer would be to do whatever it takes to never allow anything to bounce. Taking an online short-term loan is a great tip when you are in a pinch and a payment is about to go through your account.
I know! I know! Right now you are dreading the age-old advice that you should have a safety net of funds in a separate account! We all KNOW we should have money set aside for emergencies but, as we mentioned above, we are living paycheck to paycheck! If we had any extra money, we wouldn’t be in this predicament in the first place! But please, believe me when I tell you that saving money IS possible, no matter the size of the paycheck. There are very simple ways to start saving today and you will be surprised at how quickly you have a nice, tidy sum just waiting for that major emergency! So how do you avoid the empty savings account?
How to avoid: The first step is to make an appointment with your financial advisor at your bank. Let them know that you would like to set up an account for a rainy day. If you are like me, the best way to make sure that you cannot touch the money when non-emergencies arise is to set up something like a Tax Free Savings Account (TFSA) that is untouchable unless I actually go to the teller at the bank, sign something, and can get the money. Don’t get a debit card for this account. The harder it is to access the funds, the more likely you will only touch the money in the case of a REAL emergency! And even if you are simply putting $10 in every paycheck, it will add up before you even realize!
Month End Creep Up
Ah! Month End! We’ve all got one! Whether your “month end” actually happens at the end of the month or not is irrelevant. It is that time of month when all of the “extras” go through your account: the gym membership that you no longer use, the magazine subscription that you stopped reading a while ago, even the telephone and cable bills that you initially signed up for at a much lower rate! All of these bills add up and they add up to A LOT!
How to avoid: The obvious answer would be to not join anything with a long-term membership but that is too simple. We have all joined a gym and stopped going at one point in our lives. We’ve all been there, done that. One way to help out with the gym question is to see if you can sell it for a reduced rate. Often times, friends of yours might be looking to join and will be willing to take over the membership. Another great tip is to take the time to call your cable and telephone companies to see what new offers they have available. Often the deal that you originally signed up for has been replaced by something new and by simply calling and asking about their specials, they can switch you to the new, cheaper plan. It never hurts to find out!
Living paycheck to paycheck is often a vicious cycle that is hard to break. But with a few simply changes in our daily spending habits, we can slowly work to break that cycle. It is more within your reach than you realize!