Submitted by gschmidt on Wed, 04/23/2014 - 15:04
How do you plan for the unexpected? You could always set up a reserve fund; TFSA’s
are great for that; some argue that having a credit line is sufficient. Either way, here are some tips to make planning for the unexpected more effective. When it comes to creating a reserve fund, make your contributions automatic; it’s easy enough to say you will contribute as much as you can when you can, but the reality is, if you have “extra” money, you will spend it on other things. Setting up an automatic contribution will ensure a steady stream of funds into your savings and you will quickly become accustomed to it, like a mortgage or a car payment. Start small; whether it’s a reserve fund or your retirement, don’t let the idea that a little is too little stop you from making contributions; even small contributions add up over time and it’s surely better than the nothing that would be saved alternatively.
Know your budget; if you know where you stand at any given time, you will be much more prepared to make prudent financial decisions. You need to be able to know the consequences of your spending decisions at the time and not later when you have less of a choice. That’s the power of a good budget; it will allow you to know what is affordable and what’s not to be.