As a new home owner, how can I pay for expensive 'surprises’ without tapping family or credit cards? GlobeInvestor
I am currently debt-free and traditionally a strong saver, but as a new homeowner with potential for unexpected surprises, how can I prepare for cash flow issues and avoid having to tap family/friends or expensive credit cards? I’d love to preserve my good credit and minimize interest costs.in Toronto:
Here are some tips to try to stay ahead of it so that those expenses don’t end up on credit cards and lines of credit.Sounds like you’re a good saver, which is great. My first tip is to keep the portion of your savings earmarked for home-related emergencies liquid and accessible. Often I see people empty out emergency savings accounts that are only earning 1 to 2 per cent and put that money into registered retirement savings plans – especially during RRSP season.
When your fixed expenses are more than 55 per cent, more than half your income is spent before you even get to decide to save or spend it. It means less money for daily life and emergencies. The lower your fixed expenses, the more likely you are to have free cash flow that can handle those spikes in spending that home ownership brings.Story continues below advertisement
Having your liquid, safe and boring emergency account hanging out on the sidelines of your chequing account will act like a warm blanket of calm when a household emergency hits. Need a plumber? No problem. Call him or her, secure in the knowledge that you can afford to pay them.You’ve got an asset – work it. Your home is your haven but can also be a cash cow. Yes, it may be going up in value on paper, but you don’t get to reap that financial reward until you sell.
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