There are various reasons why debt occurs. Situations such as loss of a job, sickness to yourself or a loved one, an unexpected addition to your family, or student loans are generally considered more acceptable than the alternatives: trying to keep up with the Jones’, being in denial, not knowing how to say no, having one or more addiction (to a variety of things), or simply not paying attention. Obviously, some of these situations are controllable, and some are not. To safeguard against the uncontrollable situations adding stress to your life, how should one prepare to live within their means, and create a financial crisis cushion?
A recent study from the Bank of Montreal showed that 20% of Canadians said they would be hard pressed to be able to afford their mortgage if the rates rose by only 2%! With a $350,000 dollar mortgage at 2.99% over 25years the monthly cost would be $1654.57. If rates rose by a mere 2% bringing the rate to a still low 4.99% the new monthly cost would be $2033.63; a difference of $379.06. Knowing that less than $400 per month ($100 per week) is the waver range for 20% of Canadians shows, from another angle, that people are living way to close to their financial limits.