Your Questions Answered!
Lori Curtiss- Apr 2
- 5 min read
Do you ever feel overwhelmed by financial decisions? You're not alone! I often hear from people struggling with the same questions: Which budgeting app is best? How much should I save for emergencies? Is now the right time to buy a home? In this newsletter, I'll provide clear, actionable answers to these common concerns, helping you gain more confidence in managing your money.
What budgeting app do you use?
People always ask me what budgeting app I use, and it's honestly not a simple answer! Finding the right way to track your finances is a personal journey. Over the years, I've tried countless methods, and the one that finally clicked for me is YNAB (You Need A Budget). Full disclosure, if you use this link to sign up, we both get a free month:
But the best app is the one you stick with!
I recently released an eBook about this! It took me years of trial and error to discover the best way to budget for me. The way to stick to a budget? Align your spending with your values and goals. Every time you make a purchase, ask yourself if this purchase is getting you closer to your dreams or fulfilling your values. If it does not fit one of these requirements, you will likely look back and regret it. Download my book here!
What is an emergency fund for and how much should I have in it?
The ideal size of your emergency fund depends on your personal spending habits and the stability of your income. If you're self-employed and rely on a fluctuating client base (like myself), aiming for 6 to 12 months of living expenses in your emergency fund is wise. This provides a safety net during lean months or unexpected dry spells. However, if you have the security of a stable job, a smaller emergency fund of 3 to 6 months of expenses is likely sufficient.
Think of your emergency fund as your financial superhero, swooping in to save the day when unexpected stuff happens. It's there for you if you suddenly find yourself out of work, if your car decides to go on strike, or if your home needs an urgent repair (like a leaky roof in the middle of winter – yikes!). It's not for that new gadget you've had your eye on or a spontaneous weekend getaway. By saving it for true emergencies, you'll have the freedom to handle whatever life throws your way, and hey, that peace of mind is priceless, right?
Should I Rent vs. Buy a Home?
This might be my most asked question. It's a big one, and there's no single right answer for everyone. I actually found this interesting calculator online that can help with the financial side of things: https://mdm.ca/learn/rent-or-buy-calculator
While the financial aspects are crucial, the decision to rent or buy is about more than just the numbers. There are many factors to consider when trying to decide whether you should rent or buy, and the ones that are not financial are as important as the financial ones!
To help you think through this decision, consider these factors:
1. Financial Considerations:
Affordability: Does buying a home fit comfortably within your current budget? Consider not just the mortgage payment, but also property taxes, insurance, potential maintenance costs, and any homeowner association fees. Is it more affordable to rent?
Upfront Costs: Buying a home involves significant upfront costs, such as a down payment, closing costs, and inspection fees. Renting typically requires a smaller initial investment, such as a security deposit.
Long-Term Investment: Historically, real estate has appreciated in value over the long term, making homeownership a potential investment. However, there's no guarantee of appreciation, and home values can fluctuate.
Ongoing Expenses: Homeownership comes with ongoing expenses like property taxes, homeowner's insurance, maintenance, and repairs. Renting typically includes many of these costs in the monthly rent.
2. Lifestyle Considerations:
Flexibility and Mobility: Renting offers greater flexibility and mobility. If you anticipate moving in a few years for a job or other reasons, renting might be a better option.
Maintenance and Responsibilities: Homeownership involves maintenance and repairs. As a homeowner, you're responsible for these tasks and the associated costs. Renting means the landlord typically handles these issues.
Personalization and Control: Buying a home allows you to personalize your living space and make changes as you see fit. Renting often restricts modifications to the property. Do you value making changes in your home, or would you rather let someone else make those decisions?
Community and Stability: Homeownership can provide a sense of stability and belonging in a community. Renting can be less stable, as landlords may decide to sell the property or increase rent.
3. Future Plans:
Long-Term Goals: Consider your long-term goals. Do you plan to stay in the area for many years? Is homeownership a significant part of your financial plan?
Life Changes: Anticipate any potential life changes, such as changes in family size, career, or lifestyle, that might influence your housing needs.
Ultimately, the decision to rent or buy is a personal one that depends on your individual circumstances, financial situation, and lifestyle preferences. Take the time to carefully weigh the pros and cons of each option before making a decision.
I borrowed money from my RRSP for my first-time homebuyer's plan, now what?
Before First Home Savings Accounts, the most common way to save for your first home was in your RRSP. The Home Buyers' Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their RRSP to purchase or build a qualifying home, tax-free. However, it's important to understand the repayment obligations that come with this program.
I've often seen people withdraw from their RRSP for their first home and then have no idea what happens next! The worst part is, some have asked me about it three years after they were supposed to start paying it back! The more you know, the better off you will be!
Here's a breakdown: when you withdraw from your RRSP for your first home, you have 15 years to repay that money back to your RRSP. You'll need to start making repayments in the second year after you made the withdrawal. If you don't make any RRSP contributions throughout the year, the amount you should have paid back becomes part of your income, and you pay taxes on it.
Key things to remember about the HBP:
Repayment period: You have 15 years to repay the amount you withdrew.
Annual repayment amount: The minimum annual repayment is 1/15th of the total amount withdrawn.
Missed repayments: If you miss a repayment, the amount you should have paid is added to your income for that year and taxed accordingly.
Repayment flexibility: You can repay more than the minimum amount each year if you choose.
Tax implications: Repayments are not tax-deductible, but they will help to restore your RRSP contribution room.
It's crucial to understand the rules of the HBP before withdrawing funds from your RRSP. If you have any questions or need clarification, don't hesitate to reach out!
If you have a finance question you would like answered, please let me know!
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