THE STACK #3

Are there questions about your finances you can't find the correct answer to?

That’s where I come in.

I'm here to answer any question you might have, so I've compiled a list of some of the popular questions I get asked.

First, let's get one thing straight.....

I don’t like rules.

They never cover the whole picture, so take this as a GUIDE and tweak it until it suits your financial situation.

Now that we're on the same page let's answer some of your questions.

THE STACK

How many credit cards should I have?

As many as you want, as long as you follow good credit card practices such as:

Have a purpose for each card, don’t just get a card for the sake of it.

• Only spend money you already have available to pay off your balance.

• Pay off your credit card balance (across all cards) before the due date.

• Don’t overspend more than you typically would just to gain points.

• Do not max out your credit cards (unless you’ll be paying it off right away).

• If you cannot pay off the balance in full, keep your utilization rate below 30% for each card.

How much of my income should go towards housing?

30%.

Why 30%? Because you need to be able to save and invest 20% of your income AND cover other living expenses.

Most people think that if they own a home, they don’t need to invest. That is so far from the truth.

You need to have a surplus to take care of emergencies as well as invest for the future AND still live comfortably.

I know you’re probably saying to yourself, she must not live in Toronto, have you seen these ridiculous home prices?

Unfortunately, the current housing market doesn’t change the fact that If over 30% of your income goes towards housing, you will be close to living paycheque to paycheque, which will cause a lot of financial strain.

How much of my income should I be Saving / Investing?

20%.

Ok, first of all, If you’re investing even 1% of your income, you’re already doing great.

You should aim to allocate at least 15% for investing and 5% for short-term savings.

This will help you get to your financial goals a lot faster, help you achieve financial freedom and just simply make life a lot easier.

Should I lease a car?

No, unless it’s for a business.

A car is a depreciating asset. With a lease, all you have is depreciation and no asset.

One of the ways that I like to assess if a financial decision is the best choice for me is to consider the opportunity cost. Which is simply what I stand to lose if I had gone the other route.

An average lease is around $548 for a new car.

If you invest $548 in an S&P 500 index fund for ten years, you will have over $106,225! Enough to buy three really nice cars!!!!

Should I buy a brand-new car?

As someone who has been working in the automotive industry for the last seven years, I would advise against it. Especially if it’s the latest model with major upgrades.

You could save almost $10,000 by buying the previous year's model.

If you're looking to get a newer car, go around August when the dealership is trying to get rid of its fleet to make room for next year’s model.

Now, I'm sure you probably have lots of objections to this; that’s ok; after all, personal finance is personal, and I don’t know your full story.

You might not be able to afford to save $100, much less 20% of your income, but don’t let this discourage you.

Ask yourself, what can I do today to get myself closer to this?

I know you might still have more burning questions, so in next week's STACK, I'll be sending out part 2. Keep an eye out for it!

THE TOOL

You can view your credit score for FREE using the Borrowell App.

Borrowell pulls its information from one of the major credit bureaus - EQUIFAX.

One of the features I love the most is the "coach," which tells you what's impacting your credit score and offers suggestions on how to improve it. 

Monitoring your credit frequently helps you quickly identify any fraudulent activities on your credit.

THE ACCOUNTABILITY

Do you have multiple credit cards that have a balance?

Note down your utilization rate.

If your utilization rate is over 30%, stop using that card.

Ask your bank if they can increase your credit limit.

Increasing your credit limit will help reduce your utilization rate, which will increase your credit score.

DO NOT INCREASE YOUR LIMIT IF YOU'LL GO FURTHER INTO DEBT.

THE COURAGE

THE KNOWLEDGE

CREDIT UTILIZATION RATE

This is the percentage of your available credit you have used.

To calculate:

(Amount of credit currently being used / Credit Limit ) x 100

Example:

You have a credit card with a limit of $3,000.

Your current balance is $1,000

Your utilization rate will be

($1,000 / $3,000 ) x 100%

= 33.33%

That's it for this week's STACK!

Talk to you next week,

But until then...Keep Stacking!

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