How To Come Out Of An Interest Rate Increase Unscathed

It's important to have some wiggle room in your finances in case of emergencies or interest rate increases. If you're only $200 away from not being able to meet your financial obligations, even the slightest increase on your mortgage's interest rate could send you over that line. How do you prepare yourself so that you can come out of an interest rate increase unscathed? Here are 4 ways:

Two items are making the news as of late that, when combined, could spell disaster for the average Canadian:

1. Interest rates are on their way up.
2. Nearly half of all Canadians are $200 away from not being able to make their financial obligations.

1. Increase Your Margins

- Right now you’re $200 away from not being able to make ends meet. You need to change that as fast as possible. Assess your expenses and find out where you can cut down. Do you need your cable package and Netflix? What about your Starbucks coffee every morning? Could you brew at home and take a traveler mug? Do you need to drive to work each morning, or could you walk/ride/bus/carpool? There are always ways to cut back on your expenses and if you’re $200 away from not being able to pay any expenses, it’s time to find some of them to cut loose.

2. Save An Emergency Fund

- It's always advisable to have roughly 3-6 months worth of expenses saved up. Only use these funds in an emergency, such as job loss or injury. If mortgage rates increase, this extra money will allow you to be prepared.

3. Consider Downsizing

- Are you just barely living within your means? If so, it might be time to consider downsizing and finding a cheaper place to live. Lower living expenses will help create a financial buffer zone in case of any interest rate spikes.

4. Focus On Your Debts

- This will help lower your monthly expenses and boost your credit score, giving you access to lower interest rates.

Usually, the main obstacle that gets in our way when it comes to preparing for the future, is a lack of self-discipline. Making lifestyle sacrifices is never easy, but it's always worth it when it comes to a financially secure future.

What would you do to avoid being hurt by higher interest rates? Let us know in the comments!