![]() The planners suggest Luke leave his credit card at home, “frozen in a jar of peanut butter in the freezer,” especially for the first few months. “Having these funds parked away for use will help Luke to stop dipping into his line of credit,” Ms. To cover irregular expenses such as car repairs, home repairs, Christmas, sports fees, vet bills and travel, the planners suggest Luke carve off $815 a month and transfer it to three online savings accounts: one for fixed expenses ($330), one for discretionary spending ($285) and one for travel ($200). “By sticking to these two payment plans, and not adding any more to his line of credit, Luke’s consumer debt will be paid off by December, 2024,” Ms. Each July, once the payroll deductions for Canada Pension Plan and employment insurance are complete, he should set up an additional automatic payment to his line of credit for the amount of those deductions (in Luke’s case $280 a paycheque) until year end. To pay down his debt, Luke can start by paying the minimum amount on both of his lines of credit – about $100 a month on one and $200 on the other – then pay an additional $500 a month on the smaller one, the planners say. “Do not set up an overdraft on this account.” “It is there for spending and enjoying, but once it is gone, it is gone. “That is his spending money for the week,” Ms. He would set up an automatic transfer each payday from his main account to this account. “To stick to that $225 a week, he could open a separate bank account and attach it to his debit card,” Ms. Luke should cut his discretionary spending from $1,400 a month to $225 a week (from $16,800 a year to $11,700). “This will ensure he always stays on top of his bills and doesn’t end up paying interest on them.” Luke uses his credit card to pay some recurring bills, so he should set up an automatic payment of $400 a month from his main chequing account to his credit card to cover such things as home insurance, online subscriptions, parking and gasoline, the planners say. It will take a while to build the fund, “but starting the practice and developing the habit is most important,” Ms. ![]() He could start by having $100 a month automatically deducted from his paycheque and transferred to a tax-free savings account to serve as an emergency fund. He also wants to build an emergency fund. ![]() Next, Luke needs a budget so he knows how much he can spend after his bills are all paid. This would help free up cash flow to redirect to the lines of credit. This will help with cash flow so the first of the month is not “top-heavy.” He should ask whether he could extend the amortization from 21.5 years now to the original 25 years without paying a penalty. They suggest Luke change his mortgage payments from monthly to bi-weekly ($805) to align with his payday. “Write down the goals and keep them visible,” Ms. To help Luke get on the right track, the planners suggest he set up a system to try to keep himself from overspending, starting with setting clear goals. “Another healthy sign is that he is reaching out for help.” ![]() On the positive side, Luke has some “very healthy financial fundamentals in place,” they point out in their report: a well-paying job that he enjoys a house a pension and some savings. ![]()
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