It’s no secret that households across the country are experiencing financial difficulties, and although inflation is now slowing, many won’t notice any difference to their bottom line.
Over half of Canadians say they are struggling to keep up with rising costs, so learning how to manage your household’s expenses, and adapt to increasingly difficult economic circumstances, is crucial if you want to stay on track with your financial goals.
Here are some tips for doing just that.
1. Track Your Expenses
The starting point for any financial planning or decision is information.
You need to know what you’re spending, where, when and how, so you can determine what’s reasonable and what can be changed.
Inflation does not impact every expense in the same way; for example, accommodation costs are one of the primary drivers of the cost of living crisis in Canada, with shelter prices increasing by more than double the rate of inflation in the past year.
And within this sector, renting and owning have both been impacted, but not equally.
Similarly, public transit has been less affected by inflation than private transit. It’s important to understand your monthly costs before you can do anything about minimizing them.
2. Create (or Adjust) Your Budget
If you already have a household budget, then you may need to adjust it for current circumstances.
If you don’t have a regular budget, then creating one is the single most important action you can take to get a handle on your finances.
A proper household budget needs to be informed, realistic and monitored – which means continuing to track your expenses to stay within your means.
3. Pay Down Expensive Debt
If you’re holding any expensive debt, such as credit card balances, or any kind of variable debt that tracks the Bank of Canada’s interest rates, then paying it off as quickly as possible should be a priority.
This may sound redundant, as paying off debt is always a priority, but in times of financial squeeze, large interest payments will rapidly go from frustrating to untenable.
Consider transferring debt to a lower interest product if possible. Anything that reduces your monthly debt payments can help your bottom line, in the short term at least.
4. Adjust Your Lifestyle
Even seemingly small, simple changes to your lifestyle can have a big impact on your budget. There are a myriad of ways you can reduce your spending day-to-day, including:
Reassessing Service Providers
Many of us pay for internet, cell phones, TV, streaming services, insurance, subscriptions and much more, every month, without really considering their cost after sign-up.
But competition within most of these markets is strong, and chances are there will be offers out there that reduce your monthly bill without significantly impacting your actual service.
So analyze each service and provider; ask yourself whether you’re actually using the service, and if so, whether there are cheaper alternatives.
Many companies will offer existing customers a deal simply to stop them from switching to a competitor.
Planning Your Meals
Food prices are one of Canadians’ biggest concerns; one in five report food insecurity.
Planning your meals ahead of time can be a big help in this area.
This is especially true if you pair the effort with weekly discounts offered on grocery store flyers, and aim to make meals with cheaper ingredients or that provide leftovers.
Similarly, loyalty programs can provide valuable cash back or points that can be used to offset costs.
And many grocery stores have price match guarantees; there are even apps that do the heavy lifting for you, so you can maintain the benefits of loyalty to a specific chain, while benefitting from the best price in the market.
Find Sales and Discounts
Utilize sales and discounts as much as possible. Half of Canadians are delaying purchases until promotions or sales come into effect; many are also switching to cheaper brands.
This can be helpful for both large and small purchases; store brand and name brand products in the grocery store, for example, will often be of similar quality, but have wildly different prices.
Cut Back on Luxuries
There are some areas you can’t avoid spending money on, but luxuries are not one of them.
It may not be fun, but you may need to curtail spending on eating out, day trips, vacations, concerts, events, and other ‘luxuries’.
That’s not to say you can’t have any enjoyment – look for alternatives.
Lower Your Energy Consumption
Half a degree change on your thermostat may not sound like much – it’s actually so little that most people cannot detect the change – but it will save energy and money.
Research shows that most people can lower their home temperature by two to three degrees and still enjoy a comfortable environment, without taking on the burden of spiraling utility costs.
Consider Moving
Some parts of the country are more expensive to live in than others, so if you find your household is structurally unable to make ends meet over the medium or long term, then a move might be necessary.
This is more possible if you’re able to work remotely. If you’re not, then downsizing might be a viable alternative.
5. Increase Your Income
Expenses are only a part of the equation when it comes to a budget; your income is the other large part. You may want to consider one of the following if you need more money coming in to meet your essentials:
- Ask for a raise
- Look for a better-paying job
- Shift your investment portfolio or savings
- Take on a side hustle
- Rent out spare accommodation
- Have a clear-out and sell items you no longer need
Managing your household budget requires a multifaceted approach: track and adjust your expenses, prioritize paying down expensive debt, and make thoughtful lifestyle changes to reduce costs.
By also exploring opportunities to increase your income, you can better navigate the financial challenges posed by rising living expenses and stay on track with your financial goals.
