Living with a higher cost of living

For the last several years, the rising cost of living has been a tough challenge for hard working people across the country. Now, inflation is finally slowing down and constantly rising interest rates are no longer on the horizon. Which means we can all get back to normal. Right?

Budgeting for the new normal

Mortgage payments have gone up as much as double what they used to be. Basic household foods like milk and eggs sit at a new normal high price. And the gas stations certainly won’t be dropping the price of gas close to a dollar anytime soon. None of these new high prices seem to be going anywhere. Like it or not, this is the new normal for our economy.

It’s an important time to take a look at your budget and make sure your household cash in-flows are covering your household expenditures. Whether you’re updating your old budget or making one for the first time, the best way to start is by listing your monthly costs. Line by line, tally up your costs and then see how they compare to your monthly cash in-flows. If your in-flows don’t cover your expenses, that means you have a deficit and your budget is not balanced. The good news is, we have 3 great tips to help you manage your budget in the new normal.

1. Trim down your extra costs

Review your monthly expenses to see which of your expenses are discretionary and non-discretionary — in other words, wants versus needs. Needs, or non-discretionary costs include essential items that you can’t live without such as utilities, food, or mortgage/rent payments. These types of expenses are typically more difficult to control.

On the other hand, discretionary costs, or wants, are more flexible. These kinds of expenses include non-essential things like going to a movie, extra streaming services, or eating out at a restaurant. Trim your discretionary costs to free up more room in your budget until your income and expenses are balanced. While it may take a lot of willpower to scale back, it’s important to make sure your budget is balanced at the end of the month to avoid taking on debt.

2. Shop around

You don’t have to be a shopaholic to shop around. In fact, when it comes to balancing your budget, it’s probably better if you aren’t. But comparison shopping — comparing the price of the same product at different stores or online — can help you find the best deals and cut back on both your discretionary and non-discretionary expenses. Food is essential, however, some grocery stores may offer the items you are looking for at a lower price than others. You may also be able to find sales where you can get your favourite discretionary (wants) items or services at a lower cost.

Don’t be afraid to reach out to ask your friends and family for details about where they find the best deals. They may be willing to share information about sales or stores offering lower prices than competitors.

3. Get a clear picture of your current debts

Debt is one of the biggest challenges people have in managing their finances. Sometimes it can be overwhelming. But if you take your eye off the ball, it can get out of hand fast. With today’s higher costs, it’s more important than ever to understand your debt. Take a good look at your existing debts and understand what is the real underlying cost of that debt. In other words, how much is the interest costing you and how long will it take you to pay it off in full?

You may have more options than you realize to resolve your debt, even before considering something like Bankruptcy or a Consumer Proposal. Perhaps you restructure your debt with a lower overall cost. For example, taking advantage of a low interest offer from your bank or other credit card. These offers are great but, be careful; the finance companies know what they are doing. Make sure you read the fine print and go in with a clear goal to take advantage of the offer and pay it down as quick as possible.

Another option may be to identify a smaller loan that you are close to paying off and pay that loan off completely before it matures. Once that smaller loan is paid, you will feel better about yourself and it will free up some space in your budget to add back the little things you gave up to get it done. Whatever approach you take, understand where your debt is at and what your strategy is to pay it off as soon as possible.

Help is there if you need it

One thing that hasn’t changed in the new normal is that you don’t have to do it alone. If you’ve given it your best shot and you’re still struggling to cover your monthly expenses and debt payments, help is available. Licensed Insolvency Trustees (LITs) can offer the advice you need to work toward a debt-free future. MNPs LITs are happy to review your financial situation and discuss your options during a Free Confidential Consultation. Together, we can help you achieve a fresh financial start.