4 steps to survive the affordability crisis

If you’re struggling financially, we’d like to provide you with some clear and simple strategies to help you find a path forward. No matter what you’re going through, you always have options and there are debt professionals who can help.

What do affordability challenges look like for Canadians?

Let’s first take a look at what Canadians are saying about their affordability challenges.

Rising cost of living is taking a toll

For the past six months, inflation has been a hot topic and it’s no surprise that Canadians are spending more on essentials, such as housing, grocery bills and gas. Unfortunately, the rising cost of living is also contributing to higher debt levels. For people who say their debt levels are increasing over time, 70 per cent attribute it to the rising cost of living.

Larger debt burdens mean more stress

Not all Canadians are adding to their debt, but a significant portion are. Four out of ten people have debt added to their existing debts (credit cards, lines of credit, personal loans, etc.) due to COVID-19. And one quarter incurred at least one new type of debt.

Financial security is impacted through lack of savings

The increase in debt is an indication that many Canadians aren’t making enough to cover their expenses. In fact, almost half (47%) are living paycheque to paycheque. It’s why so many people (42%) are saving less or not at all.

What can you do to survive the affordability crisis?

Take one step at a time and keep it simple. Dealing with financial difficulty can be overwhelming, but if you have a good grasp on what you need to do, each step will add to your confidence, relieve your stress, and give you something to build on.

Here are 4 simple steps to address your financial challenges:

1. Figure out if you are running a deficit.

Many people struggle with maintaining a or simply don’t know where to begin. There are many ways to go about starting a budget, but the most important thing is to find out if you’re running a deficit or a surplus. Are you spending more than you’re bringing in? Start by tracking all your monthly expenses and purchases. If your spending is outpacing your earnings, take action.

2. Cut down on non-essential spending.

The next step is to cut back on non-essential spending. This may be harder than it sounds, especially as the economy reopens and expensive social activities resume. Think of your budget as a spending plan.  It doesn’t mean that you have to cut out all the fun stuff, but you should be as selective as possible about your discretionary spending.

If you’re still far from reducing your deficit, look at downsizing your necessary expenses or selling some of your possessions. From phone bills to rent, many expenses can be reduced or eliminated if you’re in financial distress. Downsizing is about reassessing what you may consider to be “essential” spending. Making some sacrifices means you’re prioritizing your financial health over other conveniences or preferences, like living on your own or owning two vehicles.

3. Explore debt relief solutions.

Debt can be a huge weight on your monthly budget. Exploring your debt relief options should also be part of the downsizing process. Less debt can further reduce your deficit and help you move out of the red. Your first step should be calculating your

Paying too much interest? Strategies for reducing your interest charges like a debt consolidation loan can be a great step for people who qualify for lower-interest bank loans.

If your debt situation is more complicated, speak with a Licensed Insolvency Trustee (LIT) as soon as possible. An LIT can go over all your available options free of charge and without any obligation. You may qualify for a consumer proposal which can reduce your debt load by up to 80 per cent.

4. Start saving, every little bit helps.

Your ultimate budgeting goal is to go from a deficit to a surplus. Or, in other words, do everything you can to reduce your expenses so you can start saving.

Saving provides peace of mind, expands your options and improves your quality of life. All your budgeting efforts should point in this direction. If COVID-19 has taught us anything, it’s that we should always have an emergency fund or some savings that we can dip into should the unexpected arise. The BDO Affordability Index shows that a majority of people (60%) are prioritizing saving for an emergency fund or nest egg in the year ahead.

The important thing to remember is that it’s more about developing the saving habit than the dollar amount. Set incremental goals based on your current financial situation. Saving can be a very addictive and healthy habit.

Are you unsure about what to do about your financial struggles? Book a free consultation with a Licensed Insolvency Trustee to learn about your options. Your story is more than your debt.

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