4 ways to keep summer spending fun and debt-freeJul 02, 2021
After a difficult third wave and long lockdowns across the country, Canadians are definitely in need of some summer fun. As Canadian provinces continue to lift restrictions, this summer is going to change the daily activities and spending habits of many households. For families that experienced job loss or reduced income in the past year, budgets can quickly get stretched. If you haven’t already, now is the perfect time to sit down and plan your summer spending.
Summer has a way of lifting our spirits, prompting spur-of-the-moment experiences and carefree spending. The good news is that you can embrace that positive energy and spontaneity while remaining true to your financial goals. Enjoying life while still living within your means is all about finding the right balance.
Here are four money management strategies to keep in mind during the summer months.
1. Continue to be mindful of your budget
In many ways, the pandemic restrictions were like an imposed spending detox. If your income was reduced, you may have had no choice but to reduce your expenses and focus on the essentials. But even for people whose finances weren’t negatively affected, the shutdowns meant spending much less on items like entertainment, fuel, commuting and travel. You may even have come to the realization that you can get by with a lot less than you normally do.
As the economy opens up, continue revaluating which have-to-haves you really care about and which ones you can do without. For parents, the same might be true for your children. As more activities and extracurricular activities become available, consider which ones offer real value for your children before making a commitment. You might find that you and your kids are happy with the budget-friendly or free activities often available during the summer. Maintaining a healthy relationship with money requires some give-and-take.
2. Reallocate funds from your pandemic budget to your summer spending
Look carefully at how you have been allocating your spending over the past months. For some households, reduced outings and less socializing have led to an increase in pandemic spending on items like take-out meals, technology, and even home renovations. One way to maximize your summer fun is to reallocate these funds towards improving your summer experience.
As you consider your summer spending, are you planning a road trip? Taking the kids camping? Hosting a few backyard BBQs? A budgeting app can help you track your spending and make smart decisions as your activities change.
Consider dividing your summer spending into different buckets, like vacations, day trips, meals, and kids’ extracurricular activities. If you’re overspending in one area, you can trim somewhere else. You can also focus your spending on the activities that bring you the most joy and value. Try to avoid putting discretionary expenses on your credit card or dipping into your line of credit. Your budget can help with this, keeping you on track and helping you avoid debt.
3. Keep building up cash reserves to avoid debt
When you think about it, summer should be the cheapest season to have fun. You can enjoy many activities for free and you don’t have to go far to enjoy great weather. If you can, try to save as much as possible. If there is one thing many people learned from the pandemic financial crisis: emergency savings are an essential part of avoiding debt. If you can, continue building savings and avoid making any large non-essential purchases. Try practicing the 24-hour rule. If you’re still interested in the desired item after sleeping on it, you’re less likely to splurge.
4. Automate bill payments and reduce your debt
Time flies when you’re having fun, which can make it easier to forget about your less exciting obligations like payment due dates. The last thing you want to happen is to return to reality with a bunch of unpaid bills. Do yourself a favour: automate bill payments and savings contributions sooner rather than later.
And if you’re planning to be out and about more this summer, enjoying the warm weather, consider re-evaluating some of your subscriptions. Cable, gaming subscriptions, streaming services and the like can often be paused or cancelled to save some money. If you’re walking or biking more, your transportation costs might be reduced, too.
Another good idea is to take time to think about your debt repayment strategy. If you’re worried about growing interest charges, try the avalanche method. Keep making the minimum payments on all your debts but allocate more funds to the debt with the highest interest rate, like a credit card balance. Once the balance is paid off you can move on to your next most expensive type of debt.
This past year has shaken up budgets and changed financial realities for many Canadian households. Depending on how your finances have been impacted, you might be struggling to make sense of how to plan your summer. If summer budgeting and a heavy debt load is making you anxious or stressed, consider speaking to a Licensed Insolvency Trustee. An LIT can help you assess your financial situation and do a stress-test before you commit to any additional summer costs.
Are you looking to explore your options for debt relief? Contact a BDO LIT for a free initial consultation.