Inflation is forcing everyone to stretch their money further to get life’s necessities. BDO’s newly released Affordability Index shows that many Canadians are finding it harder to make basic purchases, feed their families and get by without adding to their debt
The majority of Canadians (78%) say they are in a worse financial situation than last year. With the increase of interest rates, the rising cost of gas and groceries, more and more people are struggling to make ends meet and save for the future.
Despite how challenging affordability has become, it’s important to not lose hope and continue finding ways to fight back. We’re going to give you some tips that you can put to use to help your situation. And if you’re truly struggling remember there are professionals to help point you in the right direction.
Canadians are facing a unique situation right now after the past few years already brought unprecedented affordability challenges. Canadians told us what they’re struggling with most financially as a result.
Inflation has been top of mind for many. People are having a harder time keeping their spending at a level they can handle. A whopping 78% of Canadians say that their personal finances have gotten worse due to inflation. A further 54% say they’re living paycheque to paycheque now.
With high food and gas prices this year it’s no wonder that Canadians are stressed out just trying to afford the basics. Over one-third of Canadians (35%) say it’s a challenge to feed themselves and their family, an increase of 12% from last year. And over half (52%) say that transportation costs are a challenge to afford, an increase of 17%.
The rising cost of living has driven up debt levels. A staggering 42% say their debt has become overwhelming because of the rising cost of living, almost double the amount in 2021. Canadians are also putting less money away for later, with 62% saying they are now saving less due to the affordability crisis.
Cutting back on savings means cutting back on putting money away for retirement. Currently, 64% of Canadians say they are not on track to save enough for retirement. Of those between 18 to 24 years old, more than two-thirds (67%) say they have no retirement savings at all. Overall, 32% of Canadians have no idea what their retirement plan will be, despite wanting to retire.
Inflation means Canadians are having to find ways to stretch their budgets further. We asked how they were coping to understand how big an impact this was having on their finances and everyday spending. We heard a lot of different ways people are adjusting their budgets and how they’re getting by.
Here’s some of the things we heard.
Getting through inflation and the affordability crisis can seem overwhelming. It can be hard to know where to start. But you can’t remain idle. There are many strategies to choose from when it comes to alleviating financial pressure and finding savings where you can.
Here are some general steps you can take to improve your financial well-being and reduce stress.
Budgeting is the bedrock to combating any kind of financial crisis. The first thing to do is keep track of your spending. Answer this basic question: are you spending more money than you’re making each month? By keeping track of your expenses, you’ll see if you’re spending within your means or outside of them. If it turns out your spending is outstripping your earnings it’s time to act. Otherwise, you will likely be covering any shortfall with credit and added debt.
Try out budgeting and debt tools
The best way to avoid the impact of inflation and the affordability crisis is to avoid spending money on non-essential items. People often read this as ‘don’t spend money on anything fun.’ It doesn’t mean cut it out completely, it means being selective and making smart choices on what you spend money on.
There are ways to cut everywhere, even on essentials. Switching to a cheaper phone/internet plan, choosing a less pricey grocery store chain, and taking public transit instead of driving are all ways to cut spending on essentials. Chances are you are already on the right track. The majority of Canadians (60%) are cutting back on going out or ordering in.
If you want to dramatically reduce how much you pay each month consider downsizing or moving from where you live to somewhere cheaper. This can mean a smaller apartment, a smaller house even getting a roommate. If you have a partner and you’ve considered moving in together maybe now is the time to take a serious look at it.
If you work remotely full-time, you may even want to consider moving to a different and cheaper city. If you can work anywhere, why not work from somewhere that lets you keep more of your income?
Read our blog on moving to a cheaper city for some more insights.
If you’re cutting back and still finding you’re spending too much it’s time to take action. There are options to help you tackle your debt head on. There’s no one size fits all solution because everyone’s situation is different.
A Licenced Insolvency Trustee (LIT) will help you get a complete picture of your financial situation and debt options. Filing for bankruptcy isn’t the only solution to unmanageable debt. You may qualify for a consumer proposal, which can reduce your debt load by up to 80%, help you find immediate relief and unlock more of your budget for savings.
Saving money is hard when everything is more expensive. Saving if you have debt is harder. It’s super important though. If the pandemic and current affordability crisis have taught us anything it’s that you can never have enough savings for an emergency.
Making sure that you are budgeting, cutting back, downsizing and reducing your debt are the best ways to unlock savings. Putting even small amounts of money away consistently will add up over time. Your future self will thank you.
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.