Smart budgeting can curb economic fears
Worried about your financial future? You’re not alone.
With the unemployment rate at a two-year high, Canadian families appear to be keeping a tighter grip on their pay cheques. The Conference Board of Canada released numbers on Monday showing that consumers’ view of major purchases “remains highly negative” at a heightened level of 50.3 per cent.
A CTV News/Nanos survey from February had similar findings, suggesting that Atlantic Canada is the region most hesitant to make big purchases, with nearly 60 per cent saying they will delay major transactions such as vehicles or real estate:
- Atlantic Canada 9%
- Quebec 8%
- Ontario 9%
- Prairies 9%
- British Columbia 8%
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, sees the wave of uncertainty as a great opportunity for Canadians to recalibrate their budgets.
“Restrained spending might be a bad thing for Canadian retailers but it is going to be a good thing for the Canadian pocket book,” says Schwartz. “Curbing your spending impulses and reinforcing your bottom line will protect you against whatever the economy will throw at you.”
Schwartz sees it as a welcome change from the typical buy-now-pay-later mentality that has left Canadians with heavy debt loads.
“Why stop at the major purchases,” asks Schwartz. “Take a look at your entire budget and see where you can claw back some more of your hard-earned dollars.”
Schwartz recommends the following steps in order to build some consumer confidence:
Find out where your money is going – Deciding to delay or cancel a major purchase is an easy place to start, but it is also worth digging down and analyzing your budget, bottom to top. Use Consolidated Credit’s Budget Tool app to track your spending and find out where you can make further cuts. Remember, no cut is too small – it may just be a drop in the bucket, but it will add up.
Make some lifestyle changes – Your budget analysis may yield some shocking results. Consolidated Credit recommends that no more than five per cent of your monthly income should be spent on entertainment. If you’re giving your local pub more money than you are putting in your savings account, you need to make some changes.
Attack your debt – The average Canadian owes more than $20,000 in non-mortgage debt. If you are not actively reducing your debt load, particularly on your high-interest credit cards, you are needlessly devoting a chunk of your budget to paying interest to your creditors. Consolidated Credit’s credit card debt calculator shows that adding even a little bit extra on your monthly payments will mean a dramatic drop in your credit card balance.
Pad your savings – Building up your savings account will reduce the likelihood that you will need to rely on high-interest credit cards in the event of a sudden job loss or other financial emergency. Life happens, and you need to be prepared. Talk to your bank about automating a contribution to your savings account on every pay day. Build towards creating an emergency savings buffer worth three to six months of living expenses.
Are you trying to attack your debt but find it impossible to get ahead? If you are struggling to make ends meet, building up your savings account might sound like a pipe dream. Luckily, there is help. Our credit counsellors can help you recalibrate your budget and lifestyle in a way that will put you on firm financial footing. Call or try our free debt analysis to get started.