While inflation has slowed since its peak during the pandemic, economists expect cost-of-living hikes to continue in 2024. These predictions spell bad news for Canadians, many of whom are already feeling the crunch.
According to a 2023 Angus Reid Institute survey, most of the country had to pivot last year when faced with the rising costs of everything, from groceries to gas and gadgets. Two-thirds (67%) of respondents admitted they slashed their discretionary budgets last year. Another 43% delayed a major purchase, like a house or a car.
With no stop to the cost-of-living crisis on the horizon, Canadians may have to maintain these cost-saving measures for a while yet.
Inflation to Remain Elevated in 2024, Especially on Food
Economic forecasts delivered by the annual food report predict inflation will increase between 2.5 and 4.5% in 2024, signalling another costly year for Canadians at the grocery stores.
These increases will be harder to handle for some. The Angus Reid survey found that more than one-third (34%) of Canadian adults described their financial situation as “bad” or “terrible” in 2023. Amongst those who admitted they were in “terrible shape,” a whopping 94% found it challenging to put food on the table.
Canadians Are Draining Savings to Handle the Cost of Living
Angus Ried found that budgeting did not provide enough relief from persistent cost-of-living hikes. Two-fifths (40%) of Canadians withdrew money from savings accounts to balance their budget, while 35% deferred at least one contribution to their RRSP or TFSA.
Unfortunately, a growing number of people can’t rely on these savings. According to the Chartered Professional Accountants of Canada (CPA Canada), half of the country doesn’t have $2,500 set aside in savings. Meanwhile, 26% can’t come up with $500 in an emergency.
Without savings, Canadians had to look elsewhere for relief:
- 13% borrowed from friends or family.
- 11% sold their belongings to earn extra money.
- 8% took out a personal loan to handle their bills.
Rebuilding Your Finances During Tough Economic Times
Borrowing money isn’t sustainable against the ongoing cost-of-living crisis, nor is withdrawing from or suspending your savings. These momentary stopgaps are best used in singular, unexpected situations that won’t persist.
For long-term everyday bills, you need to invest in a better budget that prioritizes smart spending. Here’s how:
1. Reduce Your Frills
Tracking your spending is the first step to recovery, as this may reveal surprising ways your money disappears in a month. Once you have a good grasp on your expenses, you can identify spending that steals money away from your financial priorities, like housing, food, and healthcare.
During tough financial times, you should be wary of any non-priority expense in your budget. Every dollar spent on entertainment or home improvement leaves you with less cash to cover your bills.
How closely you follow this step depends on your unique situation. While most people won’t have to eliminate every discretionary expense in their budget to make ends meet, some sacrifice may be inevitable. You should cut back on non-essentials until you can restart your usual savings contributions.
2. Know Your Emergency Response Plan
Ideally, you can create a detailed budget that accounts for every future expense. But sometimes, something unexpected can disrupt even the best-laid plans. Your car can break down, your dog can get sick, or you can need emergency dental surgery out of the blue.
If you don’t have sufficient savings like most Canadians, a line of credit may provide an additional safety net during these difficult times. You can find out more about this financial product by visiting a website like Fora.
In a nutshell, you can draw against your limit in place of savings during an emergency if approved for a Fora Credit line of credit. An approved line of credit works quickly and conveniently, and you won’t pay any hidden fees to use it.
3. Talk to Your Creditors
A line of credit can create a safety net in a one-off emergency, but it’s less helpful when you consistently cannot pay your regular bills. Think of it as a kind of cash advance that you’re expected to pay back. If you don’t have the cash to cover your bills every month, you won’t have the money to handle your line of credit either. Relying on your line of credit anyways can kickstart a nasty cycle of debt.
If you can’t handle your typical bills, reach out to your creditors to see if they can provide assistance. Many companies have compassionate financing plans to help low-income individuals who struggle to make ends meet.
4. Increase Your Income
According to Angus Reid, age and income play an important role in how well you can rebound from inflation. Younger Canadians and those who earn less than $50,000 a year are in worse financial shape than older, better-paid Canadians.
If you can’t balance your budget, no matter how many discretionary expenses you eliminate, you need to look at the other factor of your cash flow: income. Consider what you must do in the new year to increase your salary.
In 2024, you might want to explore the following options:
- Add a side gig or part-time job to supplement your salary.
- Ask for a raise with your current employers after honing your negotiation skills.
- Apply for a high-paying job in your field.
- Switch careers by upgrading your skills or going back to school when appropriate.
A new career can be a daunting goal, but it may be the only way you can weather ongoing inflation. Consider it a long-term target while focusing on changes you can make immediately, like a slimmed-down budget and a side gig to earn extra money. This two-pronged approach to your finances yields the best results.