5 Obvious-Because-They-Work Pieces Of Financial Advice For Challenging Times

Everything from groceries, gas, utilities, and variable mortgages are taking a bigger chunk out of our pocketbooks. Plus, climbing interest rates are adding to our financial woes. Consider these five ways to get a better handle on your finances during tough times.

Track and trim your spending

Time to tighten the belt. Start tracking all your expenses using an app such as Mint, a spreadsheet or in a small notebook you carry around with you. Gather all your bank and credit card statements and scrutinize every line item. Determine your fixed expenses (things like your mortgage/rent, childcare, utilities, car payments and gas) and your discretionary expenses—basically, everything else.

If you find yourself spending more than you earn or just want to budget better, you’ll need to pinpoint the problem areas, says Robyn Thompson, a certified financial planner at Castlemark Wealth Management. She recommends looking at discretionary spending first since it’s easier to cut back on retail therapy than to not fill up the car with gas.

What purchases we value really depends on the person, so we need to re-evaluate what is truly important to us and what can be reduced or cancelled to free up some extra money, says Natasha Knox, a certified financial planner at Alaphia Financial Wellness in Vancouver.

Food is unique in that it’s both fixed and discretionary. You do have to eat, but how and what you eat can change. With groceries, are you shopping at convenient, well-appointed stores with higher prices or discount grocers? Are you shelling out for weekly meal kits? How often are you eating out or ordering takeout? “People are often shocked at how much they’ve been spending with services like Door Dash and Uber Eats,” Knox says.

Knox suggests also looking to trim things like streaming services. Knox says it doesn’t necessarily mean going without—you could look to libraries as some are offered for free if you have a library card. And other services you may not even use anymore.

While convenient, any “reloading” feature— think Starbucks that automatically adds more of your money to your gift card when the balance is running low — should probably be turned off. “You want your spending to be more mindful at this time so you’re thinking consciously about everything you’re spending and why,” Knox says.

Build an emergency fund

It can be hard to think of establishing a rainy day fund at a time when you have even less money to save, but it will serve you well over time. It will be your lifeline should you experience an unforeseen financial need. The money in the account should cover three to six months of living expenses, a daunting amount to save—but you have to start somewhere.

Getting one started is your way of paying yourself first, Thompson explains. “Consider your personal savings as the first bill you must pay each month,” she says.

She recommends depositing a regular amount, whether $15, $25 or $75 a week to start, and increasing it if funds allow. “Set aside that specific amount each payday and use an automatic transfer plan,” she says.

Thompson recommends keeping the emergency fund in cash in a high-interest savings account, and not mingling the money with other investment accounts. “This will help you avoid the temptation to ‘borrow’ money from it ‘temporarily’ for other uses,” she says.

While many people did set up emergency funds during the pandemic—after all, federal and provincial lockdowns and restrictions created forced savings—be mindful not to use emergency fund money to make up the shortfall of your monthly budget, Knox says. “As soon as that money is gone, then where is the money to continue supplementing your monthly budget going to come from? Likely debt,” she says.

Continue to pay off debt

If you have consumer debt (credit cards, line of credit, and other loans), tackle paying it off as soon as possible. Doing so will help to reduce stress during these challenging times, says Thompson.

Thompson recommends starting with the highest-interest-rate debt, usually credit cards. One idea is to consolidate all your debt into a personal or home equity line of credit at a lower interest rate. “If you can reduce your overall interest costs, that will also help to free up cash flow to be able to use for other expenses or for savings,” she says. Once you consolidate, you will need a plan for paying off the line of credit, not using it as an excuse to rack up even more debt.

Diversify your sources of income

Economic downturns and recessions may lead to layoffs. So, earning more money through a side hustle, volunteering for more shifts at work, working overtime, or renting out a spare room can help you stay afloat and save even more.

Get advice on your portfolio

If you are concerned about market volatility and the effect of inflation on your investments, address your issues with an accredited financial professional. Thompson recommends confirming that your portfolio does in fact meet your risk tolerance, investment objectives and continues to be sufficiently diversified and rebalanced.

Originally published in 2022, updated in 2023.