How to Budget During High Inflation

If you’ve been feeling the weight of inflation and high interest rates, you’re not alone. With the rising cost of living, Canadians everywhere are finding themselves living paycheque to paycheque.

During times like these, it’s essential to create a budget that will work for you (and your family) – and to stick with it. We’ve put together a list of ways to manage your money to help reduce some of your current financial stress.

WRITE DOWN YOUR INCOME AND EXPENSES

You might have an idea in your head about how much money is coming and going every month, but writing it down is the key to having a successful budget. Start by creating a simple spreadsheet, writing on a piece of paper or using an app like Mint.

Make a section for income and write down the money that is coming in each month (and where it’s coming from). Then, make a section for expenses and record the ones that are must-haves. This includes rent, mortgage payments, loans, utility bills, groceries, insurance and debt payments.

Then, make a third section for savings. Anything you have a goal for can go here including an emergency fund, vacation savings or money for a renovation.

Lastly, make a section for expenses that are not must-haves, but nice-to-haves. These are things like ordering takeout, fancy daily coffees or paid apps you don’t use often. Write down how much you spend on average for each one every month.

ANALYZE YOUR BUDGET

Once you’ve put your budget in writing, it’s important to ask:

“Can my budget handle inflation?”

To figure this out, subtract your expense and savings amounts from your income amount. If there is a comfortable amount of money left over, you are most likely in a good position to handle the cost increases from inflation. In this case, it’s a good idea to use some of your extra money to pay down debt or put more away to reach your savings goals faster.

If you analyze your budget and have little or negative money left over, your budget most likely needs some help – and a little tweaking.

START BY CUTTING ‘EASY’ EXPENSES

One of the first things you can do to make some room in your budget is to cut ‘easy’ expenses. These are things that you can live without or have the means to change. Find things you can cut out altogether – then see if there is anything you can replace with a cheaper option.

Some common things to eliminate are restaurants, subscriptions you don’t use and sporting/entertainment events. Consider cooking more at home and watching events/movies from the comfort of your own home.

TRIM ‘HARD’ EXPENSES

After cutting down on ‘easy’ expenses, it’s time to see where you can save some money on your ‘harder’ expenses. This can be a bit trickier because these expenses are unavoidable – but that doesn’t mean you can’t save some dollars with a bit of strategic thinking.

Are your housing costs putting a big strain on your budget? Look into things like signing onto a longer-term lease to reduce your rental cost or shop around for a lower mortgage rate. If you have the room, another option is to bring in a roommate or renter.

Are grocery prices getting you down? Start meal planning so that you have a clear idea of what groceries you need to purchase for the week. Consider buying in bulk, shopping flyers or using rewards points to save some of your hard-earned cash.

CONSIDER BORROWING

If you are still finding that you don’t quite have enough money to make ends meet, consider a debt consolidation loan. This will combine your debt bills into one monthly payment, reducing how much you spend each month on debt repayment.

If an unexpected bill or house/car repair sneaks up on you, consider a personal loan to help get you by until inflation comes back down.

GIVE YOUR INCOME A BOOST

It’s also important to think about how you can increase your income. If possible, ask your employer for a raise. If you are part of a union or a raise isn’t an option, ask your employer if there are any overtime opportunities you can take on to give your paycheque a boost.

Or if you are ready to make a change in your career, consider searching for new job opportunities that offer higher pay.

Many Canadians are taking their income into their own hands by making some extra money with a side hustle. Consider turning a hobby or passion of yours into something that generates cash.

SHOP BEFORE YOU SPEND

When it comes to buying a car, it’s important to know how much you can truly afford to spend. Luckily, Birchwood Credit has a nifty online tool to help you determine your budget.

We also believe it’s important to free people of financial burdens. That’s why we offer affordable interest rates on car loans to people with poor credit. If you’re looking to save on your next vehicle, learn about our in-house financing.