We’re all feeling it, at the gas pump and the grocery store. The cost of living has gone up. Our dollar doesn’t stretch as far as it used to, and if you’re carrying debt, you weren’t working with a full dollar, to begin with. Paying off debt might seem impossible when you’re also dealing with inflation but it’s a must, especially now.
The cost of living has dramatically increased, and it's confirmed by the headlines.
The costs are what they are. We have no control over how fast or high prices will go. We do, however, have control over how we manage our finances in this increasingly expensive world. And for some of us, it will mean taking actions we might not have considered before.
How Rethinking Traditional Money Management and Debt Advice Can Help
If you’ve rolled your eyes at hearing traditional money management advice, you have good reason: the simplicity of decreasing expenses and increasing income doesn’t fully address the reality we’re dealing with when inflation rises significantly over a relatively short amount of time.
How can we build a plan to get ahead of inflation? We can start by rethinking how we apply traditional money management and debt advice. Here are some starting points:
Mental Health and Financial Health Must Coexist
It’s important to check in with your personal well-being when approaching the numbers in your personal financial situation.
We’re halfway through our first summer without COVID restrictions. There are places we want to go and people we want to see. Is it realistic to say that we’ll deny ourselves and our families trips to the beach and late-night ice creams? No.
There have been increased reports of employee burnout in many sectors over the course of the pandemic. Is it realistic for you to take on a second or third job? If you can, great! But it’s also okay to accept that you’ve been itching for some sort of break.
Spend Strategically to Manage Increasing Costs
We have about a month left to enjoy the warmer weather and a costly back-to-school season approaching. Both are perfect opportunities to find ways to ‘get more, for less.’
For example, consider taking advantage of group discounts when planning activities and tapping your friend with the wholesale membership to split costs on back-to-school items.
If you’re going to spend the money anyway, you might as well spend it strategically.
Avoid Credit If You Cannot Pay Off the Balance in Full
Now is the worst time to be carrying debt. Why? Because inflation and higher interest rates make it more expensive to do so. So make a plan to pay it off.
If you’re carrying a balance on a credit card, pay it off as soon as possible and try to avoid adding additional items until you do.
Many of us use credit as a stand-in for savings and to fill the gaps in our spending plans. If that’s the case, you need to see what your spending would look like without using your credit card(s) to purchase items or dipping into a line of credit (if you have one).
What would that mean for your daily life? Or for your family? These questions can have some uncomfortable answers.
If you’re realistic in your approach, it’s easier to identify where you can make changes and where you might need some additional help. There are many tools and apps available to help you create a budget.
Get Rid of Your Debt When Inflation is High
You read that right. Your plan should focus on getting it down to zero. What you want is an end date.
If you have lines of credit, you’ll notice an increase in your monthly payments (or less of your monthly payment going towards the principal).
If you're carrying credit card balances, you’re not directly impacted by interest rate hikes but you are at risk of your lender increasing your rates due to high, revolving balances.
Combine increased debt payments with inflation and you have a recipe for being pushed over your financial edge.
If you’re realistic and focused on living within your means, a debt solution that would give you a break on the interest or balance would be ideal, like a debt consolidation program or consumer proposal.
Get Out of Debt and Back to Life with Credit Canada
You can’t control the cost of food or gas but you may have options to spend less on your debt, while actually getting out of it, with the help of Credit Canada.
You can assess your eligibility for different debt solutions by speaking with one of our certified credit counsellors. It’s free of charge and judgment-free. Our mission is to help you get out of debt, so you can get back into life!
