Thursday, 25 February 2016

Where to Start Part II

When Income Decreases, Spending Must Follow

Another of my weekly columns. This was sent in before I received so many wonderful suggestions and comments on Part I. Thanks to those who gave feedback both through the blog and in person. I am still processing and ruminating and will be working on follow up columns soon. For now, here are some more ideas to help families dealing with or preparing for a loss of income. 

Has your income decreased or are you preparing for the worst? Here are some ideas to control your monthly spending.

1.       Reduce Grocery Spending
Food is getting more expensive, but it is possible to spend less at the grocery store. Consider this: the less processed or packaged the food is, the cheaper it will be. For example, small, cute, kid-sized portions are double (or triple) the cost (think cheese strings, juice boxes, yogurt). Consider buying the 650g container of yogurt and sending it to school in a reusable dish with lid and spoon (better for the environment anyway). Follow the Canada Food Guide’s recommended portions and send a piece of cheese cut from the larger, less expensive block that you already have in the fridge. You can do the same with apple sauce, fruit salad, almost anything. If it comes in little packages you are probably paying extra. Save money by buying larger amounts and portioning them out yourself. Still using that single-serve coffee pot? Compare the cost of a can of coffee to your favorite pods. Might be time to get a reusable filter or dig out the old drip coffee maker. When shopping for food, consider how “convenience” costs extra. Can you save by doing some of the work yourself?


2.       Use A Rewards Card and In-Store Coupons
Most stores and credit card companies use a rewards system of some kind nowadays (think Airmiles, PC Plus, Shopper’s Optimum, etc). If you already shop there (or use the credit card) sign up for the points/miles/cash back options available to you. Collect the points, miles or stamps and redeem what is coming to you. If it is not something you want, donate or sell it. It takes minimal effort to “load the offers” or check for coupons as you shop. Many grocery stores give coupons for gas—ask for more details. A few cents off per litre adds up when money is tight. If the money was laying on the ground, would you pick it up? Keep track of how much less you are spending and put that money towards your highest interest rate (see #4).

3.       Pay in Cash (Envelope System)
If you are a fan of Gail Vaz Oxlade (and you should be) then you already know about the cash envelope (or jar) system that she recommends. Basically, you take out the amount of money that you will need for the month’s expenses and keep it in the designated jar. Once you are out of money you must stop spending—an effective tool but it does require will-power. If you can physically see the money leaving the jars it helps curb over-spending. Consider whether this might be a system that would work for you/ your family. Read more at Gail’s website or sites like (language warning on that one!). Find a system that you are comfortable with and get started.

4.       STOP Making Minimum Payments
If you have reduced your monthly spending and see a bit of cash leftover, don’t rush out and spend money as a reward. Try to put as much extra money as possible towards your highest interest rate. Every little bit helps over time. When you finally pay that off, tackle the next payment in the same way. Talk to someone about consolidating your debt--cut up your cards. Do whatever you have to do to crush your credit card debt. Everyone’s situation is different so take a long hard look at your payments and debts and take action of some kind as soon as possible. If you are caught up in a cycle of not making your payments, you should consult professional advice. The longer you leave it the more stressful it will be.

5.       Talk About Spending Less Money
“Keeping up” with the neighbours can be tempting if you see them continue to vacation and shop as though their situation has not changed. Perhaps their situation hasn’t changed; perhaps they had saved a lot or were gifted money or perhaps they are in over their heads but don’t know where to start. You can’t know what is going on in another household but it’s time to figure out what’s going on in yours. Be the first to talk about it and give yourself, your friends and your family permission to admit that change is needed. Share what you are doing to spend less. Your ideas might help someone and their ideas might help you. If you are invited out but it interferes with your budget and goals, explain why you can’t make it. Visit at home. Enjoy potluck suppers and coffee at the kitchen table. Be the first in your circle to turn over a frugal new leaf. Chances are those close to you will be relieved that you did!