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It’s not surprising that many are wondering how they will be able to afford groceries, fuel and other basic housing needs going forward given that countless Canadians were struggling to make ends meet before necessities started to cost more.
The fix in situations where necessities are putting an increased strain on household finances is to go back to the drawing board and rebuild your budget. This starts with tracking where your money goes, because many Canadians have lost touch with what life actually costs. The convenience of electronic payments makes it easy to ignore buying, say, a $2 or $3 coffee each morning or the occasional lunch out. But to find out everything that is adding up to the big deficit in your budget, keep track of your spending by recording it in a spreadsheet or even a pocket notebook.
Once you know where your money is being spent, it’s time to make some changes. Eating out, entertainment, travel, gifts and any other niceties are all areas that can be reduced to free up funds for the essentials. If your costs for housing, food and transportation are increasing, then carefully review those expenses. Some are more fixed than others, but freeing up any extra funds will help to balance your budget.
Housing is often your largest monthly expense. Credit counsellors recommend you aim to keep all your housing costs to no more than about 35 per cent of your net (after-tax) income. That number includes the mortgage/rent payment, property taxes, condo fees, home insurance, heat and other utilities to run your home.
If you do the math and discover your housing costs are over this limit, consider how to manage this amount. Downsizing or renting out a room could help, as can reducing other expenses. Also talk to your mortgage lender about options to temporarily reduce your monthly payments.
Aim to keep transportation to no more than 15 to 20 per cent of your income. If your budget is tight, even this amount may be too high. If you’re a two-car household, look at options to park one vehicle to save on insurance, fuel and car payments.
If you pay to park, think about how to eliminate/reduce that expense. Public transportation might be less convenient, but savings on commuting costs can have a huge impact on a struggling family’s budget. Carpooling with a co-worker may be another option as well.
With gas prices at or near record levels, perhaps you could trade in your gas guzzler for something more economical. Filling your tank for $40 instead of $80 or $100 will go a long way to freeing up money for other essentials.
In helping my clients manage their money, we budget for average monthly grocery costs, which don’t include eating out and all the other non-food things you can buy at the grocery store. On average, food should cost between $250 and $300 per person per month. Dietary restrictions and where you shop can drive those costs higher. However, if you find your grocery costs are exceeding that amount, it’s time to figure out why. Possible causes could be:
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How often you shop: The more often you shop for groceries, the more likely you are to spend. If for convenience you shop at a smaller, local store — rather than a larger grocery chain — know your prices. The larger stores are often able to provide lower-priced goods since they buy in bigger quantities. Also, some stores will allow you to price match the sale prices of other retailers, provided you bring in the competitor’s flyer (on paper or via a smartphone app).
Shopping when there is still lots of food to eat at home: Rather than letting your tastebuds drive your budget, focus on shopping your cupboards and freezer before heading to the store. Create a meal plan around what you already have and only buy what you need. That alone could mean one less trip a month for groceries.
Audit how much food you waste. Canadians may have thrown away close to $550-million worth of food at home in the past six months, according to a study by Agri-Food Analytics Lab at Dalhousie University.
If you find you are throwing out those well-intentioned fresh vegetables and fruit, stop buying them. Buy frozen instead. They are often cheaper and those without additives can be more nutritious than fresh or canned. (They are frozen at peak ripeness, not picked green to endure shipping.) They can also be ready to eat in less time than it takes to make the extra trip (more gas) to the store to pick them up.
Housing, food and transportation are the top three essential living expenses we have. Medical needs might be a fourth. If after budgeting for these expenses you have run out of money, you have four choices: look for further reductions, find ways to increase your income, supplement your budget or do a combination of all three. These trying times won’t last forever, but the skills you learn will last a lifetime.
Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 25 years.
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