Mastering the balance between income, expenses and debt
KEY TAKEAWAYS:
✔ Making a list of your income and expenses is the fastest way to get a complete view of your financial challenges and opportunities.
✔ To better manage your money, look for ways to lower your expenses or increase how much money you make.
✔ Balancing income, expense, and debt frees up money to put towards long-term financial goals.
The rising cost of living has made it challenging for many Canadians to balance money coming in (how much you make) with money going out (your expenses and debt), especially in today’s economy, where your money has to go a lot further to maintain your lifestyle.
Here’s how to put your finances in perspective and create a plan that dials down stress and gives you the confidence to take control of your money.
Know how much money is coming in and going out
You probably have a good idea of where your money goes. But it may surprise you to see how little things get in the way of achieving important financial goals. To help you see where you spend, start by making two lists:
| List #1: MONEY IN Your income: all the money you make |
List #2: MONEY OUT Your expenses: all the things you spend money on |
| - Your paycheque (after tax) | - Fixed expenses: rent, insurance, car/loan payments, subscriptions, etc. |
| - Government benefits like the Canada child benefit | - Variable expenses: groceries, gas, utilities, entertainment |
| - Any part-time work |
Making these lists will provide some clues as to where you can make small changes that can have a big impact on your financial health. The next step toward balancing your finances is to look for ways to increase the money flowing in or reduce the money going out.
Money in. Can you make more?
If your current income (the money you have left over after you pay taxes) isn’t meeting your needs, consider ways to grow your paycheque.
Invest in yourself
Ask your employer about no-cost training programs to help you expand your knowledge to grow within the company. Even if you have to pay for training, it may be worth it in the long run if you earn more money every year.
Change your job or ask for a raise
Canada’s job market is healthy, and employers are looking for people with the right skills. As you become more experienced, your income may not keep up. If you’re not earning what you think you’re worth, it may be time to ask for a raise or promotion, or start to look for another job that pays better.
Minimize taxes
Many tax benefits are available to Canadians, especially if you are new to the country, have children, or contribute to registered saving plans that reduce your taxable income. Check out the Government of Canada’s Benefits Finder web page to find out if you qualify for savings.
Where the money goes
Understanding your paycheque, taxes, and other deductions.
Money out. Can you spend less?
Look at your list of fixed and variable expenses. Are there any costs that you can cut back on or eliminate? Consider some of these ideas to lower your costs of living:
Home
If your rent is high, you may want to consider relocating to more affordable housing or a building that doesn’t have lots of amenities you are paying for, like a gym or 24-hour concierge. See more tips to save money around the house.
Food
Meal plans, couponing, flyer deals, and avoiding takeout are some easy ways to reduce the cost of food and lower your grocery bill. There are also apps where you can get restaurant leftovers for a low price.
Transportation
Run the numbers on the cost of gas, insurance, repairs and car payments. You may find that public transit will save you money. Consider not driving a few days a week or carpooling to reduce costs.
Entertainment
Regularly review your phone plan and streaming services to see if you can get a better deal or negotiate a lower price.
By balancing your income and expenses and implementing strategies to increase one while lowering the other, you’ll start to have money left over. Then, you can start putting more towards goals that will help you build a better financial future for yourself, like:
How easyfinancial can help
If you’re trying to manage your money but still struggling financially, it may be worth exploring the benefits of a personal loan. It can provide the relief you need with flexible payments to fit within your budget. Applying online is easy, and you can be approved in minutes.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.