It was hard enough before the downturn. Canadians have been struggling perhaps since before the pandemic, with many just scraping by to hardly being able to keep afloat. This is why, debt-riddled Canadians, it’s time to take this as an opportunity to get a handle on your finances and even start investing.
Step #1: Meet with your advisor
Before you make any moves, meet with your financial advisor. Let me be clear: if you have a bank, you have an advisor. It doesn’t cost anything. You can just meet with a banker who can go over your spending and savings and debt. This person can help you identify where you’re going wrong or even just where you could make some changes.
This advisor should help you come up with long-term goals that will go beyond your debt. They should be able to come up with a game plan that will see you make a budget and work towards saving long term. From there, you should have more meetings at regular intervals to keep you on track.
Step #2: Identify cost savings
You’ve made the meeting with your financial advisor. What you can do in the meantime is identify what you don’t need? There are must-haves and nice-to-haves in every budget. There are also, however, shifts you can make that will save you big time in the long run as well as ways to bring in cash.
I’ll go through a few examples. If you get takeout regularly, the best way to save money is to buy your own food. Honestly, this could include pre-made meals from the grocery store if you’re terrified of the kitchen. Also, instead of delivery, consider picking up food to save a ton on service and delivery fees.
A huge cost for households is cars. If you bought a nice car a few years back, consider selling it and downgrading. Just make sure you don’t increase your gas costs or repair costs in the process. Buy cheap, buy used, or don’t buy at all!
Step #3: Create extra income but don’t spend it!
You can also see if your credit card is charging you high rates and consider moving to a new card. This doesn’t mean moving to a new bank; just take advantage of one of the deals on offer! It might mean $0 fees for a year. It could also mean an influx of reward points that can be used to help pay off your credit card.
Then look into creating some income. This could look like selling products online, renting out storage space, or even taking on a new job in the evenings. All of this could really help bring in extra income and pay off debt faster.
Once you’ve created this extra income, throw everything at your debt. Create a budget based on your original income source, and any extra income should be put towards debt. Once it’s paid off, you can move on to the last step.
Step #4: Shift to savings
What you’re doing now is creating habits of creating savings in the long term. You’re putting cash aside on a regular basis to pay down debt, but this can eventually shift to create more savings. Let’s say you put 5% of each paycheque towards debt. Once your debt is paid, just transfer those payments to an investment account!
Then choose a strong long-term option. For example, Vanguard Growth ETF Portfolio (TSX: VGRO) will grow your returns, while also providing income through a 2.08% dividend as of writing. It’s a solid long-term option that’s provided returns of 18% since coming on the market in 2018.
By investing, you won’t just have some fun cash to play around with. You’ll be creating an emergency fund that will help you should you ever find yourself in debt again. And you’ll know exactly what to do from then on.
