Financial Friday 170: Avoiding a Fall Financial Storm!

An July 7 report from Statistics Canada on the financial state of Canadians says that, "Middle-income earners were affected most by inflationary pressures over the last year, as they spent an average of $1,306 more than they earned in income in the first quarter, while they had positive net saving of $521 in the first quarter of 2022."

It's no secret that 2022 was a financial disaster but the data is showing that many of us are even worse off in 2023, and there is no relief in sight!

For younger Canadians, the statistics are more dire “Debt-to-income ratios for younger and core working-age groups as of the first quarter were at their highest rates on record, which go back to 2010.”

Regardless of age, Canadians are wondering how to cope with spiking inflation on necessities like food and gasoline in addition to rising interest rates which are makes homes, cars and other debt obligations a lot more expensive.

If you are looking for some answers to the most common and troubling personal finance issues out there make sure to check out next week’s free webinar. If you need some food for thought right now about how to handle an autumn financial hurricane..... here are three things keep in mind.

1. Reconsider your big three.
The "big 3" expenses for Canadians are housing, transportation and food. Adjusting your lifestyle can save you huge money in these areas. For example, having a roommate isn't for everyone and you may have grown to like your independence, but it could instantly cut your expenses in half. If you are a homeowner, the demand for rental housing is surging and you may be able to rent a room to a student or even do some short-term Airbnb rentals to help with the mortgage.

Cars are another money pit for Canadians with the average price of a new ride now at $66,000 and financing rates hovering around 7%. The average car payment has gone from $577 in June of 2019 to $797 in June of 2023. Add that to the average Canadian gas prices of $1.68/litre and much higher prices for everything car-related from snow tires to an oil change. It’s easy to see how driving is taking a much bigger bite out of your paycheque these days. Going without a car might not be an option, but the inconvenience caused by going from a two-car family to a one-car family or to a cheaper/smaller/more fuel-efficient car might be looking a lot more tolerable given the savings.

Groceries are expected to run about $16,000 annually in 2023 for a family of four, so food is definitely and area that deserves attention. We have all heard the many the tips and tricks for cutting back (comparing prices, loading up on specials, coupons, buy no-name, etc.) so it is just a matter of regularly using the ones that work for you. There is almost always a cheaper food option and you have to balance your menu with your budget... Starbucks beans or a jumbo can of Folgers ground?

2. Stay calm and learn to dismiss the hype.
Constantly being worried about "what could happen" only leads to unnecessary anxiety. We are constantly bombarded by cable TV news, you-tubers, internet experts, naysayers, pundits, social media influencers & fin-fluencers... and it can really pile on the stress. It can also lead to a lot of illogical decisions. Nobody can predict the future and we sometimes forget that fact when we are bombarded by hyped-up news reports day after day.

Financial market "experts" are a great example. There is always a steady stream of them predicting a huge crash and occasionally, they do get it right. However, the truth is that most of these predictions are flat-out wrong, and you would be much better off to ignore them and simply ride out market downturns. The same goes for talk of a recession, even the experts can't tell us if we are heading for a recession or already in one.

3. Focus on what you can control.
No matter how much you read or talk about inflation or interest rates, both are way out of your control. Just last week it was looking like the Bank Of Canada may leave interest rates unchanged until the end of the year, but after this week’s inflation data some economists are changing their tune.

Likewise, you can't predict with any certainty which way financial markets will move. If you follow the market update in this newsletter you see how the various stock indexes bounce up and down considerably from week to week. The TSX composite index is down 2.6 % in the last 5 days but up about the same percentage if you compared to the start of the year. If your strategy is to buy and hold a diversified, low-fee portfolio of stocks (or ETFs or mutual funds) then stressing about the short-term fluctuations is something you need to stop!

If you are going to stress over your finances (which we don't recommend) focus on the things you can control like reducing your spending, increasing your income, or learning to better manage and invest your money. Challenging times provide opportunities and motivation and are a great time to improve critical financial skills and attitudes that will help you throughout your lifetime.



Rent vs buy debate rages
This study looked at two simple metrics: the monthly rent versus the monthly mortgage payment and made a map for cities all across Canada. It ignores many other costs and advantages/disadvantages of each, but it does make for an very interesting graphic.... check it out!

Variable-rate mortgages rise from the ashes
Mortgage renewers are once again looking at variable rate options as many believe interest rates have peaked and will soon be on the way down.

What to know about wills
Estate planning vs wills? power of attorney, executor? This 8-minute video gives a very clear explanation of what you need to know and should be thinking about as you hit your golden years.

Who do you turn to for financial advice?
Your bank? a friend? TikTok fin-fluencers? This article looks at some of the options and why you need to be very careful about what you hear. You can also talk to us, we have free webinars each week and offer one-on-one coaching options. Set up a free financial assessment call to discuss your situation and see how we might be able to help!

All the ways Canadians will get more money from the government this fall
Sounds like a dream headline and although you may not qualify for some of these benefits based on your income or family situation, you may end up with a surprise cheque in hand sometime this fall.