Red-hot inflation has been making headlines for the past year, and its time in the spotlight isn't over yet.
Forecasts for 2023 show inflation will remain higher than average for several months before possibly cooling off later in the year. Until then, concerns about affordability remain top-of-mind for most people.
If you're finding it hard to remain optimistic about your finances in the new year, these budgeting tips may bring you hope. They'll help you prepare for another costly year of inflation.
Update Your Budget
A budget has to be current in order to be helpful, so it's important you update your expenses to reflect inflation's latest spikes.
Note any changes to your usual bills, like housing, car insurance, or utilities, and input these new figures into your budget. For variable costs like groceries or clothing, you'll have to base your spending on the last few bills to get a good idea for costs.
Shore Up Your Budget
A well-balanced budget should cover the three main branches of spending - needs, wants, and savings- but bad luck can get in the way.
Let's say your dog eats chocolate and requires urgent vet care the same week your car breaks down and your toilet overflows. This might seem like a comically improbable list of events, but stranger things have happened.
Unexpected expenses can happen at any time and all at once, overwhelming your balanced budget and emergency fund. That's why many people get a line of credit for peace of mind.
A line of credit is an added cushion of cash that sits on standby until you need help in an emergency. It can sit untouched for months before you run into trouble. At which point, you can go online to withdraw against your limit.
An online lender like Fora gives you ongoing access to your credit limit as you need it. You can draw against your limit, repay it, and redraw throughout the year, using a small portion or all of it at once. For more specifics, you can visit https://foracredit.ca to learn more about a line of credit.
Make Realistic Cuts to Your Spending
If you're finding it hard to strike a balance between your needs, wants, and savings, review your spending habits. You might have some bad habits that waste money and interfere with your goals.
From a financial standpoint, it might be tempting to cut all spending, but this isn't practical in reality. Saying you won't buy new shoes for a full year doesn't do much good if the pair you need for work is falling apart. It just makes things harder when you don't budget for the replacement pair.
Make sacrifices that fit your lifestyle. Do you have eight subscription services? Cut back to one or two. Are you spending too much eating out and snacks? Treat yourself to these luxuries just once a month rather than every week.
Fun splurges and other small expenses may not be what's holding you back. Your budget may not be sustainable if you pay too much for the essentials.
The start of a new year is the perfect time for introspection.
- Is it possible to move to a cheaper apartment or neighbourhood?
- Can you get a better paying job?
- How can you reduce your energy consumption to reduce utilities?
Consider what you would have to do to make these big changes and start putting them into motion in the new year.
Bottom Line: Stick with It!
Inflation may feel like it's never going to pop, but it will eventually. Until then, sticking with your budget can help you weather these extra costs.