One of my favourite activities is throwing a big seasonal party for my closest friends and family. And no party is complete, at least in our household, without an authentic guacamole-and-chips appetizer.
But was I in for a shock when I tried to round up the necessary ingredients for my guac dip before my latest gathering. Avocados are going for $2.49 each; Roma tomatoes sell for $2.99 a pound. Add in the spices, the onions, cilantro and garlic, and my trademark dish would cost a cool $15 to produce.
For anybody who does the grocery shopping on a regular basis, it is no great surprise that everything is much more expensive than it used to be. Inflation has been running at 40-year highs — and food prices are among the costs that have risen the most. I get a serious case of sticker shock every time I hit the checkout aisle of the grocery store.
If you’re making a mortgage or rental payment, have a line of credit or are trying to pay off a credit card balance, you’re well aware of the impact rising rates are having on our day-to-day finances.
According to a June survey by the Angus Reid Institute, I’m not alone: Cost of living/inflation is now the No. 1 issue facing Canadians. Here in B.C., 60% of British Columbians point to it as being the one issue they care about most — ahead of health care (45%), housing affordability (38%), environment/climate change (24%) and crime/public safety (22%).
We all want to find ways to save money while we pay off debt. And it is possible.
Here are some strategies that can help you get ahead, maximize savings and get out of debt.
In a high-interest rate environment, reducing debt is critical.
While undoubtedly a challenging time for many B.C. families, there are ways to save money and pay off debt — and keep more money in your pocket for that occasional splurge on ‘luxuries’ (like guacamole!) With the right strategies, and a values-aligned financial partner, we can survive this inflationary, high-interest environment while paying down debt and contributing to savings accounts.
Sophie Salcito, a Vancity wealth advisor, shares that as interest rates start to surpass the rate of inflation, getting debt levels down is key. She says it’s important to ask your financial institution for the lowest rates they can offer on credit cards, loans or mortgages. “If you have existing debt, ask your financial partner if you can pay the loan or mortgage down weekly instead of monthly or biweekly,” she says.
Prioritize debt with the highest interest Rate.
Make sure to prioritize different ‘buckets’ of debt — and pay off the ones (like credit card balances) that have the highest interest rates, while making minimum payments on the rest.
Use the snowball method to pay down debt.
Use the snowball method to pay off the smallest debts first, and then use the money you save to start paying off larger debts. This way, you’re making a dent in your overall debt picture — but staying motivated in the fight for solvency.
Set up automatic payments.
One trick that helps is to set up your credit card account for automatic payments. This way, the highest-interest item in your debt load gets dealt with each month, whether you like it or not!
Collect (and use) loyalty points.
Salcito also suggests that if you have loyalty points with your bank card or retailers, “redeem them now and regularly.” This is especially important as the relative value of those points decreases during inflationary times. “Let those points pay down your debt or buy the items you need,” she says.
As an example, the Vancity Visa card lets users redeem 50,000 points for $50; if you do that regularly, you can then use that cash to pay off your daily expenses.
And if you’re keen to make sure that you are not only earning points — which can be turned into cash — but helping the planet, Vancity’s enviro™ Visa* might be right for you. With this card, 5% of card profits go toward environmental initiatives like Project Zero, Threading Change and other Vancity enviroFund™* recipients that are making a difference in our communities. That’s a real win-win.
Tap into the opportunities for high-interest savings and term deposits.
With interest rates offering historic returns, now is the time to sock some money away if you can, and a high-interest savings account is a great way to commit to saving regularly and watching your money grow.
Open a high-interest savings account.
“High interest savings means something again!” says Salcito. If you have any extra savings each month, she says, “be sure to have that money sit in high-interest savings accounts — or you may miss out on a 3-4% rate of return.”
Consider a term deposit.
If you have a bit of flexibility on how long that money is out of your hands, consider a term deposit. At Vancity, there are a variety of options — both redeemable and non-redeemable deposits or GICs.
In an ideal scenario, Salcito says, we should consider saving about 10 to 20% of our income. “But in today’s environment of rising prices, we have to be prepared to be flexible on this,” she adds. So if cash is tight, start small — and gradually increase the amount you’re saving each month. Consider setting up automatic transfers from your chequing account to your savings account. Just like paying off your credit card debt, an automatic payment system helps you to prioritize savings — and means you’re less likely to spend the money before you can save it!
Review your budget.
If cash is extremely tight, however, it may also be time to take an ax to some of those recurring expenses that you can afford to lose, says Salcito: “What can you suspend: A magazine subscription? A gym membership, by exercising at home or outside? Find something to save money on.”
For me, it’s all about streaming subscriptions. I didn’t realize how much I had going out the door each month until I did a review of my credit card statement last month. I’ve recently put a pause on a bunch of them, including Netflix, Crave and Apple TV — which, in the warmer months, don’t get nearly as much use anyway.
Talk to people who have come through high-interest, high inflationary times.
As tough as things are right now, it’s worth remembering that this too shall pass. Inflation is, after peaking in 2022, slowly making a retreat.
But if you want to learn how to manage tough times, Salcito suggests “talking to friends or family members who had a mortgage in the 1980s at almost 20%! They likely had useful strategies and can help us to see that we have had these hard times before.”
Financial success depends on mindset and habit shifting.
Ultimately, getting out of debt and saving money requires a mindset shift. So commit now to changing your spending habits, and make saving and debt repayment a priority.
If you’re not in the habit of budgeting, consider setting a budget for yourself — maintain a detailed list of your expected income and planned expenditures for each week or month. (And yes, find ways to economize on those extras like seasonal parties!)
Finally: Don’t be afraid to seek professional help, including from a financial planner, if you need assistance in creating a debt payoff and savings plan. A helping hand to set you on solid ground, is just a phone call, email or conversation away. Learn more about how Vancity can help you reach your financial goals today.
* Trademark of Visa Int. Used under license.
This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.
