We’ve had three straight years of personal finance drama, but 2023 may be the worst of them. Inflation has been running hot for two years, interest rates are peaking and the number of consumer insolvencies has risen sharply. A mid-year financial checkup seems a good idea amid all these challenges. For help with that, I turned to certified financial planner Jackie Porter. Ms. Porter has been in the financial industry for 25 years and says one of her key focuses is empowering women financially.
Q: Inflation and high interest rates are two of the biggest personal finance challenges right now – what questions are you asking to see how people are holding up?
A: Mid-year checkups help us get a better understanding of how we’re tracking and determine if we need to shift our budgets for the second half of the year. At minimum, people should be doing a quarterly check-in. By regularly looking at your finances (i.e. what’s coming in and what’s going out), you become more aware of where your money is going when it comes to spending and expenses, which allows you to make smarter decisions to stay on track. I always encourage my clients to ask themselves: Is my money working hard for me, and how can I make it work harder? Am I using the right tools and resources to manage my finances? Are there non-essential spending expenses I can cut back on?
Q: It seems that FOMO – fear of missing out – is a big problem these days. While some households are struggling and cutting back, others are spending on restaurant meals, concerts, travel and more. What suggestions do you have for resisting FOMO-driven spending?
A: Here are three tips to put into practice this summer:
- Don’t be afraid to say no, or suggest new ideas: It’s important to set financial boundaries with family and friends when you can’t afford an activity, or suggest something new. Suggesting a more affordable alternative like a backyard movie night or a picnic in the park will help alleviate some of the pressure you feel this summer.
- Use tools to keep track of your spending: One of the best ways to stick to your budget is by tracking your spending. Many Canadians aren’t using the free budgeting resources and apps that are available at the financial institutions they bank with, leading to overspending. The great news is that there are numerous easy-to-use resources that can do the work for you.
- Point programs are your friend: While summer activities can get expensive, it’s important to look at other avenues to see where you can stretch your dollar further.
Q: If you have to renew a mortgage in the second half of 2023, what can you do to prepare for higher payments?
A: Don’t wait until the last minute: Now is the time to contact your lender to determine your best options. This could look like increasing your amortization, taking a shorter-term mortgage, or potentially refinancing other debts you are holding into your mortgage to reduce your monthly payments. Also, stay on top of your spending. Keep a close eye on essential expenses versus non-essential spending so you know when you’re approaching a spending limit and need to cut back.
Q: High interest rates are hard on borrowers, but great for savers. What do you look for in deciding if people are saving enough?
A: There isn’t a formula for whether or not you are saving enough. It all depends on your individual or household residual income after essential expenses – that’s what determines how much you can put toward saving.
Q: What about including your job and salary in your mid-year financial checkup? Is it feasible to address your financial pressures by asking for a raise or finding a higher-paying job?
A: A mid-year checkup is not just about your expenses, but also how your income tracks with your everyday lifestyle. So, in some respects, asking for a raise or seeking a higher paying job helps you focus on areas of your finances that you can control. But I wouldn’t only focus on a raise when determining budgets. Budgeting should focus on your daily life and expenses, and be adapted if it doesn’t meet your needs. Whether that’s making food at home instead of a restaurant, there are ways to adapt your budget without finding a higher-paying job.
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Rob’s personal finance reading list
Canada’s most affordable provinces
A ranking by the Savvy New Canadians blog puts Quebec at the top. Some surprises in the ranking after that.
Climbing the GIC ladder
I like this – the tried and true strategy of laddering guaranteed investment certificates presented as an investing hack, aka a way to simplify things. If you can’t decide what term of GIC to buy, give this a read.
Hot times for housing
If you already own a home, there’s good news in this housing analysis from a managing director at DBRS Morningstar. Strong demand and limited supply will keep prices rising, especially in urban areas. If you’re struggling to get into the housing market…
10 tips for lowering your life insurance costs
Improve your health, pay less for life insurance. Quit smoking, lose weight and much more.
Tools, Explainers, Guides and Charts
What to do about a TFSA overcontribution.
The Money-Free Zone
Further to a point raised in a recent money-free zone about judging people when you don’t know their story: A first-person account of a rookie hostess at a restaurant and the withering one-star review a customer gave her.
Watch this
I have to hand it to Pizza Pizza for speaking directly to people exhausted by food inflation. The pizza chain has a new marketing campaign featuring a small pie that is 44 per cent larger for the same price. Elsewhere in food, prices rise and portions shrink.
From the Twitterverse
Introducing thawflation – frozen food that, after thawing, weights a lot less than the amount specified on the package.
ICYMI
What I’ve been writing about
- Lower interest rates will bring a ‘wildebeest migration’ of investors into beaten down dividend stocks
- In the wake of the Bank of Canada’s latest move, here are the savings rates that are on the rise
- High interest rates mean the new normal in vehicle buying is a monthly payment in the $1,000 range
- The cost of keeping your independence in retirement could be $3,500 per month
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money – you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
