Q: My wife and I have good incomes and together we’re able to support our family. We think we make pretty good choices with our money, but we never seem to get ahead. Now I’m hearing reports that 2012 will be an expensive year. I don’t know how this year could be any worse than last year, so if they’re right, I don’t know how we’ll manage the increasing cost of living. What can you suggest?
A: When we hear reports about utilities, fuel or income deductions going up yet again, it can feel like our living costs are outpacing our incomes. The reality is that during these uncertain times, we can gain the upper hand by going back to the tried and true. Here are some suggestions to get you started:
Take a hard look at your spending habits
When it seems that there’s more month than money, it’s time to take a hard, honest look at your spending habits with a fresh perspective. Challenge everyone in your family to write down everything they spend money on for one month. You might be surprised to learn how much you spend on certain things – eating out when shuttling kids between activities or coffees on the go are among the culprits for many people.
Look for lots of small savings – together they can make a surprising difference
Next, consider your fixed expenses. Sit down with a calculator and all of your bills. Go through each one line by line. Communication bundles often eat up more than we expect. Decide if you need a home phone with extra calling features if you also have cell phones. Then take a look at your cell phone bills and see what you can scale back on. Eliminate anything that you aren’t fully utilizing. If you’ve chosen bigger plans “just in case,” figure out if it’s actually worth paying $6 a month (which is actually $72/year plus tax) for something you might only use once a year. Challenge your family and tackle your hydro bill; turn the lights off when leaving a room, do laundry with cold water and unplug devices that aren’t used much.
Pay down your most expensive debt
Every little bit helps, and the most significant thing you can do to get ahead is to pay down debt. As you look at your bills, prioritize your debts. As you decrease your spending on other expenses, apply the additional funds to your high interest debts. If you're making accelerated mortgage payments but using high interest credit cards to pay for living costs, you might actually be going further into debt.
By focusing on all the little things that you can do, rather than on factors beyond your control, you’ll set yourself up for success.