How to Cut Costs for an Emergency Budget
When your income suddenly drops, your spending may have to as well. Many Canadians don’t have an emergency fund to help weather financial storms. Without that, cutting costs is the next option to consider.
Tracking your expenses is helpful because seeing exactly where your money goes will help you find places to reduce your spending. One part of making a budget is breaking your expenses down into categories. This is different than looking at our bank account or credit card statements, which tell you which stores you shopped at but not what you bought. When you need to cut costs for an emergency budget, having a detailed plan for what you can afford and what needs to wait is essential.
Here are savings tips for some common budget categories. Every little bit counts and can add up to the saving you need to make it through an emergency.
Entertainment – Separate Wants From Needs
When times are tough, cutting your entertainment costs might seem like the first place to start, but is it really that easy? We may think it’s simple to spend less on fun during hard times, but the challenge comes from separating our wants from our needs. We all need to shop, but is your cart often full of what you want, or what you need? Do you need to get your lunch or dinner at a restaurant, or is that just what you want to do?
Having fun doesn’t always have to be costly. Try to replace your pricier activities with fun things that costs less or even nothing. For example, instead of a vacation, how about a staycation? This also goes even for cheaper activities. Do you need to buy new books, or could a library card quench your literary thirst?
Groceries – Avoid Paying More for Easy Meals
Everyone needs to eat and groceries should keep you both fed and healthy. Yet it can be hard to separate wants from needs when it comes to food. These costs are also not just about what you eat—you’re paying for convenience as well when picking up ready-made meals or getting served in a restaurant, so avoiding costs like that will bring immediate savings. Some other popular tips for saving on groceries are:
- Shop on a full stomach. Everything looks tasty when you’re starving.
- If you have the fridge space, buy bulk packages and split them into meal-size portions. Use what you need now and freeze the rest for later.
- Keep cheaper no-name or store brands in mind. The quality might surprise you!
- Don’t be afraid to use community resources if you’re really in a tight spot. Things will improve and you could one day return the favour.
7 Ways to Save on Your Grocery Bill During the Coronavirus Pandemic
Housing and Utilities – Scale Back Where You Can
Many of the costs associated with keeping a roof over our heads are fixed. Our rent/mortgage, strata payments, taxes, insurance, and certain bills like our electricity or heat are hard to change or reduce at a moment’s notice. Focus instead on some of the bills where you can scale back services or eliminate them temporarily to get through a hard time. Think about phone/internet/cable plans, paid streaming services, storage or parking fees, décor, gardening supplies, etc.
Contact service providers and ask them how they could help you get through the next few months. If you’re not locked in, shop around for the best deals.
If you’ll only be making less money for a short period of time, then the price of downsizing your home might not be worth it. However, if you anticipate that your income has decreased for a lengthy period of time, it might be an option to consider.
Transportation – How to Consider Alternatives
While switching cars is a lot of work, it can lead to big savings without drastically changing your lifestyle. Beyond that, you can earn small but sure savings by avoiding unnecessary travel or using healthier means like biking. If you commute by public transit, work out whether an unlimited pass, pay-per-use tickets, or something in-between best suits your needs.
If you do use a vehicle, then you will likely have to budget around $50 – or the cost of one fuel tank – a month for maintenance and repair costs. Remember that buying quality used cars will bring huge savings over spending on the newest vehicles. If your family has two cars but you’re not sure if you can get by with just one, then instead of selling the second immediately, try keeping it parked for a month so that you can test drive a 1-car life.
Changing Your Driving Habits Could Save You $111 per Month
Clothing – Stretch Every Dollar
Clothing is a necessity. However, do you buy clothing based on what you need to wear, or is it more of a hobby? When hunting for deals, keep in mind that quality often beats quantity. Some people might feel like they’re scrimping when they buy a $1 shirt over a $5 one, but that $5 shirt might last 10 times longer. Of course, a higher price tag is no guarantee for better quality, so make sure to do your research!
Other tips for building an affordable wardrobe include:
- Learn to make minor alterations such as hemming to get longer wear from an item.
- Trade with friends or family – lets you have more for less!
- Only buy items that fit now and that you really love.
- Learn to coordinate your wardrobe so that you have more choices to mix & match.
Health Care – Take Care of Your Well-Being First
Rather than cut costs, this is the one place in your budget where you want to make sure you’re putting in what you need. After all, what’s the point of money if you sacrifice your health to have it? When it comes to most over-the-counter medications, however, you can pay less for a no-name brand without losing quality or the key ingredients that are necessary for its effectiveness. When in doubt, ask a pharmacist.
If you have an extended health plan through your or a family member’s work, make sure you’re familiar with what’s covered and how to get reimbursed. Don’t lose money just because you didn’t know you had it!
Your Health Is More Important Than Your Credit Rating
Savings and Debt Payments – If You Feel Overwhelmed, We Can Help
In an emergency, it helps to adapt both how you save money and how you pay what you owe to suit your new situation. This might mean anything from holding off on savings deposits until you’re back in the black to asking creditors for a new deal on your debt repayment schedule. We know that making the best decisions when it comes to managing your savings and debt payments is a complicated task and can feel overwhelming. Whether it’s about paying creditors during difficult times or creating an effective emergency budget, one of our accredited credit counsellors would be happy to discuss your challenges and assist you in finding concrete solutions. Chat with us anonymously online, send us an email, or give us a call at 1-888-527-8999. We’re here for you.