How to Lower Your Fixed Monthly Expenses to Pay Down Debt Faster
By Carmen Chan
You’ve got your mortgage and car loan to pay, credit card bills and HELOC payments, and a running list of utility bills and other key expenses – does it feel like your fixed monthly expenses are eating up all your income?
Canadians’ budgets are being stretched thin, according to a March 2024 report issued by credit monitoring bureau Equifax. It suggests that the average consumer is carrying $21,296 of debt, and delinquency rates on their loans have increased by 28.93% year-over-year.
Mortgage delinquency rates soared by 135.2% in Ontario and 62.2% in British Columbia at the end of 2023. Because of the rise in interest rates, consumers renewing their mortgages saw their payments increase by $457 on average, with spikes of up to $680 in Ontario and BC!
If you’re wondering how to lower your fixed monthly expenses so you can keep up with your monthly bills, here’s a look at 4 key strategies to save money so that you can also pay down debt.
Eliminate Subscriptions and Recurring Monthly Bills
Pore over your bank statements, credit card statements, and any other financial documents and list out every single direct debit that’s taken out of your account. You can also search your email inbox for any recurring receipts that are quarterly or annually.
You may find over the years you’ve subscribed to:
- cable, internet, and phone services
- gym, yoga, or spin class memberships
- grocery delivery services or meal prep service kits
- streaming services, like Netflix, Disney+, Spotify, and Amazon Prime
- newspaper and magazine subscriptions
- roadside assistance for your automobile
- apps for brain exercises, fitness and calorie counting, or other hobbies
The list goes on – and when you add them up, recurring costs can amount to a mighty sum. Don’t shy away from making steep cuts to your subscriptions, especially ones that have been barely touched. You could save hundreds by simply cancelling, reducing, or temporarily suspending some accounts.
Renegotiate Your Home and Car Insurance
How much are you spending each month on homeowner’s insurance and car insurance? Spend a few hours comparison shopping for various quotes for insurance – bundling your home and auto insurance can save you up to 25% depending on your insurer and location.
If you’ve been with your provider for years, without incident, you can ask your insurer about available discounts. They may suggest signing up for electronic payments, installing a home security system, or increasing your deductibles to bring your premium down. If they don’t have your birthdate on file, ask them if there’s a senior’s discount at a certain age. With some insurers, 55 is the magic number for that added discount. You may even qualify for discounts as a long-term safe driver or someone who drives a limited number of kilometers each year.
When it comes to vehicle insurance, consider reducing your coverage or increasing your deductibles. Full coverage may not be necessary for an older car. If you’re a two-car household, simply taking one car out of the equation and finding alternatives for your commute is enough to cover the cost of a loan payment increase.
Get a Lower Interest Rate on Your Credit Card
Credit card interest rates vary, but average about 20% for purchases – the rate is higher if you use your card for cash advances and withdrawals. If you’re carrying a balance of $5,000 to $10,000 on your credit cards, you could be paying hundreds of dollars each year on interest alone. Cutting down your interest rate is a crucial way to lower your monthly costs and ensure your debt payments are paying down more of what you owe. You can start by calling your creditors to ask for a lower interest rate or a grace period of a few months as you get your finances in order.
10 Tips for Paying Off Credit Card Debt
Draft a script – maybe you got into debt because of a job loss or a medical emergency, but you’re committed to paying off your debts. If you happen to be a longstanding customer in good standing with making payments over the years, your creditor may give you some leniency. If you’re turned down, ask about a balance transfer to a new credit card account with a lower interest rate. If your current lender doesn’t offer such a card, shop the competition and apply before your credit score takes a hit for missed or partial payments. Check out this Government of Canada, Credit Card Selector Tool for the straight goods and no sales pitch.
What Counts as a Fixed Expense in Your Budget?
Get Advice From a Professional Credit and Debt Counsellor
The cost-of-living crisis and increasing interest rates are putting pressure on households, regardless of income. If you’re having trouble tackling your debts alongside your monthly expenses, consider calling us and speaking with one of our professional credit counsellors for advice and guidance.
Professional organizations, such as the Credit Counselling Society, can help you get a handle on your debts when you’re feeling intimidated and don’t know where to start. We’re a not-for-profit service providing professional financial counselling and education, whether you need help contacting your creditors, creating a budget, or beginning a debt repayment plan. Established in 1996, we have helped a million Canadians learn how to manage their money and debt better.
Dealing with Debt Can Help Lower Your Fixed Monthly Expenses
One of the best ways to lower your monthly expenses is to reduce your debt payments. While paying off what you owe – and choosing the best debt repayment strategy to do that – is maybe what comes to mind first, our credit counsellors can give you other ideas, too.
Appointments are free and confidential and don’t obligate you to anything further. Your counsellor will answer your questions and help you come up with a plan that suits your needs. Our credit counsellors have seen thousands of household budgets and are happy to share their best tips and tricks to lower monthly expenses. And if you need help with your debts, options are readily available to you, to help you tackle what you owe and provide you with the skills to manage your finances for the long run.
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