How to cut back on expenses and spending

Key takeaways

Inflation is having an impact on people’s ability to meet day-to-day expenses.
There are many ways people may be able to either cut expenses or make additional income to help meet their needs.

Why people are looking to cut back on expenses

There’s no doubt that inflation and rising prices on things like housing, utilities, groceries and gas are hitting people’s wallets.

According to Statistics Canada, by spring 2024, 45% of Canadians reported that rising prices were impacting their ability to meet day-to-day expenses. This was up from 33% in 2022.

Rising prices have had a disproportionate effect on:

Lower income Canadians
Younger adults
Households with children
Individuals with a disability

People who experience greater financial stress are more likely to report having a lower quality of life.

With that in mind, let’s look at some steps you can take to cut back on your expenses.

Assess your finances

The first step is to review your budget, including your income, expenses and investments.

You’ll need to separate fixed expenses (larger expenses such as a mortgage or rent payment that don’t fluctuate) from variable expenses (expenses like food, utilities, etc. that do fluctuate). It’s variable expenses that you may be able to find ways to reduce.

If you have debt, it may also be helpful to separate good debt from bad debt. Bad debt can strain your finances and make it difficult to reach your financial goals.

Regarding your investments, review your financial goals and determine whether you need to change the amount you’re investing to achieve those goals. You may wish to involve your advisor in these decisions.

Tips to help reduce your expenses

It’s possible for almost everyone to find ways to reduce their spending without drastically changing their lifestyle. Check out the tips below, start small and track your progress to stay motivated.

Food

Eat at home more often and eat out/takeout less often.
When you do go out to eat, going out for lunch will often cost less than going out for dinner.
Prepare lunches and coffee from home to take to work.
Save on grocery bills by planning meals for the week in advance and only buying what you need to prepare those meals.
Where you can, use store loyalty programs, price matching and coupons to save money.
Purchase a generic or store brand versus a name brand when it costs less.
When a food item you use frequently goes on sale, buying in bulk may make sense.

Transportation

Reduce the number of vehicles you own by using public transit, carpooling or rideshare, walking or cycling.

Utilities

There may be lots of ways to lessen these costs:

Switch to LED lighting or turning lights off when no one is in the room.
Take short showers instead of baths.
Seal leaks around windows and doors.
Repair leaky toilets and faucets.
Wash laundry in cold water.
Hang laundry to dry instead of using the dryer.
Lowering temperature for home heating and raising temperature for air conditioning by a degree or more.
Install a smart thermostat to adjust temperature when you’re not home.
Lower the temperature on your water heater to 54° Celsius.

Home and auto insurance

Bundling both types of insurance with the same provider may provide a discount.
Some auto insurance providers may provide a mobile phone app that tracks how you drive to save you money.
You may be eligible to receive a discount if you belong to a specific employee group, or professional or alumni association.
You may wish to confirm with your providers that you require all the coverage you presently have (i.e., deductible amount).

Subscriptions and services

Confirm that you need and use all the subscriptions (especially streaming services) and memberships (i.e., gym membership).
If you’re paying someone to look after your lawn, shovel show, clean your home, etc., look at doing it yourself if you’re able.

Debt

Look at ways to manage your debt, including ways to consolidate or pay down your high-interest debt.
If you have a mortgage, determine if there are benefits to paying it down faster or refinancing.

Housing

Determine if it makes sense to rent rather than owning your home.
If your home is larger than you need, consider downsizing if it will save you money.
Determine if it makes sense to move to an area with a lower cost of living.

Non-essential/discretionary spending

While it’s important to treat yourself from time to time to enjoy life, it’s also important to control your non-essential/discretionary spending:

Take a staycation or road trip instead of flying somewhere.
Before making an impulse purchase, sleep on it overnight.
Consider not using a credit card, but instead only using cash to make purchases.

Ways to help increase your income

The other side of the coin to saving money is determining if there are ways to make more income.

Determine if it makes sense to rent your home or a room in your home.
If there are items around your home that you no longer need/use, sell them for cash.
Explore whether it makes sense to make more income with a side-hustle or part-time job, or by freelancing or doing consulting.

What’s next?

Talk with your advisor about reviewing your budget, savings goals and investments, and ways to consolidate or pay down debt.

The information provided is accurate to the best of our knowledge as of the date of publication. This information is general in nature and is intended for educational purposes only.