Readjust Your Monthly Budget
As unpleasant as this may sound, rebalancing your budget will doubtlessly require reducing your non-essential spending: the expenses that do not cover a basic need. You can resume enjoying these little extras when your finances are in better shape! Don’t eliminate all your leisure activities, however, or you probably won’t stick to your new budget very long. Have you never planned a budget? Most banking institutions offer free budgeting tools. You can use them simply by logging into your account. You may be surprised by the expenses you will see listed. Perhaps you are paying for two accounts to a single streaming service, for example.
Increase Your Income
There are really only two ways to balance a budget: either spend less or make more. Do you have an empty room in your home? Rent it out a few nights a month through a short-term accommodation platform. This can bring in several hundred dollars per month. Do you work from home? You could babysit some neighbourhood kids after school before their parents get home from work. Ensure you can carry out such income generating activities legally by checking your municipality’s bylaws.
Look at Your Savings
Do you have regular savings contributions, optional payroll deductions or a dividend return? Consider reducing these and reallocating the amounts to your mortgage payments. You could also think about dipping into your savings account, or even your TFSA to limit the impact of interest rate hikes. Confirm the feasibility of these options with your financial advisor.
Consolidate Your Debts
If you have several credit cards, lines of credit and other debts, consolidating them all into a single monthly payment might be worthwhile. This is generally an excellent way of reducing the interest you are paying and therefore ridding yourself of your debts faster. Some households may be able to do this by refinancing their mortgage. Contact your current mortgage lender to see if you can extend the amortization period of your loan. Many mortgages were taken out with a less than 20% down payment, qualifying for an amortization period of up to 25 years.
Furthermore, if more than 20% of the property’s principal has already been repaid, you may be eligible for an extension period of up to 30 or even 35 years. This will greatly reduce your monthly payments, but you will end up reimbursing the mortgage over more years. This option should be resorted to sparingly, and only on the recommendation of your financial advisor.