The cost of living in Canada has been steadily on the rise, leaving many families feeling the impact of inflation. To combat this, the Bank of Canada has implemented measures to dampen inflation, including raising interest rates. While these measures can have long-term economic benefits, they present immediate challenges for Canadian families.
Let’s explore some practical strategies that you can adopt to mitigate the effects of rising interest rates on your finances:
- Review your expenses
As the cost of borrowing increases, it becomes crucial to understand your monthly expenses clearly. Assess your spending habits and identify areas where cost-cutting measures can be implemented. Consider evaluating your grocery bill, utility bills, and entertainment expenses to offset the rising costs.
- Renegotiate your loans and consolidate your debt
For those with variable interest rate mortgages or loans, the increased interest rates directly impact the cost of servicing the debt. If you find yourself with multiple high-interest loans, consolidating them into a single fixed payment/term loan could provide a lower interest rate. If you’ve got a variable rate mortgage, you may reach a ‘trigger rate,’ prompting your financial institution to contact you to determine next steps. It’s important to weigh the options presented, such as increasing payments or extending your mortgage/loan term, to maintain manageable financial obligations.
- Defer discretionary & unnecessary purchases
When interest rates are high, it’s wise to postpone significant purchases unless you have sufficient savings to cover them. Making unnecessary purchases using your credit will result in higher costs in the long run. If our expenses have already increased due to inflation and higher interest payments, it’s better to wait for until you have the funds to pay for them upfront, so as not to take on additional debt.
- Get Professional Guidance
Navigating through periods of high-interest rates can be complex and seeking the assistance of a reputable financial advisor can provide invaluable support and trusted advice. An Alterna Financial Advisor will analyze your situation and suggest financial services or products that fit your circumstances and align with your family’s needs. You can safeguard your long-term financial goals by focusing on reducing current expenses, securing the best interest rates, and aligning your spending with your priorities.