Toronto is an expensive city. The real estate market just went boom, and an ice cream cone can set you back $5-8 a cone! Many Torontonians are having to pay way more than they can afford in order to break into the market. As a result they are carrying more debt than the average Canadian.
According to a recent survey by Statistics Canada, for every dollar of disposable income earned; Canadians, on average, owe $1.67 in credit market debt (mortgages, loans and consumer credit). That’s a staggering number. And one that has many Canadians facing a long and winding road back to being debt free.
One of the best ways to get back into the black is to cut up your credit cards and start living on cash. Our family has been living credit card free for almost three years now and doing so has meant some big adjustments to how we live and plan.
Here are some tips on how to succeed
Create a Budget (and stick to it)
This seems like a no brainer but it’s key to being able to manage a cash-only life. This means not only making a budget but following it. Many families have a budget but rarely look to see if their actual spending is in line with what they have allocated. When you are creating your budget take a look at your last 3 months of spending for an idea of how much you should put in each category.
If you aren’t sure about where to begin there are lots apps and software options available. We like You Need A Budget – it’s simple and easy to implement.
This is one of the easiest ways to save money on an ongoing, regular basis. Most banks offer this option to transfer money into a savings account for every transaction. The amount is up to you but starting with just $0.50 or $1 is good and you will be amazed to see how quickly that adds up in your savings account. Plus because the money is moved on a gradual, daily basis it doesn’t feel like a big hit on your chequing account. We save about $250 a month using this month. Check with your bank on how you can set this up.
When you don’t have a credit card you have to make sure you are ready for any big expenses that might come your way. By forecasting at least 6 months ahead you ensure that you’re prepared for large payments like Summer Camps, birthday parties or family holidays. Planning ahead allows you the time to save up and then transfer the money over to a bank account until it’s needed. If you are worried about dipping in set up a new account that can’t be accessed through your debit card. When you make the money hard to access that usually ensures it stays where it should be for when that payment is due.
Get a Pre-Paid Credit Card
Getting rid of your credit cards will teach you just how tough it is to function in today’s world without one. While some companies allow for payments to be made through Interac online or VISA debit cards, there are still many that only accept credit cards. This is where having a pre-paid card – sometimes called a travel credit card – can make life a little easier. Pre-paid cards allow users to transfer money onto them and make purchases anywhere the cards are accepted. They are especially handy for things like reserving hotel rooms online. And because you are loading the card with a certain amount of cash this doesn’t put you into any kind of debt. Note: a pre-paid card is different than a gift card you buy at a drugstore. Both BMO and CIBC offer pre-paid options and you can get one even if you don’t bank with them.