The start of the new year is the perfect time to re-evaluate your financial priorities.
Rising costs of living, coupled with ongoing economic uncertainty, have led many to doubt their financial futures, whether it’s investing in their small business idea or simply saving for retirement.
While your bills and expenses may seem fixed, this couldn’t be farther from the truth. There are a number of creative routes you can take to methodically downsize your lifestyle and save hundreds (or even thousands) of extra dollars per month. It just takes a bit of creativity.
Below, I’ll explain some of the best reasons to consider downsizing and show you just how easy it is to start making small changes that can have big results down the line.
Downsizing can give you a financial restart
Downsizing isn’t about deprivation -- it’s about simplifying your lifestyle, cutting unnecessary expenses, and freeing up resources to focus on what truly matters.
A recent survey revealed that 44 per cent of Canadians expect their finances to worsen moving into 2025. Even though the Central Bank has managed to lower the inflation rate to 1.8 per cent (within a healthy ‘target range’), many are still scrambling to catch up from the peaks we saw in 2022, when the inflation rate hit 8.1 per cent – higher than it’s been in decades.
Grow your savings
One of the first changes you’ll notice a few months into your downsizing journey is that you’ll have extra cash on hand. After you pay your bills, you might have hundreds or even thousands of extra dollars sitting in your bank account.
Instead of saving with a traditional savings account, set the money aside in a special high-interest savings account that allows you to earn anywhere from two- to five-per cent APY (annual percentage yield, or how much you’d earn with compound interest) on every dollar you have saved.
Prepare for retirement
Saving for your eventual retirement should go hand-in-hand with growing your emergency savings. A portion of the extra money you’re making should also be invested into a long-term investment account, such as a Tax-Free Savings Account (TFSA) or an RRSP.
Both of these accounts can be used as investment vehicles, and each has its own prospective tax benefits, which you can read more about here.
5 ways you can downsize
Here are a few simple steps you can implement to take control and start downsizing your life.
1. Reduce rent or mortgage payments
It may be nice having a whole apartment to yourself, but you could cut your living expenses in half by adding a roommate to your lease or renting out a room in your home.
If you’re uncomfortable with the long-term commitment of a full-time roommate, you can try renting an extra room out on Airbnb to travellers. This will allow you to earn some extra income for brief periods, and you can always take the listing down if you have family/friends coming into town who you’d rather give the room to instead.
2. Trade in your car or negotiate lower payment
If you’re facing a high car payment, trading in your car for an older model or lower trim package can be a great way to reduce your monthly payment. Other options you could consider include:
- Leasing: Leasing generally gives you a lower monthly payment compared to financing, as long as you’re willing to accept annual mileage limitations, and is a great option for those with shorter daily commutes.
- Refinancing: After building a good payment history with your bank or lender, you can go to another bank and request to refinance your existing auto loan at a lower interest rate.
3. Audit subscriptions
If you’re like many, you probably have more subscriptions than you really need. Netflix, Amazon, gaming apps, YouTube Premium, music streaming, ultra-high-speed internet, and other apps are all $10 to $50 add-ons that can add up to hundreds of dollars per month.
Go through all of your subscriptions, stick with the ones you use on a daily (or at least weekly) basis, and consider cancelling the rest.
Remember, you can always re-subscribe later if you feel that you really need or want the service. Chances are that you’ll completely forget about the subscription after it’s cancelled, proving to yourself that you never really needed it to begin with.
4. Compare insurance quotes
If your auto or home insurance rates have been steadily rising, it could be a good idea to compare quotes from other companies. You can use an online aggregator service or simply call one of the competing companies, explain that you’re looking for a lower rate and ask for a quote.
Nine times out of 10, you’ll get a lower initial premium rate than you’re paying with your current company.
Even if you really don’t want to switch companies, you can use this new quote to negotiate a lower rate with your existing company. Once you call and explain that you’ve been offered a lower rate, your existing company may offer to lower your rate or offer additional perks to keep you on as a customer.
5. Cut back on eating out
Lastly, cut back on how often you eat out or get food delivered. Simply eating at Chipotle, Tim Hortons, or Starbucks every day can equate to $500 or more per month.
Try meal prepping at home or planning your meals ahead of time. It’s easier than you think and can save you a ton of money and stress. Cook up some simple recipes in batches, so you have ready-to-go meals for the week. Stock your fridge with easy staples like pre-washed salad greens, sandwich fixings, or ready-to-eat soups to make it less tempting to reach for your phone and order in.
For coffee lovers, investing in a good coffee maker and a travel mug can save you a fortune compared to your daily Starbucks run, and you still get to enjoy your favorite brew.
To cut back without feeling deprived, set a “no-delivery” rule during the week or save takeout for special occasions. You’ll be amazed at how much you can save just by eating at home more often. It’s usually healthier and helps reduce food waste, too. It’s a win all around!
Final thoughts
Whether you plan on adding a roommate to your living situation, refinancing your car, auditing your subscriptions, or reducing your discretionary spending, each one of these choices you make has the potential to save you hundreds of extra dollars per month.
The cumulative effect of implementing a multiple of these strategies each month can easily save you $1,000 or more per month. Think of all that you could do with an extra $12,000 per year.
Some of these changes may take a couple of months of planning and preparation to implement, but once you start seeing the extra money in your account, you’ll be glad you took the time to make the changes.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.
