Don’t list your house for sale yet. Rebuild your budget as a first step

It’s healthy to vent to friends and family about being squeezed again by rising rates. It’s not like there wasn’t much left to squeeze after June, anyhow. When you’re ready, unfurrow your brow and shift that OMG face to your toughest take-action face. You’re not out of smart money moves.

Start here: flip your budget on its head. You might uncover further ways to save. Begin by clearing all the cells in your financial spreadsheet.

First, input your rainy-day savings

“Whaaaat? Shouldn’t I use this money to pay down my crazy-high mortgage?” you ask.

No.

This rainy-day fund is the key to ensuring you won’t have to fire-sale your house six months from now.

The first entry into your budget template is the equivalent of two to three per cent of your household income towards your rainy-day savings fund. My pro tip: make this a high-interest savings account (HISA) that capitalizes on the rates being high right now (more interest on your savings).

Regarding your investments, during lean times, it’s totally OK to pause contributions to RRSPs and TFSAs. Put a reminder in your calendar to resume once you can afford to.

Add your newly consolidated debt payment

Have you held off on consolidating your debts? Are you and your partner trying to tackle debt independently? Do you have more debt now than you did six months ago?

This is your incredibly loud cue to do a debt consolidation, pronto.

Consolidation to a loan or line of credit almost always results in a lower interest rate (yes, even today) and the opportunity to lessen the total monthly payments toward debt. You may even get the option to lengthen the term of the loan to reduce the payment, say, from five years to seven. I get that you don’t want to slow-burn your debt repayment, but you can catch up once your cash flow improves. If you and your partner are operating in financial silos, it’s time to come together to tackle your debt as a team.

Next, add core essential costs

Financial types call this a burn rate — how much your household must spend to function on the most basic level.

Before you frantically input every single expense you can think of, step back. You’ll need to slow down, to be super strategic, in order to speed up. This part is about inputting core essentials only and investigating each one for savings opportunities. If you’ve done some of this work already, do it again.

Core housing essentials include your higher mortgage payment, utilities and insurance. Evaluate the option to extend the amortization on your mortgage. Negotiate rates or terms for internet and mobile phones. Cancel non-core services like security and cable. Shift your insurance deductible and ask for a multi-line discount when bundling coverage together. There’s not much you can do about condo fees and property taxes, so input those as they are.

Groceries and child care are also core. Don’t know what you’re spending on groceries? Grab your receipts and statements and tally them up. Are you still shopping at the most expensive supermarket without a list and throwing away food every week? Consider what’s on the table: changing your shopping habits versus not being able to keep your house.

Are there any options to bring down your child-care costs? Even if you’re not keen, it’s time to consider these. Kids’ activity fees are not core, so keep them off the spreadsheet for now.

Core travel and commuting costs should be added and carefully reviewed. What’s most economical: transit passes, one car versus two cars, or no car at all? Can you carpool? Is taking an Uber a few times a month cheaper than keeping a second car? Consider it all and make a plan.

Now you can see what’s left for discretionary expenses

Your template now shows you the cost of running your household. When you compare it to your income, you can see what’s left for the fun stuff and start planning important spending priorities with peace of mind. And if you commit to only spending that balance, you’ll stay on track. Heck, this process might even get you thinking about switching careers to earn more at your job, which can take some time.

If you upend your budget and try all these suggestions, and discover it’s still not feasible to keep your home amid rising rates, then consider your real estate options: selling, renting out your property, etc. At least you’ll have done everything you could to manage the costs within your control — and that too offers some peace of mind.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.