Old habits die hard, perhaps even more so when it comes to money.
Half of Canadians (51%) are concerned about their finances, but the majority have not changed their unconscious spending habits compared to six months ago, according to an October 2022 survey of over 1,500 Canadian adults conducted by FP Canada, a national trade organization for financial planners.
Gain solid financial footing in 2023 by identifying costly habits that might be holding you back — and the money moves you need to get unstuck.
1. Ignoring your credit card debt
I learned the hard way that credit card debt has consequences. Enter the six-month stint in my early twenties when I let my credit card bills pile up as I swiped my card, blissfully unaware of how much I owed. Rest assured, the fun was short-lived.
I wound up with a maxed-out credit card, a barrage of collections letters and a floundering credit score that took years to rehabilitate.
Beyond the cost of ongoing interest charges, you risk damaging your credit score if you regularly rack up your credit card balance. Using more than 35% of your available credit negatively impacts your credit utilization ratio, which factors into your credit score. Your credit score may also suffer if you routinely fail to make the minimum payment.
Credit cards are a convenient tool — especially around the holidays. Nearly 3 in 5 2022 holiday shoppers (59%) said they planned to use a credit card to pay for their holiday gifts, according to NerdWallet’s 2022 Canadian Holiday Shopping Report. If you swiped your card during the holidays, having a strategy for your January credit card bill is essential.
Get unstuck: Pay down high-interest debt with a balance transfer card
The average interest rate on a Canadian credit card is 19%, according to NerdWallet analysis. One way to give yourself an edge when paying off this type of high-interest debt is a balance transfer credit card. These cards may have lower interest rates than standard credit cards or offer 0% interest for a promotional period after you first open the card.
2. Riding the slippery slope of lifestyle creep
Lifestyle creep happens when your non-essential spending rises alongside your income. This is an insidious money habit because it often flies under the radar.
“Lifestyle creep adds up,” says Victor Godinho, Certified Financial Planner, chartered investment manager and principal broker at Kismet Wealth Group in Etobicoke, Ontario. “It’s like, the more you have, the more you spend. And the thing is, people aren’t very conscious or proactive about managing it. Those costs add up over time.”
A salary increase is often the precursor for lifestyle creep. And it’s one heck of a slippery slope.
Get unstuck: Stay accountable and track your spending
To stave off lifestyle creep, consider tracking your spending or creating a budget.
“The only way to really catch it is to be conscious about it and be aware of it,” says Godinho. His suggestion for curbing lifestyle creep? Tracking your spending through your online banking platform or a third-party app. “You get the view across all of your accounts in one place. They’re free apps, and they allow you to set a budget and see what you spend.” The 50-30-20 approach is a popular one: 50% of your income goes to living expenses, 30% to non-essential spending and 20% goes into savings.
Earning more means long-term savings and investment goals can grow. Define those goals and stick to them by automating transfers into designated accounts. High-interest savings accounts, tax-free savings accounts and registered retirement savings plans can help you accelerate your earnings with higher interest rates and tax benefits.
3. Losing track of paid monthly subscriptions
Like lifestyle creep, subscription overload can sneak up on you. One Hulu Premium or DashPass subscription doesn’t seem like much, right? But stop to tally them up, and you may be surprised to find you’re spending hundreds of dollars monthly on subscription services.
Get unstuck: Conduct a subscription audit
Banish subscription bloat by tracking how much you pay for each service. Godinho suggests using your monthly bank statement to sniff out paid services flying under the radar. Scout for services that may have risen in price since you initially signed up and scrap any you no longer use.
4. Neglecting employer-matched RRSPs
An employer-matched RRSP is a group retirement fund managed by an employer. Employees can contribute to the plan to save for retirement. Some employers match the employee’s contribution into the plan, dollar for dollar, up to a certain amount — typically a percentage of the employee’s salary. Failing to maximize your contributions if you’ve got access to an employer-matched RRSP means leaving free money on the table.
The benefits of RRSP matching programs are twofold. One: you double your money (up to a set limit, as determined by your employer). And two: you maximize your potential deductions come tax season. RRSP contributions are tax-deductible, so putting money into your plan may reduce the tax you owe on your income.
Get unstuck: Make the most of your RRSP contributions
The remedy for this one is simple. Maximize your contributions if you have access to an employer-matched RRSP and can afford to do so. These plans are designed to help you save for retirement, and it’s never too early (or too late) to put your money to work.
Best RRSP Accounts and Rates in Canada for 2023
Use these high-interest RRSPs to make contributions in the short term before deciding how to invest your retirement funds in the long term.
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