Canadians feeling financial pressure as interest rate rises to highest level in more than 20 years

Many Canadians are feeling the squeeze on their finances as the Bank of Canada once again raised its key interest rate to five per cent, the highest level it’s been since 2001.

Higher borrowing costs, along with rising inflation, and the increased cost for food and gas has many Canadians families feeling financial pressure when it comes to paying their bills.

Laurie Campbell, a financial expert who has worked in the credit counselling industry for over 20 years, said many families are reaching a tipping point when it comes to their finances due to rising costs.

Campbell said while many families don't like to talk openly about their financial situation, it can help if you keep track of where every dollar is going.

“Find out areas where you can cut back. Find how you can bring more money into your household. What are some things you can give up? How can you do more things for free? It’s important to have these conversations,” said Campbell.

Many people don't like to use the term budget, but the best way to monitor your finances is to keep track of all the money flowing in and out of your life.

Carolyn Goodwin, the Social Impact Manager at Chartered Professional Accountants Canada (CPA), helps educate Canadians on financial literacy and money matters.

Goodwin uses an example to show how Canadians can try to save a little money each day that can add up to a lot over time.

“If you were to save $20 a day for 365 days in a year you would have $7,300. On the flipside if you are spending $20 a day on little things, then you've burned through $7,300 - and that's a lot of money,” said Goodwin.

As interest rates rise it’s advisable to avoid taking on new debt, pay off high interest debt first, never let a bill go to collections and don’t use buy now pay later plans.

Anne Arbour, Director of Partnerships with the Credit Counselling Society, said you also want to protect your credit score by not missing payments.

"Paying those bills on time and keeping a clean reputation will go a long way towards keeping your credit score on the better end," said Arbour.

A higher credit score shows you’re a good credit risk and you could also be able to more easily get a loan or a preferable interest rate.

While you should have long term financial goals there are strategies you can implement right away. To save money this summer consider a summer staycation and do low budget activities.

You can check to see if you may be able to cancel unneeded subscriptions, reduce your spending and consider increasing your income or getting a part time job.

If you have credit card debt, don't add to it and try and pay it off as soon as possible.

"We know that many Canadians are only making the minimum monthly payment on their credit cards which are 19 per cent interest and 29 per cent interest for retail cards, and if you only make the minimum monthly payment you could be paying it off for decades” said Campbell.

If you have a lot of high interest debt it may be worth getting a consolidation loan, at a lower rate to pay it off. However if you continue to run up your debts this strategy will not work and could get you in an endless cycle of debt.

If you're facing financial problems it can be beneficial to speak with someone by reaching out to friends, family, your bank or a credit counselling service which can offer help, support and advice.