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Increased CPP, EI deductions mean smaller paycheques — how to cope

Sandra Fry: These practical tips can help you get by on a slightly reduced take-home income

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The change of the calendar signalled an increase to statutory payroll deductions, which means some of us will be getting slightly smaller paycheques than we’re used to.

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Of note, Canada Pension Plan (CPP) contributions rose, an additional CPP contribution amount was added for higher-income earners and employment insurance (EI) premiums increased, too. Income tax brackets were adjusted as well, and if you received a salary increase to coincide with the start of the year, you may face higher premiums for insured extended benefits through your employer.

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Smaller paycheques are never great news, but they sting more than usual at a time when every dollar counts. If utility providers in your province also announced increased rates for electricity, gas and water, or your city’s taxes are going up, 2024 could prove to be yet another difficult year. With that in mind, here are some practical tips that can help you get by on a slightly reduced take-home income.

Start by analyzing your paycheques to see if there are any changes you can make to discretionary deductions, even temporarily. Payments for extra benefits, automatic donations for workplace fundraising (for example, jeans days) or non-registered retirement savings plan (RRSP) deductions are worth reviewing annually, but especially if you need to recoup a decline in your income.

However, if your employer offers an RRSP matching program, be sure you’re taking full advantage of it, without contributing over and above when money is tight. A matching benefit is like getting a 100 per cent return on your investment, plus market interest on the whole amount once it’s invested. That’s a deal you can’t score anywhere else.

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If you are making significant donations beyond some workplace fundraising, make sure you aren’t donating yourself into a precarious debt situation. There are many ways to help out in your community or at your place of worship, so consider giving your time instead of your money if you can’t afford to keep donating at the rate you have been. Look back at last year’s taxes or consult a tax professional if you need to work out how much financial giving makes sense in relation to your household tax bracket.

Consider any revisions to optional payroll deductions in light of your overall budget. Outline your budget, track everyone’s spending for a few weeks to identify habits and where your money is actually going, and then look for ways to make up what you’re losing on your paycheque. This could include a deep dive into your utility bills. Contact every service provider to see if they can help you save even $20 a month. Keep working on your budget until it balances, meaning you aren’t spending more than you earn.

Be sure to look at your debt payments, too. Interest and fees add up quickly and a lot of debt can make it hard to manage when your income goes down. If my client is eligible for a debt management program (DMP) through our organization, they jump at the chance to get the help. Creditors typically support our clients by not charging any interest, or greatly reducing the rate, going forward on debts that are being repaid through a DMP. This means our clients can get back on track in a few years.

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For clients whose budget makes them ineligible for a DMP, we help them get debt relief in other ways. So, if you’re spending a lot of your income on debt payments, reach out to a non-profit credit counselling organization in your area for help.

You’ll notice when tracking your spending that some of your habits are costing you more than you thought. Make some simple changes to free up a little cash here and there.

For example, do you change into shorts and a t-shirt when you get home from work? Change into sweatpants and a sweatshirt instead and lower your thermostat by two degrees to save on electricity and/or gas costs. Turn out the lights when you leave a room, wear warm socks or slippers rather than going barefoot on cold floors and keep doors open inside the house to allow warm air to circulate, rather than depending on space heaters in every room.

One way to save big on shopping is to keep several lists. Choose a simple app for your phone so that you always have the lists handy. Some people like to organize their lists by topic, say, groceries, drug store, etc. Others find it handier to organize what they need by the type of store where they would buy the item: their main grocery store, a favourite big-box store, the closest home repair shop, etc. If you shop a lot online, that could mean making another separate list. Being organized with your shopping lists will help you budget better and spend more mindfully, rather than impulsively.

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Along with cost-cutting lifestyle choices, look for small ways to increase your income. Even renting a room can bring in a few hundred dollars a month, which could be just enough to balance your budget or create the breathing room you need.

Managing your finances during a period of reduced income can be challenging, but not impossible. By taking a proactive approach and being creative, you can make the most of your situation and come out stronger, with new skills, on the other side.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 27 years.

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