TORONTO -- As many Canadians try to squeeze every last dollar out of their budget to cope with the soaring cost of living, financial experts say cutting expenses to the bone is not always a viable option and they should instead focus on increasing their income.
Slashing expenses is never a long-term solution and can only go so far, says Janine Rogan, a chartered professional accountant and founder of The Wealth Building Academy.
As a first step, she suggested evaluating whether you can negotiate a higher salary at your job, especially during the promotion season, which is typically early in the year and during the summer months.
“Do your research - if you're being paid fairly, similar to your peers or the market value,” she said, adding to be clear about your accomplishments and gather data supporting the case for a raise.
Even during a time of layoffs and a weak economy, Rogan said employers are often willing to pay more to keep good workers. She emphasized employees should take the chance and go into negotiations prepared to back up their arguments.
Diversifying your income sources is another way to get ahead, experts say. This could range from decluttering at home and selling collectibles to renting out possessions such as a vehicle or a room in your house.
Sandra Fry, a Winnipeg-based credit counsellor at the non-profit Credit Counselling Society, says homeowners can consider renting a room to a student or a professional, which may help in handling rising mortgage payments. But, she said, renting a room is not a solution for all.
“Somebody with young children may not want to have a stranger in their home,” she pointed out.
Fry said people looking to expand their income beyond a salary raise might have to consider the trade-offs - namely, time or privacy.
“Time is always a factor,” she said, especially for those opting for part-time work or side hustles and have to balance family-related obligations.
Parents may have less time, whereas a single person may have the benefit of more freedom, Fry said. For people renting out a room, meanwhile, a loss of privacy could be a concern.
Sandy Yong, author of “The Money Master,” says people who are handy can consider signing up on apps such as TaskRabbit to perform odd jobs like building someone's Ikea furniture or helping a stranger move.
Other options on her list include monetizing specific skills, tutoring, selling handmade goods on marketplaces like Etsy or finding part-time work on platforms such as Upwork and Fiverr.
Those that need some extra cash can try picking up shifts at a retail store on the weekend or in the evenings, Yong added, or consider self-employment opportunities such as food delivery services or ride-share.
But side jobs, requiring more hours of labour, can affect day jobs, experts warn.
Fry said overworking can cause burnout and mental health concerns.
“Make sure that whatever (you're) doing on the side is not impacting (the) main job,” Fry said.
People opting for part-time work or side hustles also need to keep in mind they'll be paying taxes on that extra income.
“When you add the (income from) two (jobs), there's a possibility of being bumped into a higher tax bracket,” said Fry.
“Even if you lose 40 cents of every dollar to taxes, you're still ahead 60 cents,” she said. It is important to account for taxes from side hustles and put money aside for the following year's taxes if needed, she said, to avoid a financial penalty when filing.
Overall, the decision to take on a side hustle will look different from person to person, Fry said. It might not be for everyone.
For some, the best option could be searching for a better-paying day job.
This report by The Canadian Press was first published Feb. 15, 2024.
