Dear Chuck,

I have friends living in Canada. They say the cost of living is so high that many people feel like they cannot afford to live there anymore. Those who had savings are drawing down to make ends meet. What advice would you offer me that I can use to encourage them? 

Looking for Financial Tips 

Dear Looking for Financial Tips, 

I have read about the suffering in Canada, and it is well-documented to be a serious problem. I hope we can encourage your friends or others who are desperate right now.

The Bank of Canada has raised rates several times to try to curb inflation, but it remains a problem. People have taken to TikTok to express their pain and frustration. Many Canadians are being forced to make difficult decisions. Even middle-class families are having to choose between buying food or paying their bills. A survey from Food Banks Canada revealed that nearly one in five people went hungry over the last two years. Today, many are living paycheck to paycheck, unable to save, and foregoing vacations, extra-curricular activities for their children, and nutritional supplements.

The Angus Reid Institute, a not-for-profit, non-partisan research foundation, reported on the problem in April. They said two-thirds of Canadians were cutting back discretionary spending. 40% had to take money from accounts they try not to touch, while 35% say they had to defer contributions to their RRSP or TFSA (retirement and savings accounts). 13% borrowed from friends and family, 11% sold assets, and 8% sought a bank loan. 34% said they were in either “bad” or “terrible” shape, a 6-point increase from July 2022. However, not all areas of the nation reported financial pain. 

Inflation is often called “an invisible tax” because it takes money out of our pockets and is non-productive. Two areas creating problems for Canadians are the high cost of housing, particularly the financing costs for homeowners, and food costs. 

Adjustable Rate Mortgages

1/3 of Canada’s residential mortgages are adjustable loans with no fixed interest rate. Lenders typically require borrowers to make fixed payments. So, when interest rates rise, more of the payment goes toward paying interest rather than principal, extending the amortization period.

Some Canadians have extended their amortization periods to more than double the typical 25 years—and some as long as 90! Lenders are doing it automatically to protect households from greater monthly payments. However, the higher debt load is a concern to regulators. Higher interest could hit the trigger rate—where interest exceeds the fixed payment. This could lead to forced home sales, higher delinquencies, or a depressed housing market. 

Extending amortizations was a temporary solution to prevent higher payments. But lenders will eventually force customers to pay down the principal. If not, homeowners will have generational mortgages: mortgages that are passed on to children. These keep borrowers in debt and increase the amount paid in interest. Fortunately, Canada’s lenders require borrowers to return to their original amortization upon renewal. An initial 25-year note extended to 60 years would return to a 20-year note upon renewal after five years. 

Food Costs + Mortgage Rates

The Financial Post reports that a record increase of 30.6% in mortgage interest costs, along with higher grocery prices, have severely impacted the growth in inflation despite the fact that energy prices are lower than a year ago. Even though the Bank of Canada expects inflation to return to a 2% target by 2025, economist Tiago Figueiredo believes it will be a “long time” before prices are brought back into balance. “As time passes more mortgages will renew at higher rates and any excess savings will be exhausted which should weaken demand going into the latter half of the year.”  

My Advice for Your Friends 

When times get tough, families must come together and attempt to care for one another. If stuck with an adjustable rate mortgage that is no longer affordable, sell the house, and seek creative and economical places to live, like tiny houses or garage apartments; you can also trade skills for rental fees.

In a similar way, seek solutions to lower the cost of the food you eat. Older cooks should teach the younger ones how to fix frugal, nutritious meals. One Canadian website shared grocery shopping tips here: 

• Stay within your budget.
• Only buy what you need.
• Plan to eat leftovers.
• See if stores will price match. 
• Shop sales, patiently wait for lower prices, and then stock up. 
• Try different ingredients, like replacing meat with beans and legumes.
• Find deals using Flipp App, Flashfood App, or Foodhero App. 
• Shop different stores. Walmart supercenters are cheaper for most items.  

Another website offered these tips: 

• Make a list.
• Cook at home.
• Meal plan.
• Eat before shopping.
• Shop online.
• Eat fewer processed foods.
• Try frozen or canned fruits and vegetables for affordability and longer shelf life.
• Consider bulk shopping.
• Check weekly flyers, apps, and coupons.
• Reduce waste.

These tips are helpful for anyone wanting or needing to reduce their grocery costs.

Prepare for the Future

We should all prepare for difficult times. Since no one knows the future, we should live like the ant in Proverbs 6: “Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.” She works and saves for the days to come. 

Canadian borrowers should prepare for a spike in mortgage payments, assuming rates remain high. Find ways to increase income or reduce expenses in anticipation of higher payments. Fund an emergency savings account, and reduce consumer debt. When possible, begin paying extra toward the principal every month. 

Sacrifices will be necessary, but trusting God in the process and seeking His guidance will build resilience and hope for the future. This may be a time to effectively share the Gospel.  

Hopefully, Prime Minister Trudeau and his new cabinet will develop an effective plan to help relieve the nation’s suffering before Parliament meets in September. May the Body of Christ serve with love and compassion during this time. 

Let us pray for our brothers, sisters, and friends to the north. 

The Crown God Is Faithful devotional offers inspiring and practical Biblical wisdom. Subscribe to receive daily devotionals that will help transform your finances and provide much-needed encouragement. May it be a blessing to your family, friends, and you!

This article was originally published on The Christian Post on August 31, 2023.