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It’s important to determine if the pandemic has shifted the way you prioritize lifestyle expenses, and if that shift is likely to continue as travel and social activities pick up, says an advisor.JASON HENRY/The New York Times News Service

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It’s been 30 years, but Carole Urias still remembers the woman who fled the office in tears after her financial advisors told her to get married – or risk a lifetime of poverty.

It was the moment Ms. Urias, an administrative assistant at the time, decided to become a certified financial planner (CFP) so she could give better advice to clients seeking ways to live well on a reduced income.

“After she left, I questioned my colleagues: ‘Couldn’t this single, 55-year-old woman, who was facing a shortfall after taking a buyout at work, get a part-time job?’” says Ms. Urias, now an insurance and financial advisor at Peak Investment Services Inc. in East Selkirk, Man.

“Couldn’t she have taken a renter, moved to a less expensive residence, or considered selling her home and renting an apartment?”

It seemed there were so many available options that just weren’t broached, she says.

These days, Ms. Urias is in particularly high demand among clients who are increasingly in pursuit of a better work-life balance. Some of her clients are resigning outright from demanding jobs, while others laid off during COVID-19 say they have no desire to return to the daily grind.

“We’ve always defined success by the almighty dollar, but going through the pandemic and having to see family members die brought up other priorities,” Ms. Urias says.

“As a result, we see a couple of resets going on – people are simultaneously reassessing their lives and realizing they haven’t been feeling happy at work,” she adds.

While the mental health benefits gained from reducing work stress may outweigh the discomfort of a reduced cash flow, Sara La Gamba, CFP and senior advisor with SPM Benefits Inc. in London, Ont., points out that living paycheque to paycheque can also cause tremendous anxiety.

“Clients need to weigh the value of time and balance that with the importance of discretionary spending and cash flow security,” Ms. La Gamba says. “I recommend diving into household cash flow prior to making decisions that will impact household financial security.”

She adds that it’s important to determine if the pandemic has shifted the way clients prioritize lifestyle expenses and if that shift is likely to continue as travel and social activities pick up.

How to manage on less income

Ms. La Gamba cautions clients that a pay cut may need to come with compromises like delaying retirement or having to work part-time in the initial phase of retirement.

Major purchase goals may need to be deferred while flexibility for discretionary spending or bigger ticket items could become a thing of the past.

The best way to prepare clients for the reality of living on reduced income is to get them to start as soon as possible, says Heidi U. Pullem, CFP and wealth advisor with Pullem Wealth Management at Worldsource Financial Management Inc. in Vancouver.

“Finding out sooner rather than later whether their expectations are realistic is critical, as most people will have far fewer [if any] options in the future when age and health often work against finding new income sources,” she says.

Depending on whether the income reduction is temporary or permanent, many difficult decisions are needed as clients reprioritize what’s truly important to them.

“That often includes cutting back on eating out and ordering in, multiple streaming services, online and impulse shopping, service and high-interest charges, entertainment choices, and paying others for work you can do yourself,” she says.

Ms. Urias points out that even choosing or having the ability to work from home can reduce vehicle-related expenses by up to $8,000 a year including maintenance, parking, gas, and insurance.

“Carpooling, planning your driving to include multiple errands and changing your car insurance from all-purpose to basic [coverage] can all help reduce transportation costs,” she says.

“In general, when the cost of working outside of the home is taken out of the equation, the savings opportunities are endless – from not having to buy clothes [for the office] to eating at home.”

Cutting back on discretionary spending

For clients on a budget, Ms. Urias says exploring more creative ways to reduce consumption, such as stepping away from fast fashion in favour of mending and repairing clothes instead.

She is also a big proponent of the 100-mile diet, pointing out that it not only supports local businesses but can be less expensive as food is shipped from closer to home.

Other ways to save on food include planting a garden, getting less takeout and making food from scratch rather than buying pre-made or packaged food.

“I ask them, ‘What are your priorities?’ Those $13 coffees at Starbucks [add up to] a lot of money at the end of the year,” she says. “So, consider making it at home and bringing it with you in a thermos when you go out.”

As entertainment is a discretionary expense, Ms. Urias says taking advantage of free resources such as library cards that offer access to books and movies, visiting provincial parks year-round, and volunteering at events at which admission can be offered in exchange for putting in time.

Other ways to slash expenses include reviewing monthly bills, auditing bank fees and service charges, and shopping around for the best deals on wireless Internet – switching carriers when needed.

Tapping into new sources of income can also be a good strategy to offset reduced cash flow, Ms. Urias says.

She encourages clients to use online platforms like Facebook Marketplace to sell items they no longer use and to get creative with a side hustle they enjoy, such as writing, editing, or baking.

“Many Canadians have discovered untapped talents that can be used to earn money,” she says.

The options of living well on a reduced income are as numerous as the individual cares to explore. In short, she tells clients to be cognizant of their expenses and take things a bit slower.

“Remember that someone else always has more. Get used to that, and don’t fall into the trap of trying to keep up with the Joneses,” she says.

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