Have you noticed your dollars are not stretching as far as they once did at the gas pump or the grocery store? You’re not alone. With prices skyrocketing on everyday essentials such as groceries, gas, and rent, many Canadians are questioning their financial present and future. The reason for these price increases? Inflation. In these unprecedented times, adopting the right financial habits could help you ease your financial stress and take charge of your financial future.
What is inflation and why does it matter?
Inflation measures the rate at which the price of goods and services changes over a given period. As inflation rises, your purchasing power decreases which can change how you shop, travel, and eat. For example, if you are able to purchase 3 bags of groceries for $100 today, in five years that $100 may only buy 2 bags. Simply put, with inflation the same dollar today could buy you less tomorrow.
Here are a few financial tips to ease the sting of inflation on your finances:
1. Delay big-ticket purchases (for now)
Thinking of buying a new car or purchasing your first home? Consider hitting the pause button on those plans. With inflation at an all-time high, the price of a new car is more expensive than ever before. Before making a big purchase, review your finances to get a clearer picture of your financial needs versus your wants. By taking stock of your financial situation, you could find opportunities to hold off and come back and buy your big-ticket item later down the road when automotive prices have steadied. So rather than jumping to purchase that new car you have had your eyes on, pass on those new wheels until prices stabilize and put that extra cash towards your savings instead.
Don’t lose sight of your special purchases though! By staying on track with your savings habits and working with a financial advisor at your local credit union, you’ll be ready with cash in hand to pull the trigger on your large purchase when the time is right.
2. Diversify your investments
In unprecedented financial times, one of the best ways to protect yourself and your financial goals is to maintain a well-balanced investment portfolio. Just like a balanced diet, having a mix of investment types (i.e., stocks, mutual funds, ETFs, etc.) within your investment portfolio can help you better manage the impact of inflation, and preserve your savings in turbulent times. Remember to avoid putting too many of your investment eggs into overly conservative (i.e., fixed income securities) or high-risk securities (e.g. stocks) as that could leave your money susceptible to falling behind inflation or becoming over-exposed to market volatility.
With a diversified portfolio, you might invest in stocks with high growth potential but also have low-risk investments such as government bonds. This way if one of your investments fails to deliver, you still have an opportunity to grow your wealth which will bring you closer to achieving your short and long-term financial goals. Now, that’s a win-win!
3. Comparison shop
If your grocery bill is starting to look more like your monthly rent, you’re not alone. But have no fear, even with prices on the rise, there are bargains to take advantage of if you know where to look. From clipping coupons to buying items in bulk, being strategic with your grocery shopping budget can help your money stretch a little farther each month. Before heading out on your next grocery trip, be sure to check out any coupons or flyers for the stores you plan to visit to find the best price for the items on your list. If you have a smartphone, download Flipp for access to thousands of digital flyers and coupons and find out which stores offer the most affordable prices so you can save more on your next trip to the store.
Looking for another way to save? Substituting brand-name with generic items is an easy way to maximize your savings at the grocery store. So, the next time you are walking down the grocery aisle, consider swapping out your go-to box of Honey Nut Cheerios for a generic cereal brand. This way, you get the same great taste at affordable prices!
Manage the sticker stock of inflation a little easier…become a credit union member
From rising food prices to the housing market, inflation impacts every facet of Canadians’ lives. Credit unions are a great financial option to help you modify your finances for inflation so you can continue to reach your financial goals. Not yet a credit union member? To find your nearest credit union, click here.