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Inflation 101: How to Navigate the Inflation Wave in 2022

Inflation 101: How to Navigate the Inflation Wave in 2022

From the dot-com bubble burst to the 2008 economic downturn, Canadians have faced an array of economic calamities over the decades. In 2020, Canadians faced the perfect economic storm as the global pandemic halted goods and services production, generated an influx of economic relief, and increased consumer demand with limited supply, giving birth to the highest rate of inflation Canadians have seen in 30 years. 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 drastically change your shopping habits, travel options, and transportation costs. 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. 

What are the causes of inflation?

Inflation rates can increase due to several factors including: a growing economy, immense government spending, and soaring food and energy prices. So as Canadians increase their demand for goods and services, businesses often raise their prices to keep up with demand and the limitations in their supply. 

Can inflation impact your savings goals?

With the cost of everyday items increasing from year to year, these larger price tags could make reaching your savings goals seem like a tall task. However, no matter your income level, developing regular savings habits is the key to putting you on the path to financial freedom. Start by setting aside as little as $10 per paycheck (or as much as your finances allow) into a savings account to help you reach your financial goals. Consider putting these funds into a high-interest savings account and take advantage of favourable interest rates, so you can keep building your wealth even in financially uncertain times. Visit your local credit union and speak with a financial advisor about your savings account options to find the one that’s right for you.

Can inflation change your retirement plans?

For those starting their career, making a modest income, or even approaching retirement, today’s rising cost of living might be putting a serious dent in your wallet. Now while this might cause you to think twice about saving for retirement until your salary improves, the truth is you can’t afford not to start saving. Due to inflation, if you’re hoping to maintain your current standard of living in your later years, you’ll have to start putting away money today to retire comfortably later. Starting to save a little each month at an early age, could help you set yourself up for a financially secure retirement. If your current finances limit your retirement savings options, have no fear! Consider taking on a side hustle, such as driving for Uber or starting an online business to add more sources of income that will keep your retirement dreams within reach.

Here are a few more helpful hacks to navigate inflation:

1. Be a more diligent shopper

Before the pandemic, many of us may not have paid as close attention to the rising cost of everyday items, such as groceries. But as prices on everyday items take a sharp turn, shopping more carefully could have a big payoff. 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 to find out which stores offer the most affordable prices, so you can save more on your next trip to the store. 

2. Put off big-ticket purchases, for now

Thinking of buying a new car or renovating your home? Consider putting those plans on temporary hold. With inflation at an all-time high, the cost of a new car is more expensive than ever before. Similarly, the rising cost of building materials and supplies such as lumber and steel have made home renovations a costly endeavour. So rather than jumping to purchase that new car you’ve been looking at, or upgrading your kitchen, consider delaying these big-ticket purchases until prices stabilize and put that extra cash towards your savings instead.

3. Trade delivery apps for pickup orders

For many of us, ordering our favourite restaurant meals for delivery has become a much-deserved treat after a long work week. Ordering takeout can be a nice treat on occasion, but with the rising cost of delivery and food prices, your next Uber Eats delivery could cost you more than you think. Now, rather than give up your takeout, consider switching from food delivery to picking up your takeout in-store instead. By not using a third-party service, you not only spend less on your order, but your money also goes directly to supporting the local eateries you enjoy. That’s a win-win!

4. Save money on gas

As the price at the fuel pump continues to rise, Canadians who use their vehicles daily to drive to work and run errands, are feeling the financial strain. To manage this, consider signing up for the rewards program at your go-to gas station to take advantage of the exclusive savings they may offer to reduce your gas costs. Also, download a gas comparison app to find the lowest gas prices in your area so that your next trip to the gas station costs you a little less.

Ride the inflation wave 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? Find your nearest credit union, click here.