Inflation

Stopping Inflation from Pushing Your Finances Over the Edge

Since the beginning of 2021 the word inflation has permeated every conversation about the economy as it pushes the cost of goods to levels not seen in 30 years. But what is inflation and what does it mean for the average Canadian?

Put simply, inflation is when a currency loses value which affects purchasing power, so goods purchased with that currency become more expensive. Global factors such as the pandemic, supply chain disruptions, extreme weather and energy prices all contribute to the level of inflation we experience.

Where will inflation hurt the most?

For Canadians the pain of inflation will be felt hardest in the grocery store and at the pumps as the cost of dairy, produce and fuel are set to increase throughout 2022. According to Canada’s Food Price Report, the average grocery bill for a family of four is expected to increase by nearly $1,000 annually due to inflation. With world food prices increasing by 28% in 2021 alone (the highest amount in a decade) many Canadians will be facing difficult decisions at the cash register.

How can I protect my finances from inflation?

Unfortunately, since inflation affects our most basic expenses no one will be able to avoid its impact, however, with careful planning and some changes in your spending behaviour you can reduce how much inflation eats into your budget.

Planning for inflation at the grocery store

Based on current trends the items you will see the sharpest rise in at the grocery store include dairy (milk, cheese, and butter), fresh produce, and bakery items, including bread. Meat (pork, chicken, and beef) has also experienced a sharp increase in cost but is anticipated to level out over 2022, along with the cost of eggs.

So how do you save money when so many of the basics have gone up in price? Here are some tips to help protect your grocery budget.

• Make a menu plan. Write down all the meals you’re planning to make for the week and what you need to buy to make them. Plan recipes that utilize what you already have in your freezer or pantry, the less you waste the more you save.

• Stick to the list. Avoid shopping on a whim or when you’re hungry. Impulse purchases can ruin your budget and leave you without essentials.

• Price shop! Whether you use store flyers or any of the price checker apps, shop around to make sure you are getting the best prices.

• Add some vegetarian or vegan meals to the rotation. Even without inflation meat is an expensive menu item. Try and find some simple and flavorful vegetarian dishes to stretch your grocery budget further.

• Buy frozen instead of fresh. Because of the sensitive nature of transporting fresh fruit, particularly from faraway, it’s almost always more economical to buy the frozen version.

• Stock up. When you find a pantry item you use frequently on sale stock up. Canned/dried goods have a long shelf life and make for nutritious and delicious meals. 

• Become a food rescuer! For years grocery stores and restaurants have struggled to reduce food waste. While many have established donation networks to help the problem, there was still more to be done, enter food rescuers. Through apps like Too Good to Go, Flashfood, and Feedback, savvy consumers can connect with local grocery stores, bakeries, and restaurants to rescue left-overs or food nearing expiration for significant discounts. Keep it interesting by selecting a mystery bag.

Planning for Inflation at the Pumps

The soaring costs of oil are adding to inflation woes felt around the world and driving up the cost of fuel. Fuel prices have increased by 30% across Canada since the beginning of 2021 and given current trends will only be pushed higher.

So, what can you do to stop inflation from leaving your car high and dry?

• Evaluate your usage. Since the beginning of the pandemic many people have found themselves less dependent on their vehicle or transitioning to remote work. With expenses like insurance and vehicle maintenance it may be the time to ask yourself if owning a car is worth the expense.

• Reach out to your insurer. Insurance is important but it can also be quite expensive. Talk to your provider to see if there are opportunities for you to save money and reduce your monthly costs. Here are some helpful tips for saving on auto-insurance.

• Carpool. If you must commute to work, and you are comfortable to do so, talk to your coworkers to see if there is an opportunity to share the cost of fuel and vehicle maintenance by carpooling.

• Plan you trips. Possibly the biggest advantage of owning a car is having the freedom to go anywhere anytime the mood strikes you. However, with the price of fuel at record heights it’s best to plan to reduce the number of trips you take, or the distance covered. Break your errands down geographically so you’re not driving across town when it’s not necessary.

• Leverage memberships and reward points. There are several reward programs that can help you save money at the pump. Costco memberships provide immediate savings for members by providing a reduced price per litre (you can also save on groceries). Airmiles allow you to use accumulated points at select gas stations for $10 or more off a fill. Most credit cards have cashback programs on fuel/grocery purchases that can be leveraged as well.

• Walk. Whenever the opportunity allows walk or bike to your destination. Walking is wonderful way to stay in shape, get fresh air and reduce any stress inflation maybe causing you.

Be wary of shopping your fuel prices! We all have a friend or family member who drives out of their way to fill up at a place where the price per litre is cheaper. Before you follow suit remember to check the math.  For example, If one station is 10₵ less per litre than another and you have a 60L fuel tank your total savings will be $6. The farther you have to go to save money the more of your savings you are burning up.

Inflation and the Rise of Interest

The Bank of Canada is expected to raise interest rates in the months ahead in hopes of reducing interest, which will raise the cost of borrowing. The goal of raising this cost is to reduce the supply of money readily available to the market. By doing this, suppliers will have to respond by lowering prices thus reducing inflation.

While reducing inflation will benefit everyone economically, the rise in interest rates can have an impact on borrowers. If you are carrying debts from a number of lenders you may want to consider a consolidation loan to reduce your monthly payments. For more information on how interest rates effect your debt, or to access tools like our debt consolidation calculator, visit the goeasy Academy.