Balancing your budget while dealing with inflation
We have all heard about inflation. Lately, it seems to be a buzz word on most economic news reels. While journalist may talk about it in high-level jargon, for the consumer, it is quite simple: As prices go up, your paycheque buys less today than it did last year or even last month.
Statistics Canada has just released their latest monthly Consumer Price Index, and it shows an annual increase in consumer goods ranging food and clothing to recreation and housing.
Among the items that are costing you more are:
- Food (+3.4%);
- Beer and alcohol (+7.8%);
- Sporting and exercise equipment (+7.4%);
- Appliances (+6.9%);
- Newspapers (+6.1%);
- Books and reading materials (+5.4%); and
- Internet access (+5%).
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, suggests that while consumers may be concerned by the rising cost of goods and services, they are not helpless.
“Individuals and families often walk a tightrope when it comes to their household finances,” says Schwartz. “When we are not budgeting properly, even the slightest rise in inflation rates can send our finances spiraling out of control.”
By following the lead of corporations and governments, Canadians can go a long way in protecting their bottom lines.
“Educate yourself about inflation, and factor it into your budget and financial planning,” adds Schwartz. “Those that take into account the rising price of consumer goods can stay on top of things and avoid debt.”
To help Canadian families balance their budgets in the wake of the rising cost of living, Schwartz and the team at Consolidated Credit offer these budgeting tips:
Research inflation. According to Statistics Canada, our inflation rate currently sits at 2.1%, which means the average price of consumer goods are 2.1% more expensive than they were last year. The rate of inflation is also expected to increase at an average of 1.42% over the next year. This indicates that goods will cost approximately 3.5% more next year than they did last year
Scrutinize your budget. Take a good look at your household budget. Outside of fixed-rate loans and mortgage expenses, what were your monthly household expenses last year?
Factor in inflation. Let’s say your monthly household expenses were $2,000 last year. In order to keep up with the rising cost of goods, and avoid having to rely on credit, you need to budget an additional 3.52% for the coming year. This means budgeting an additional $2,070.40 for monthly costs.
Make cuts. One of the simplest ways to cushion your household budget for the financial blow of inflation is to make small cuts to your discretionary expenses. Eliminating your daily cup of coffee, or reducing the number of times you eat out can easily free up the extra $70 dollars you need each month to make ends meet.
Avoid credit. When finances get tight, it is easy to turn to credit in order to get by. Unfortunately, this short term gain can result in long term financial pain for your budget. If you want to eliminate any unnecessary added expenses in your budget, be sure to avoid the use of credit and the interest charges that can come with it. Tuck your cards away somewhere safe and only use them when absolutely necessary.
If the increased cost of living and high price of consumer goods has caused you to fall off the financial tightrope, we can be your safety net. Call today to speak to a trained credit counsellor and find out how you can get your budget under control. You can also try our Free Debt Analysis online and a counsellor will reach out to you.