Inflation is on the rise in Canada, going up for the past two months in a row. While the economics behind what is driving the level of inflation upwards may not interest you, the potential impact that these increases may have on your household budget going forward should.
What is inflation?
In a nutshell, inflation measures the increases in costs for goods and services. As a consumer, there are a number of goods and services. Of the eight categories that Statistics Canada reports on, six marked increases, including transportation, shelter, household operations, health and personal care, recreation and alcohol/tobacco. The only ones that declined were clothing and food.
Given that each consumer will be touched in varying degrees to these increases of key products and services, it’s smart to plan ahead proactively with your budget. While you may receive a small cost of living raise annually to keep ahead of rising inflation, you can’t always count on it. And it’s possible that the rate of inflation may outpace your income growth too.
That’s why you’ve got to be aggressive and proactive with your budgeting. You’ve got to create more wiggle room where you can and employ strategies to keep other costs down as you can.
Inflation has been low for years
“One problem is that levels of inflation have been pretty low for a number of years, so people have mostly become accustomed to lower costs. Case in point is the extended period of low interest rates, where more people have been able to borrow more money. Unfortunately, this has created a false sense of financial security,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
With the likelihood of rates rising in the near future, there will be a new reality settling in soon. It’s one where it’s going to cost more to service that existing debt, which may also impact your monthly budget,” says Schwartz.
Take advantage of the moment now while rates are still low to pay down your existing debt and avoid taking out new debt. Your money will get more mileage in terms of being able to put a bigger dent in your debt while rates are low.
Save on gas
If you own a car, you’ve felt the sting recently at the pumps for sure. To save money on gas, consider carpooling. Make sure that your car is serviced regularly and that your tires are properly inflated to make sure your car is running most efficiently. Don’t idle the car in the driveway or while in drive-thrus. Don’t wait until your car is empty to fill up, because you’ll be forced to pay whatever gas costs at that moment.
Save on food
Costs for food have recently declined, but are forecasted to rise through 2017, according to Dalhousie University’s Food Price Report for 2017. Continue to use smart shopping strategies, like clipping coupons, meal planning and looking for less costly alternatives to fresh produce and meat can help your dollars stretch.
Save on clothing
To build on clothing savings, start looking to consignment stores. Not only are prices lower to begin with, you can reduce them even further by bringing in your old clothes and getting a store credit. This is particularly useful for children’s clothing.
Cut out vices and save
Some of the biggest increases are going towards alcohol and tobacco. Embracing healthy living will not only improve your health, it can save you lots of money too.
Do you have a budget? Did you know that setting a working budget is an essential tool to help you reach your financial goals? To learn more about setting a budget, call one of our trained credit counsellors at 1-888-294-3130 or get started with our online debt analysis.