Your financial plan during inflation

Une mère et ses enfants consultent un ordinateur portable

Do you notice everything costs more since the pandemic? You’re right. And whose fault is that? The culprits are inflation and high interest rates. Result: like many households, you’re finding it hard to make ends meet. With expenses increasing faster than income, no wonder it can be a struggle at the end of the month. If your budget is tight, take the time to build a financial plan. We’ve got some tips to help.

Inflation is…

A persistent rise in the average price level over time, 4.4% in Quebec this year. Economists measure inflation using the Consumer Price Index (CPI). The famous ‘basket’ is then used to show the evolution of costs.

Make or redo a budget

Are you still staying within your budget despite inflation? In reality, you’re pulling out all the stops to stay on track. One solution to your financial stress would be to review how you spend.

It means cutting those costs that are easiest to eliminate. In other words, consume less, consume better!

For example:

  • Reassess your multiple subscriptions (Netflix, Prime, Spotify...).
  • Take a coffee from home instead of buying one.
  • Make your lunch instead of going out to eat.
  • Snap up deals when grocery shopping.
  • Cook money-saving meals.
  • In the meantime, cut back on outings that cost a lot: shows, sporting events, restaurants...
  • Be selective in your leisure activities.
But why inflation?

The price of products and services rises for various reasons: supply issues, labour shortages, increased cost of raw materials.

If you’ve never made a budget, now is a good time to get started. Extremely important in times of inflation, it will undoubtedly nurture some healthy financial habits.

Manage your debt

Is it almost time to renew your mortgage? We’re hearing it all over the news: mortgage rates have almost doubled. It exposes you to mortgage payments that could take a huge chunk out of the family budget.

If you're not in a position to increase your income, try to first pay off those debts that cost the most in interest. This would include a personal loan or car loan, or credit cards. Ideally, you should put all your loans on the card with the lowest interest rate. Like a home equity line of credit.

What are the impacts of inflation?

As more money is needed to maintain the same lifestyle, retirees are among the most affected. Financial insecurity means putting off some expenses or delaying a project (buying a home, having a child, going back to school...). Rising interest rates are putting households into greater debt.

Review your investments

Are you setting money aside every month for your retirement? Cut your budget by reducing your savings. No sense adding more stress to your life. A better idea is to plan your retirement based on realistic assumptions.

Will your retirement income be indexed (This hyperlink will open in a new tab)? What impact will indexation have on your standard of living? Have you thought about diversifying your investments with inflation (This hyperlink will open in a new tab)-busting strategies?

In order to make enlightened choices, it’s a good idea to build your strategy with your advisor.

Are you in the same boat as Canadians who live pay cheque to pay cheque, unable to withstand unforeseen expenses? A car that needs repairs, new glasses to buy, a water heater to replace… How to do that without a financial cushion, without money to spare? Keep an emergency fund available to avoid having to borrow.

Your personalized financial plan

When inflation sets in, it’s recommended to act quickly to provide for your day-to-day needs. Make a budget, know how to best allocate and optimize your expenses, lower your debts... Your advisor can help you build a financial plan. An efficient and sustainable way to ensure your financial health in more challenging times, whether you’re in the middle of the work grind or already retired. And to end things on a good note: there are inflation-busting solutions.