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Dealing with Inflation: Strategies to Manage Rising Costs
Understanding Inflation Inflation is an ongoing reality for all Canadians, causing the cost of goods to rise over time. This means that the purchasing power of money diminishes. The rate of inflation is expressed as a percentage and reflects how much prices have increased.
Vanessa Bowen, a chartered professional accountant and founder of Mint Worthy, advises creating strategies to manage inflation's impact on your finances. Here are expert tips to help you navigate a more expensive world.
- Monitor Your Spending Adhering to a budget is crucial, but rising prices make it challenging to stick to set limits. Essentials like groceries and fuel have become more costly, impacting your budget.
Kerry Taylor, financial journalist and founder of Squawkfox, suggests shopping with a list and using a calculator to track prices. Understanding unit pricing can help you make cost-effective choices and avoid the pitfalls of shrinkflation, where product sizes decrease but prices remain the same.
- Prioritize Debt Repayment Canadians are increasingly burdened with debt, with a high debt-to-income ratio exacerbated by rising interest rates. Doug Hoyes, co-founder of Hoyes Michalos, recommends focusing on paying off high-interest debts first to minimize the impact of rising costs.
If managing debt becomes overwhelming, consider balance transfer offers that allow you to move debt to a card with 0% interest for a limited period. This can provide temporary relief and help you pay down debt faster.
- Utilize Cash Back Credit Cards or Bank Accounts Earning cash back on everyday expenses can help offset rising costs. Bowen suggests using credit cards that offer cash back for groceries and fuel. Ensure that the rewards outweigh any potential fees or interest charges.
If credit cards are not ideal, consider alternatives like the PC Money Account, which provides rewards for purchases without impacting your credit score or incurring debt.
- Embrace Coupons Coupons can be a valuable tool in managing grocery expenses. Apps like Flipp allow you to compare prices and find deals without physical coupons. Jason Heath, a Certified Financial Planner, also recommends using cashback coupon apps like Checkout 51 to save on purchases by scanning receipts.
Be mindful of not straying from your grocery list, as coupon apps can sometimes encourage unnecessary purchases.
- Avoid Volatile Investments During periods of economic instability, focusing on stable investments can be beneficial. According to Sacke, investing in companies with solid financial performance, such as utilities, may be preferable to more volatile sectors like technology. Staying the course and not reacting impulsively to market fluctuations is key.
By implementing these strategies, you can better manage the effects of inflation and maintain financial stability.
