✔ Inflation is measured by the rising cost of everyday necessities like groceries, gas and housing.
✔ You can reduce the impact of inflation with a plan to manage household expenses and by tracking your spending.
✔ Inflation can have an impact on interest rates so look for ways to reduce high-interest-rate debts like credit cards.
When the cost of everything around you is going up at the same time, for reasons that aren’t always clear – that’s inflation. So why does it happen? And what can you do about it?
Prices keep going up
Inflation is the steady rise of prices across most basic necessities that Canadians buy regularly. To track inflation, economists add up the cost of a basket of goods and services that represent a wide range of common items we all pay for like food, clothing, transportation, and rent. If the cost of these goods goes up, the cost is inflating, and economists can measure how quickly it’s happening.
Where will inflation hurt the most?
For Canadians, the pain of inflation will be felt hardest in the grocery store and at the gas station. Canada’s Food Price Report 2023 predicts a 5% to 7% food price increase in 2023, with the most substantial increases in vegetables, dairy, and meat. For an average family of four, that means their costs for groceries in one year could be up to $16,288.41, an increase of over $1000 when compared to the previous year.
Gas prices tend to fluctuate for a number of reasons and Canadians have been adjusting to higher prices over the past few years. The type of vehicle you drive and the distance you commute will have a direct impact on how much fuel prices affect each household.
How you can keep up with rising costs
Inflation affects people in different ways. Those with expenses that can’t be easily cut will find it tougher to trim their budget than those with more flexibility in their daily spending. To learn more about the difference between these types of expenses and how they affect you, see How to Build a Budget in Four Easy Steps.
Planning for inflation at the grocery store
What you eat, how you cook, and reducing food waste all contribute to how much your cart of groceries will cost you in the long run. Here are some tips to stretch your food budget.
- Make a meal plan. Plan your meals for the week and buy only what you need. This will cut down on impulse purchases and reduce waste. Include the food you already have in your freezer or pantry.
- 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. Vegetarian meals can be much cheaper and they’re good for you and the environment.
- Buy frozen instead of fresh. Because of the sensitive nature of transporting fresh fruit, particularly from far away, buying the frozen version is almost always more economical.
- Become a food rescuer! Through apps like Too Good to Go, Flashfood, and Feedback, you can connect with local grocery stores, bakeries, and restaurants to rescue leftovers or food nearing expiration at 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 are driving up the price 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 manage the rising costs of filling up the tank without emptying your wallet?
- Carpool. If you must commute to work, consider talking to your co-workers about opportunities to share the cost of fuel and vehicle maintenance by carpooling.
- Explore insurance discounts. Increasing your deductible or combining home and auto coverage could lower your monthly insurance premiums. Ask your provider to review your policy today.
- Plan your trips. Postponing or shortening road trips and combining errands are two easy ways to lower the distance you drive and go a long way to cutting costs.
- Re-evaluate your needs. If you’ve recently moved to a city or stopped commuting to work, you could be better off trading the cost of vehicle ownership for more affordable options like public transportation.
- Walk or ride. For those shorter destinations, like the grocery store or coffee shop, consider walking or biking to your destination. Both are great ways to stay in shape, get fresh air and reduce any stress that inflation may be causing.
Combat climbing interest rates
Inflation also impacts the cost of borrowing because it often leads to rising interest rates which makes loans more expensive. Take some time to review your payments on any loans, lines of credit or credit cards as you could be paying more in interest. If those costs have gone up, you may be able to hack your way to a lower interest rate or consolidate your debts with a loan that offers a fixed interest rate and term, with one set monthly payment that fits within your budget.
If the increased cost of everyday necessities has caused you to struggle financially, easyfinancial is here to help. We offer a wide range of flexible borrowing options that can help Canadians improve their financial outcomes and start on a path to a better tomorrow, today.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.