With the number of global factors that are occurring around the world, the result is inflation. Inflation causes the price of goods to be more expensive than their historical values. To cope with inflationary issues, you do not need a finance degree or to hire a financial advisor. In reality, financial advisors recommend utilizing the same sensible money-saving strategies they advocated during the boom years, such as managing spending, addressing debt, and avoiding hazardous investments.
Track your spending
Financial advisors have a common consensus and recommend budgeting to save on monthly costs, but sticking to a strict plan is more challenging than ever. While you may be able to postpone making large purchases like a car, the cost of necessities such as food and gas has risen. Creating a personal budget and listing all your expenses to create an overview of what you are spending per month. From there you can begin to identify where you are spending the most and if it is absolutely necessary. If not it can be cut out or reduced. You can do this with all your expenses, something like rent may not be changed but 5 nights out to the restaurant can be minimized. Tracking your spending can be a great way at creating better purchasing habits and benefit you during times of inflation.
Tackle debt as fast as possible
Inflation causes debt to exponentially increase because interest rates on loans are higher resulting in debts that are more expensive to pay off. Taking care of your debt can be difficult to accomplish if you do not have the plan to do so. However, a few ways in which you can implement that can lower your debt, such as paying more than the minimum monthly payment due on your credit card debt, overdraft, or line of credit. If you merely make the minimum credit card payment each month, it may take an eternity to pay off your amount. This is due to the fact that the bulk of your minimum payment will be used to pay interest costs rather than lowering the amount you really owe.
Another tactic is to pay off your most expensive debts first. Making minimum payments on all of your loans and credit cards except one is one of the finest debt-reduction tactics. Choose the loan with the highest interest rate and direct all of your additional payments toward paying it off first. Once your first, most costly loan is paid off, redirect all of the money you were spending on it to the next most expensive bill. Continue using this strategy to pay off your obligations until you are left with your least costly bill to pay off last. This technique will swiftly bring you out of debt, and you will be motivated as you monitor your progress.
Use cash-back credit cards or bank accounts
Cash-back credit cards work on the basic principle of returning a set amount of money to your pocket depending on how much you spend on purchases. This may be accomplished in one of two ways: either a flat rate or through category-based expenditure. If you use a flat-rate cash-back credit card you can get a set amount of money back on all of your transactions. If you want to maximize your spending across multiple categories, consider a cash-back card as some can earn a certain percentage on specific purchases such as travel-related spending, drugstore purchases, restaurant bills, and even a small percentage on all other types of purchases.
Cash-back credit cards are sometimes forgotten, especially when travel rewards credit cards draw the most attention due to their attractive advantages. Cash-back cards, on the other hand, provide one huge benefit that everyone may enjoy, saving money on purchases. However, keep in mind that not all cash-back credit cards are made equal. Consider the following questions while selecting a new one such as, are your purchases spread out across several categories? Can you earn the card’s welcome bonus responsibly if it is available? Are you open to paying an annual fee for the card? All are possible considerations for getting these kinds of credit cards or bank accounts.
Use coupons and look for savings
With rising inflation, you may have noticed that your grocery expenses have increased but the amount of food you purchased is still the same. The cost of production has begun to rise due to inflation and it can be evident on your food bill. Fortunately, big retailers such as Metro, Loblaws, and Walmart still provide flyers, the ones your parents or grandparents read regularly for the best deals. However, you do not have to wait by the mailbox or your front door to pick up a paper copy every week to discover where you can save the most. There are available apps like Flipp that can allow you to compare costs across many retailers from a single screen without leaving your home.
These types of coupon applications allow anybody to save money on food, even if it is past its expiration date but still edible. Some of these applications also function as grocery lists. Sometimes it can also be beneficial to look for savings by choosing retailers or groceries that offer a rewards program that gives a percentage of your purchases as in-store currency for your next transaction or accumulate a lump sum. These savings may seem small by themselves but if you buy groceries every week, the savings can easily add up.
Avoid unstable investments
Inflation risk may affect all assets, although it is particularly prevalent in bonds and other fixed-income products. Bonds are the most vulnerable to inflation risk for most investors since their payments are often based on fixed rates. The buying power of your bond payment falls when inflation rates rise. Stocks, on the other hand, may provide some inflation protection depending on the sort of company you decide to invest in. Some businesses can raise the price of their goods or services as inflation rises in order to retain profit margins. However, when firms absorb increasing costs and sales stall, inflation can negatively impact their revenue and earnings. A utility may be more appealing to an investor right now than a tech business or a bank if they are carrying a large portion of the debt they owe. Investors are unlikely to see significant returns if a company’s CEO is compelled to spend a large portion of its revenue simply servicing current debt. On the other side, some sectors of the market, such as commodities and commodity-related equities, as well as real estate, may gain from growing inflation. Generally, during times of inflation, it is best to avoid unstable investments.
The greatest advantage of these tips is that they can be used even in times when there are higher interest rates or inflation is occurring. In fact, by using these tips during positive economic conditions you can save even more. If you have any questions or are looking for strategies to help you in times of high inflation in Canada, speak with a reputable and experienced financial advisor.