How to curb the impact of inflation

There’s been a lot of attention on the rate of inflation lately, and Canadians are feeling the pinch. It seems like costs are going up for everything, and making it harder to stretch your dollar whether you’re at the grocery store or saving for a new purchase like a home or car. Even filling up your tank with gas costs a lot more these days. 

With costs rising faster than our incomes, avoiding going into debt takes careful consideration. In fact, inflation is higher than it’s been in decades. If you’re not already seeking the advice of an expert accountant, now is a good time for it. Getting guidance on how to curb spending and take advantage of tax savings and rebates can help you weather this inflation storm relatively unscathed. 

For instance, today the Government of Canada began sending out rebate cheques to help Canadians offset the steep increase in the price of groceries. In order to be eligible, you must have qualified for the GST rebate as of January of this year. It’s a one-time top-up payment—but if you’re working with an accountant, you’ll already have identified whether or not you’re eligible for automatic rebates like this one. 

Additionally, we have a few other ways that you can help lessen the impact of inflation on your family’s budget or your small business’ bottom line. Keep reading, or give us a call to book a consultation for financial advice that will help keep you on track. 

1. Create a budget—and stick to it

You can’t control spending you don’t know about, so the first thing you’ll need to do is sit down and go over all of your finances. This will prepare you to create a realistic budget. If you tend to pay for most things using a debit card, carefully review your recent statements and categorize your expenses so you’ll have a better idea of where your money is going. You might be surprised by your discretionary spending, which is easier to trim once you’re aware of it. 

It’s possible that you’ll need to reevaluate your spending habits in light of current inflation rates. While groceries continue to be an essential purchase, you could find ways to save on food by switching to a budget grocery store or curbing spending on restaurants and takeout. If you have a number of digital subscriptions, consider which ones you can live without. Review your credit card statements and commit to paying off the balance so you’ll keep unnecessary interest charges under control.

2. Build an emergency fund

If you don’t already have one, it might feel like a tough time financially to start building an emergency fund, but it’s a good cushion to have in case things continue to get worse. Aim to set aside 3-6 months of expenses in liquid cash that’s available instead of invested. 

An emergency fund gives you peace of mind that you’ll be able to cover your costs without going into significant debt or paying excess interest. If you keep the extra funds in a high interest bank account, you’ll generate a little bit extra, as well.

If it seems overwhelming to save during a time of high expenses, the old adage about paying yourself first can help. Prioritize saving for a rainy day, even if it’s only a few dollars a paycheque. Over time, it will add up and you’ll have the assurance of extra funds when you need them.

3. Consider investing

If you already have an emergency fund (or once you’ve been able to establish one), the extra bit that you’ve been setting aside can be contributed to long term investments instead. This way, you’ll capitalize on higher returns and continue to build your financial stability. 

A financial advisor can help you identify good opportunities depending on the amount you have available to invest and your tolerance for risk. Even during financially difficult times and periods of high inflation, there are commodities that continue to be consumed, like natural gas and oil, or other opportunities to buy low (and hopefully sell high at a later time). 

4. Boost your income

Sometimes, the only way to get control over your financial future is by finding ways to increase your income. A temporary boost might be enough to help you get through a difficult period without going into significant debt.

If you’re in a stable career, you could ask for a raise or to work extra hours to increase your income. If that’s not an option, a part-time or seasonal position can offer a bit of extra money to cover costs like rent and food. While this isn’t an ideal solution and might not be sustainable in the long run, it can be a temporary response to a really challenging financial reality. 

5. Reevaluate your business affairs

Small business owners need to keep their books up to date. This will ensure that you have a good handle on your business’ finances, protecting you from unpleasant surprises like the inability to make payroll. You will also stay more informed about how inflation is impacting your expenses, enabling you to make changes accordingly.

You might be able to boost profit margins by improving efficiencies. For instance, there are increasing opportunities to work remotely, which can save business owners from the overhead costs associated with office space. 

Avoid making big purchases until you feel like your business’ future is once again on more stable footing. Asset acquisition that isn’t urgent should be put on hold. 

6. Ask the experts

Financial advice can be a prudent investment even when resources seem scarce. Chartered professional accountants can help you keep your finances in order, giving you a more accurate financial picture. It’s useful to have objective advice and professional evaluation during times of stress, when our emotions can cloud our decision-making. You’ll gain confidence in your financial planning and know that your decisions are as informed as possible. 

Accountants are also knowledgeable about inflation and can help you find additional ways to offset its impact. They can offer you strategies to offset high interest rates on your mortgage, or help you manage financial investments that are fluctuating and costs that continue to rise. Your overall financial health will benefit from seeking professional advice. 

The reasons for inflation are complex and can impact your family and business in various ways. If you’re struggling to make ends meet or to keep your company afloat, find out how the services of MMT Chartered Professional Accountants can help you get back on track. Getting your spending under control while continuing to build on your financially secure investments and savings can make this troubling time less stressful and mitigate the long term effects of inflation. 

Don’t wait to take control of your financial future. Whether it’s capitalizing on rebates and tax savings or overhauling your approach to budgeting and investing, we can help. Call us today, and start protecting your future. 

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