Inflation can be a financial challenge for many Canadians, making everyday essentials like groceries, transportation, and housing feel like a burden. While increasing your income might seem like an obvious solution, it’s not always possible. But don’t worry—there are simple and effective ways to manage your finances during inflation without feeling like you have to sacrifice too much. In this guide, we’ll explore practical steps to easy savings, smart spending strategies, and tips to help you stay on track.
1. Reassess Your Spending Habits
Inflation tends to push prices higher, making it essential to take a closer look at where your money is going. A good place to start is by reviewing your budget and determining if there are things you can cut back on, at least temporarily.
Don’t have a budget? Read our article and get our free budget app. A Complete Guide to Creating Your Personal Budget.
The Power of Awareness
It’s easy to spend money without realizing how much small expenses add up. Dining out, subscription services, or extra entertainment can eat into your budget quickly. According to a survey by NerdWallet, 83% of Canadians have already changed their spending habits due to inflation, and 33% have adopted more conservative approaches. Pressing pause on non-essential purchases allows you to focus on necessities like housing, groceries, and transportation.
Before you head to the mall or grocery store, make sure that you know why you are going. Experience says that if you go to the mall, you will buy something. Make sure it’s something you need, not an impulse buy.
Practical Steps to Reassess Spending:
- Track Your Spending:
Start by tracking where your money goes. You can use apps like the free one from your bank, our free habit tracker or simply write down your expenses for a few weeks.
- Cut Non-Essentials:
Review your spending and identify areas to cut. Do you really need that gym membership, or can you exercise at home? Can you temporarily do without Netflix or dining out?
- Stick to a Budget:
Make a budget that prioritizes essential expenses. If inflation hits your income hard, it may be time to focus on needs over wants.
2. Avoid Variable-Rate Debt
As the Bank of Canada raises interest rates to combat inflation, variable-rate debts can quickly become more expensive. If you’re carrying variable-rate loans, now might be the time to refinance or consolidate that debt to something more stable.
The Risks of Variable-Rate Debt
Variable rates fluctuate with the market, and while they can be low during good times, inflation-driven interest rate hikes can make your monthly payments skyrocket. Consider consolidating high-interest credit card debt into a personal loan with a fixed interest rate. This ensures predictable payments and protects you from further rate increases.
Practical Steps to Manage Debt:
- Refinance to a Fixed Rate:
If you have a variable-rate mortgage, look into refinancing to a fixed-rate option. This protects you from sudden interest hikes and ensures stability.
- Limit New Debt:
Be cautious about taking on new loans, even with low or fixed rates. Every new debt means an additional monthly payment and less financial flexibility during inflation.
3. Become a Sale Shopper
Groceries are one of the hardest-hit areas during inflation, but you don’t have to let rising food prices break your budget. Becoming a savvy sale shopper is one of the best ways to manage grocery costs.
Bargain Hunting Without the Stress
You don’t need to become an extreme couponer to save money at the store. Instead, pay more attention to weekly sales, clearance items, and bulk deals. You can also take advantage of price-matching policies offered by many Canadian retailers, allowing you to get the best deal without visiting multiple stores. According to a NerdWallet survey, 47% of Canadians are paying closer attention to sales, while 25% are switching to cheaper brands, and 20% are buying in bulk. Make a shopping list and stick to it!
Practical Steps to Shop Smarter:
- Use Apps for Sales:
Apps like Flipp allow you to view flyers from multiple stores, so you can compare prices before heading out. Take note of price-matching opportunities.
- Switch Brands:
If your go-to brand is too expensive, try store brands or less popular names. They’re often just as good, but at a lower price.
- Buy in Bulk:
Stock up on non-perishable items like toilet paper, pasta, or canned goods when they’re on sale. Just make sure you have enough storage space!
4. Maximize Loyalty and Reward Programs
Loyalty programs and credit card rewards can be a hidden goldmine of savings. Many Canadians participate in grocery store loyalty programs like PC Optimum (offered by Loblaw Companies and Shoppers Drug Mart), and ScenePlus offered by most Sobeys stores, as these points can translate into big discounts if used wisely.
How to Make Loyalty Programs Work for You
Before heading to the store, take a few minutes to check your loyalty app or website for deals, but don’t buy things you don’t use or need. Let those deals guide your shopping list and watch your points rack up faster. These points can then be redeemed for future discounts or cash back. Don’t forget to check your credit card rewards for similar opportunities—sometimes you can redeem points for gift cards, merchandise, or travel discounts.
Practical Steps to Maximize Rewards:
- Use Loyalty Apps:
Sign up for grocery store apps like PC Optimum or ScenePlus to track your points and get notified of bonus point days or special offers.
- Stack Rewards:
If possible, stack rewards by using a cashback or rewards credit card while earning points through a store’s loyalty program. This double-dip can save you even more. My wife and I used this all the time at Safeways.
- Redeem Points Wisely:
Some credit card companies offer occasional promos for redeeming points on things like merchandise or gift cards, which can help offset costs.
5. Be Strategic With Your Savings
While it’s important to save during inflation, the value of your savings can actually decrease if inflation rates rise faster than your interest rates. This means you’ll need to think carefully about where you’re putting your money.
Inflation-Proofing Your Savings
If you’re not comfortable with the volatility of the stock market or don’t like the fluctuating rates of high-interest savings accounts (HISAs), consider putting your money into a Guaranteed Investment Certificate (GIC). GICs offer fixed interest rates, meaning you know exactly how much you’ll earn over time. Although your money will be locked away for a set period, this stability can be a safe haven during inflation.
Practical Steps to Protect Savings:
- Compare GIC Rates:
Shop around for the best GIC rates at Canadian banks or credit unions. Consider both short- and long-term options.
- Diversify Savings:
Keep a portion of your savings in more flexible options like a high-interest savings account for emergencies, but balance it with more secure investments like GICs.
- Avoid Panic Selling:
If you have investments, try not to sell in a panic when the market dips, and it will dip. Inflationary periods are often temporary, and selling at a loss can hurt your long-term growth. Be patient and wait it out. The market has always recovered and made gains.
6. Cut Energy Costs
Inflation doesn’t just affect food and gas—it can hit your energy bills too. Whether it’s electricity, heating, or water, cutting down on energy usage is a smart way to save.
Small Changes for Big Savings
Simple habits like turning off lights, unplugging electronics, or washing clothes in cold water can make a big difference in your monthly bill. You can also switch to energy-efficient light bulbs and appliances, which may cost a little more upfront but will save you money over time.
Practical Steps to Reduce Energy Use:
- Use a Programmable Thermostat:
Set your thermostat to reduce heating or cooling when you’re not home. If there is almost always someone at home, a shut-in or work from home person, this may not be a wise investment.
- Seal Windows and Doors:
Prevent drafts by sealing gaps in windows and doors. This keeps your home warmer in the winter and cooler in the summer, reducing energy consumption. This DIY effort can be done quickly and easily with almost not tools.
- Unplug Electronics:
Even when not in use, electronics like chargers, TVs, and computers can still draw energy. Unplug them or use a power strip to save on electricity.
7. Review Your Subscriptions
Many Canadians subscribe to multiple services—think streaming platforms, magazines, meal kits, or gym memberships. While convenient, these subscriptions can quietly drain your bank account.
The Benefit of Cutting Back
Take a close look at your monthly subscriptions and ask yourself which ones you really need. Can you share a Netflix account with a family member? Can you live without that meal kit subscription? Cancelling or downgrading unnecessary services can add up to big savings over time.
Practical Steps to Cut Subscriptions:
- Audit Your Subscriptions:
Write down every subscription service you have, from streaming to gym memberships. Identify which ones you don’t use regularly and cancel them.
- Share Accounts:
If possible, share subscriptions with friends or family. Many services allow for multiple users on one account.
- Look for Free Alternatives:
For entertainment, check out free resources like your local library, which often has movies, e-books, audiobooks, and more available for free.
8. Grow Your Own Food
Food prices rise during inflation, but there’s a way to fight back—grow your own produce! Even if you don’t have a large yard, you can still start a small garden or use containers for herbs and vegetables.
The Rewards of Homegrown Produce
By growing your own food, you can cut down on grocery store trips and enjoy fresh, organic produce at a fraction of the cost. Not to mention, gardening can be a fun and relaxing hobby!
Practical Steps to Start Growing:
- Start Small:
If you’re new to gardening, start with easy-to-grow herbs like basil, mint, or parsley. As you gain confidence, try growing vegetables like tomatoes or peppers.
- Use Containers:
If space is limited, grow plants in containers on your balcony or windowsill. I grow lettuce and tomatoes on my balcony using a cheap hydroponics set up.
Read about inexpensive hydroponics set ups at Hydroponics for You.
- Join a Community Garden:
If you don’t have space at home, consider joining a community garden where you can share resources and grow your own produce.
Small Changes, Big Impact
Inflation may feel overwhelming, but with a few smart adjustments, you can regain control of your finances. By reassessing your spending habits, managing debt carefully, taking advantage of sales, maximizing rewards, and making small energy-saving changes, you can protect your financial well-being during these challenging times. Sensible living is all about making practical, small changes that add up over time, and each of these tips can help you not only survive but thrive—even when inflation is high.
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.
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