If you are standing around the water cooler these days, you are likely listening to a lot of chatter about the rising costs of just about everything. Prices are climbing across the board. From gas and groceries to cars and housing, we are spending a lot more than we used to. According to Statistics Canada, “Canadian consumer prices increased 5.7% year over year, up from a 5.1% gain in January. This was the largest gain since August 1991 (+6.0%).” Economists are warning that the rising prices could get worse. Even though we are all paying more for goods and services, very few of us are earning more. How can we stretch our dollars to cover these added costs? We offer some insight into the areas of the economy that seem to be most affected and provide some ideas on how to best manage this period of higher inflation.
GASOLINE
The rise and fall of gas prices is directly related to the price of crude oil. Unfortunately, several factors are causing the price per barrel to rise, not least of which is the geopolitical conflict between Russia and Ukraine. Since this conflict does not appear to have an immediate solution, we should be prepared to spend more at the pumps. In fact, in February 2022, “Canadian motorists paid 32.3% more at the pump compared with February 2021.” How can we reduce our spending on gas? You may want to consider carpooling with a co-worker or using public transit if it makes sense and would reduce your costs. If these options are not practical, consider trading in your vehicle for one that is more fuel efficient or electric or hybrid. If you are not in a position to trade in your vehicle, you can use an app like GasBuddy which compares gas prices at local stations or you can get a membership at stations like Esso or Costco, which may reduce your overall fuel costs.
FOOD
Canadians are learning to be especially creative when navigating the rising costs of food. Feeding a family has always been expensive, but the sticker shock in the aisles is certainly getting worse with each passing day. Inflation in food prices has had its largest yearly increase since May 2009. Most of the sticker shock is due to stresses on the supply chain and rising costs of transportation, as well as the conflict in Eastern Europe. StatsCan reported that in February 2022, the price growth for meat rose 11.7%. “Fresh or frozen beef (+16.8%) and chicken (+10.4%), was higher year over year in February than in January (+10.1%).” If you are hoping to keep your grocery bills under control, consider the following:
- Save on vegetables by purchasing them frozen instead of fresh.
- Consider alternative proteins: beans, canned fish, seeds, nuts and nut butters.
- If you do purchase meat, buy it in bulk when prices are cheaper and freeze it.
- Use coupons and check flyers for specials.
- Skip brand-name items and go for generic as much as possible.
- Cook at home and reduce or eliminate take-out or restaurant meals.
Cutting out convenience foods will save you a significant amount of money and help you and your family eat well while the cost of food soars.
SHELTER
Statistics Canada reported that “in February (2022), shelter costs rose 6.6% year over year, the fastest pace since August 1983. Higher costs for both owned accommodation (+6.2%) and rented accommodation (+4.2%).” The cost of housing has become popular dinner table conversation across the nation. For those who have yet to climb on the property ladder, the rising cost of houses is an ever present source of stress. Couple high home prices with the promise of increasing interest rates, and home ownership is becoming an unlikely dream for many. All hope is not lost. There are some things you can do to save money toward a home purchase. For starters, shop around for lower mortgage rates and work at saving a bigger down payment. This may take longer, but it is helpful in the long run as you are more likely to get approved for a lower rate if you have a larger down payment. Shoot for 20% if possible. Try to improve your credit score. Lenders may be able to offer you a better product if you have a good rating.
If you are already a homeowner and are experiencing the squeeze of inflation, you may want to consider refinancing your mortgage if you are able to find a better rate which may lower your monthly costs. To save more, try shopping around for less expensive car and home insurance and do your best to negotiate the interest rates on other debts you may have (ie. credit card or Line of Credit). If you are still finding money tight, consider a side hustle to help you generate more income.
BOTTOM LINE
With rising prices, it has never been more important to evaluate your budget. Prioritize which expenses are absolutely necessary and decide what you are willing to reduce or eliminate as costs are likely to keep rising in the months to come.
SOURCE: Consumer Price Index, February 2022: https://www150.statcan.gc.ca/n1/daily-quotidien/220316/dq220316a-eng.htm?indid=3665-1&indgeo=0, March 16, 2022
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