Smart Money Moves for Navigating Inflation

If you have recently bought gas, groceries, or a home, you and your wallet have likely felt the effects of inflation first-hand. As prices continue to rise, more Canadians are going into further debt to keep their head above water. If rising costs have you rethinking your finances, continue reading our experts’ smart money moves for navigating the inflation.

What is Inflation?

Inflation refers to the general increase in prices of goods and services over time, leading to a decrease in the purchasing power of money. The Bank of Canada raises or decreases interest rates to influence inflation in the country and keep it at its target of two per cent annually.

In Canada, inflation is measured using the Consumer Price Index (CPI), which compares the cost of a fixed basket of goods and services over time, including essentials like food, housing, and clothing. The percentage change in this basket’s price estimates overall economic inflation. This indicator helps Canadians and policymakers understand how the cost-of-living changes and plays a crucial role in shaping monetary policy and financial decisions.

Smart Money Move #1: Re-assess Your Budget

When facing inflation, it’s essential to re-assess your budget to adapt to rising prices. Follow these steps to get started:

1. Calculate your total income from all sources, including employment, rental or investment income, support payments, and pensions.
2. List all your expenses into two categories: non-discretionary costs, such as mortgage payments and utilities, and discretionary expenses, like dining out and entertainment.
3. Prioritize essential expenses and allocate funds accordingly. Tracking your expenses using budgeting apps or spreadsheets can help you stay on top of your finances.
4. Consider cutting back on non-essential spending and diverting those funds into savings to mitigate the impact of inflation.
5. Regularly review and adjust your budget to accommodate changing prices.

Still trying to figure out where you stand financially? Find out how you stack up and get customized tips by taking our 3-minute Financial Fitness Quiz.

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Smart Money Move #2: Restructure your Debt

Debt restructuring is a process that allows individuals to adjust the terms of their debt to make it more manageable. If you feel like you are losing the race against inflation, a crucial step to getting ahead is restructuring your debt. Take control of your finances by following these tips:

Assess Your Debt

Start by taking stock of all your debts, including the amounts owed, interest rates, and repayment terms. Understanding the full extent of your debt will help you develop a plan to restructure it effectively. Understand how inflation may impact the value of your debt and prioritize addressing high-interest debt that may become more burdensome as prices continue to rise.

“Our goal is to help you regain control of your finances and work towards a debt-free future,” explains Jessi Swaenepoel, Financial Consultant in Souris. “By working together, we can develop a tailored plan to manage your debts and ultimately pave the way for a brighter financial outlook. Your financial well-being is our priority, and we are here to assist you every step of the way.”

Prioritize High-Interest Debt

With inflation in mind, focus on paying down high-interest debt, such as credit card balances, as the actual cost of this debt may increase with inflation.

Create a Repayment Plan

A realistic repayment plan is crucial to manage and pay off your debts effectively. Here are some different repayment methods you can consider to tackle your debt:

Debt Consolidation

Consider consolidating your debts into a single loan with a lower interest rate to mitigate the impact of inflation on your overall debt burden. For an in-depth look at Westoba’s debt consolidation solutions, read our Take Control of Your Finances: Your Steps to Debt Consolidation blog here.

Snowball Method

With the snowball method, you focus on paying off your smallest debt first while making minimum payments on your other debts. Once the smallest debt is paid off, you roll that payment amount into the next smallest debt, creating a snowball effect that accelerates your debt repayment.

Avalanche Method

The avalanche method involves prioritizing debts with the highest interest rates. By paying off high-interest debts first, you can save money on interest payments over time. Make minimum payments on all debts while directing any extra funds towards the debt with the highest interest rate.

By choosing a repayment method that aligns with your financial goals and lifestyle, you can effectively pay off your debts and work towards a more secure financial future.

Smart Money Move #3: Explore Your Mortgage Options

Rising interest rates can impact your cash flow, which means more of your income goes towards basics such as your home and groceries, and there is less room in your budget for movie nights out with your family. As one of the most significant purchases you will make, your mortgage can take up a substantial portion of your budget, so when inflation increases, it is an excellent time to look at your options.

Fixed-Rate Mortgage

A fixed-rate mortgage offers a stable interest rate and monthly payments throughout the loan term, providing predictability in budgeting. This option can be advantageous in times of rising inflation as your payments remain constant. If you currently have a fixed-rate mortgage, you won’t be impacted by rate changes until your renewal date, but if that date is coming soon, you should talk to your Financial Advisor about your options.

Variable Rate Mortgage

For those with a mortgage featuring a variable rate, your interest rate will likely increase unless you have a variable rate mortgage with Cap Rate Protection. In this case, consider switching to a fixed rate, which will secure your rate for the mortgage term. Most variable-rate mortgages offer the option to convert to a fixed-rate mortgage, but it’s essential to speak with your Mortgage Specialist to understand the steps involved.

If you own a home, are in the market to buy, or are considering refinancing, a Westoba Mortgage Specialist can guide you through the different mortgage options and assist you in selecting the best fit for your needs. Speak with an expert, virtually or in person, here.

To learn more about your mortgage options and how to find the best fit for your situation, check out our mortgage resources here.

Smart Money Move #4: Keep Your Investments Top of Mind

When you’re feeling the pressures of rising prices, it’s essential to keep a close watch on your investments to mitigate the impact. Consider working with your trusted financial planner to discuss diversification of your portfolio. “Regularly reviewing and rebalancing your investment portfolio with the help of your Financial Advisor will ensure it remains aligned with your financial goals,” says Tara Wilkie, Financial Planner. “Staying informed about economic trends and seeking guidance from a financial team can help you make informed decisions to safeguard your investments.”

Smart Money Move #5: Reach Out for Financial Guidance

If you’re feeling your money is spread thin, have questions, or want to ensure you are on the right track, reach out to your financial advisor today. By getting a Financial Fitness Checkup with a Westoba advisor, you get the answers needed to cope with inflation while staying on track to achieve your financial goals. Our experts are here to review your financial health, give you actionable insights to give you peace of mind, and ensure you’re heading in the right direction.

Navigating inflation requires a proactive and strategic approach to managing your money. By re-assessing your budget, restructuring debt, exploring mortgage options, keeping your investments top of mind, and reaching out for financial guidance, you’ll be better equipped to weather the storm of rising prices.

If you have questions or want to book an appointment to speak to one of our experts, please call 1-877-WESTOBA (937-8622) or visit this page today.

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