No doubt you've been hearing a lot about the significant spike in the cost of goods recently. The reason for these price increases? Inflation.

The Canadian inflation rate rose to a 30-year high of 4.8% in late January 2022*, largely due to supply chain issues resulting from the global pandemic. Everything from groceries to gas is noticeably more expensive and this has many families feeling a pinch on their household budgets.

The good news: there are steps you can take to reduce the effect inflation has on your monthly budget and your financial goals. Here are five tips to help you combat inflation.

An illustration about inflation tips. From left to right, a lamp, a computer screen showing part of a car, a wallet with some money sticking out and $ on a ribbon pointing down, a mobile phone showing a bar chart, a pie chart, and a certificate.

1. Understand the impact on your personal situation

Inflation rate expresses the price increase for a range of goods as an average. The prices of certain goods may see drastic increases, while others not so much. Depending on the goods your family regularly purchases, you may not experience as much of a hit to your budget as your neighbour or vice versa.

If you're noticing a large uptick in your household spending, try taking note of items you're spending significantly more on and perhaps consider alternatives or cutting back on how often you buy.

2. Postpone large purchases

If you were planning to make a big purchase this year, for example, a new vehicle or major home renovation, you may want to hold off if possible. Being realistic about needs versus wants will help you find opportunities to hit pause and then come back to a purchase decision at a later date when prices have come down again, or at least settled.

Don't lose sight of your special purchase goals though! You can stay on track with your savings by setting a goal in Servus online banking and you'll be ready, cash in hand when the time is right.

3. Diversify your investments

One of the scariest impacts of high inflation rates is a loss of future purchasing power and what that means for your long-term goals like retirement. The best way to help protect yourself and your financial goals is to maintain a well-balanced investment portfolio.

Like a balanced diet, having a healthy mix of investment types (i.e. stocks**, bonds**, mutual funds**, etc.) will help your savings grow at a rate that stays on par with (or hopefully beats) inflation over time.

4. Anticipate interest rate increases

History tells us that when inflation is on the rise, interest rates are sure to eventually follow. A rate hike can affect you differently based on your individual financial situation.

First, consider your borrowing. If you have low-rate loans (i.e. a low variable rate mortgage), you may want to do what you can to lock in your existing rate. Second, consider your savings deposits and how earning a better rate on that money may help your shorter-term goals.

5. Stay the course

You have a solid financial plan (and if you don't — talk to us!) for a reason and it's designed to withstand these types of ups and downs. The current inflation situation may feel extreme, but rest assured you don't need to react with extreme measures to remain on track to achieving your goals.

If inflation still has you feeling uneasy, this is a great reason to schedule a check-in with your financial advisor and see if there are any changes you need to make to your plan.


** Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Mutual funds, other securities and related financial planning services are offered through Credential Securities. Credential Securities is a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Financial planning services are available only from advisors who hold financial planning accreditation from applicable regulatory authorities.

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.