Our household spending has increased by around 10% compared to last year.
At first I thought it was because I’m 7.5 months pregnant, unusually hungry and nesting these days.
But, inflation is the main culprit… and maybe a few more jars of chocolate peanut butter ice cream.
Cars, furniture, shelters, gas, groceries, lumber, barbecue meats; it all costs more, according to new data from the Consumer Price Index (CPI).
Around the same time last year, much of what a household bought was cheaply because we were at the onset of the pandemic, and demand for consumer goods plummeted as consumers Canadians have accumulated savings, if they could afford it.
It seems that the brief era of widespread savings opportunities is coming to an abrupt end with the reopening of the economy and the resumption of “normal” consumption of goods (eg clothes and shoes) and services (eg drinks on the Internet. a patio).
Try these techniques to prepare for higher costs while still being able to save money.
Rework your budget for higher costs
Yes, that means you need a budget. So if you don’t have one yet, download a free template online and get started.
Start with essential categories like housing, groceries, transportation, gasoline, utilities, diapers, vitamins, and medications. When you’re proactively budgeting for the coming month, which I highly recommend you do rather than setting your budget for an extended period, increase those numbers to between 3-6%.
Then target the non-essentials: clothing purchases, activity fees, camping reservations, streaming subscriptions and more. Also increase these numbers by a few percentage points.
Finally, go through each element and highlight what you might want to cut. Maybe you don’t need three meal boxes a week and you can get by with two. Or, maybe a streaming service will do. Plan your meals for the week to control your grocery expenses and plan your trips, especially if you drive more than 200 kilometers per week, to reduce fuel consumption. Use whatever you have in your pantry, medicine cabinet, or storage cabinet before replacing or bulk purchasing.
Even if it is tempting, don’t cut your insurance until you have carefully considered your needs with your respective providers and compared with others; this applies to your life, disability, critical illness, home and auto insurance. Cutting insurance without a thorough analysis could put you at huge risk in the event something unexpected happens, such as if you become ill or disabled or have an accident. But don’t be afraid to change insurance providers and even consolidate your coverage if it saves you money while ensuring adequate protection.
If your actual spending is lower than your budget numbers which means you’ll have to keep track of that, then congratulations … it just means you can save more, spend a little on that bike you’ve had your eye on. or put the excess towards debt.
Go have fun, but not on credit
It is very good for your mental health and well-being to spend money for fun. Just be prepared because restaurants, bars, social distancing concerts, golf matches, and sporting events will all be more expensive.
To avoid unnecessary stress, pay cash (or debit) and avoid accumulating a credit card balance, which will cost over 19% interest.
And know that you can reduce the frequency of fun events and tell your friends that you are choosing not to spend money on something that is not good.
Remember it, but don’t stop recording
We’re not out of the hostel yet, so don’t slack off when it comes to saving. It’s good to reduce what is set aside, in order to make room for some welfare expenses, for example, and especially if your emergency fund is fully funded (three to six months of essential costs are best practice). But, by keeping this saving habit regulated, you’ll be prepared for both emergencies and any upcoming big-ticket purchases like that pesky roof repair or the vacation you desperately need.
When and if you’re ready, you can invest any excess savings for your retirement (but not your emergency fund! This should never be exposed to market risk).
If a major purchase by a consumer can wait, they probably should
Do you notice that the cost of a new sofa, TV stand, computer, car, or new patio is exponentially higher than it was a few years ago? This is because the inputs that go into making these products are more expensive due to the surge in demand and / or supply shortages right now.
The economy still needs time to return to normal, which will hopefully stabilize the prices of these new larger purchases. But for now, expect them to cost more.
My advice is if you need something right away, go for the second hand market until then. It’s a great way to avoid paying a high price and can often help the environment. The diaper changer and nursing chair I just bought from Kijiji literally cost a third of the cost of buying new and barely used.
And, if the purchase can wait, hang in there and keep saving in the meantime.
The savings heyday might end as prices rise, but healthy financial habits formed during the pandemic, like budgeting well and stretching your hard-earned money as much as possible, are worth keeping.