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Brio EAP – March 2024 – Budgeting tips for inflationary times

Budgeting tips for inflationary times

With inflation now at 3.8%, the wallet is taking a beating. As of 2021, the 30-month inflation rate exceeded 15%, something unseen since the beginning of the 1980’s. Rising costs of goods and services, especially groceries and power, can be a real strain on personal finance. As prices increase, your buying powers decrease, making it more difficult to manage your budget. However, there are steps to take to protect yourself from the effects of rising prices. Below are ten ways to help manage a budget during a period of inflation.

Keep an eye on your budget
Your very first step towards dealing successfully with inflation is to draw up a budget. Determine what your monthly income and expenses are. Maintain a log of all expenses, both large and small. By tracking finances, you can get a clearer picture on how inflation is affecting purchasing power. You may think groceries are costing $500 every two weeks, but is that the case?

1. Saving money
In inflationary times, it is essential that you save money. Small savings can really add up. Seek ways to cut back on spending, like buying in bulk, reducing outings at restaurants, or cancelling unneeded memberships. Do you know how many Netflix accounts you have?

2. Investment wisdom
Investment can be a great tool to protect against inflation. Consider investing in stocks, inflation-linked bonds or property. Such assets will tend to track or exceed the inflation of the market, meaning your cash retains value as time goes by.

3. Stay clear of high interest debts
High interest debt, such as credit cards, can become a financial burden in times of inflation. Higher rates can make it more difficult to repay debt, since monthly payment levels rise. Aim to cut your high interest debt as quickly as you can. For example, you could consider a debt consolidation plan with a lower rate or accelerate the mortgage payments prior to renewing the mortgage with a higher rate.

4. Diversifying investments
Diversification is an important way to protect money during periods when inflation is on the rise. A diversified investment portofolio ensures that you are not reliant on one type of asset to grow money. That can reduce your risk exposure and improve the chances of positive return.

5. Search out affordable options
As prices increase, it can be wise to seek affordable options to products and services you currently consume. For instance, if fuel rates are on the rise, you might think of taking mass transportation, car-pooling and/or purchasing a more fuel efficient vehicle.

6. Bargain for your expenses
Do not hesitate to bargain on prices when possible. Occasionally, suppliers and vendors will offer you discounts and special deals to build customer relationships. Negotiate carefully to save money. This applies particularly when you renew cell phones and insurance.

7. Saving in anticipation on price increase
Plan in advance by saving on a regular basis. Set aside emergency funds for unanticipated costs and keep an account to save money for the future. As prices rise, you will be financially much more prepared.

In closing, budgeting during inflation can be challenging, yet there are measures that you can adopt to help you protect money. By sticking closely to a budget, by saving and investing money wisely, and being aware of any promotional offer, you can manage money more effectively during inflationary times. Remember, diversification of investments is key to minimizing your risk while maintaining purchasing power. By applying all these tips, you will be much more prepared to face the challenges posed with inflation and to protect personal finance.

Amine Chbani, MBA, Adm. A. Pl. Fin.
Senior Associate FinEduc Performance Inc.

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