According to Statistics Canada, inflation rose to 8.1% in June 2022, which is the highest increase since 1983. But what exactly is inflation?

What’s Inflation?

Inflation measures the overall impact of changes in price for different types of products and services. It allows for a simple value representation of the increase in the price of goods and services over a period of time. Simply put, inflation is the rate at which prices of our goods and services rise. This means that what you could buy with $100 before will need to be increased in order to buy the same products and services today.

To put it in perspective and using the Bank of Canada calculator, what you could buy for $100 in 2020 will now cost you $111.44 with inflation. As you can see, you will need more money today in order to get the same products and services as before. This is in a sense what inflation is.

Inflation affects everything we spend our money on. From groceries or gas to insurance and even housing, everything has been gradually increasing over the years. However, the same cannot be said about Canadians incomes. While the cost of daily living is increasing, most people’s income hasn’t followed this trend. Thus making it very difficult for the average Canadian to keep up with inflation. So what can we do to keep up or at least feel the negative effects of inflation on a lesser scale? Here are all the tips you’ll need to stay on track.

Be more mindful of your finances

In order to keep up with inflation, you first need to make sure you understand your financial situation. While most people don’t like talking about money or thinking too much about their finances, this is the single most important tip you can get to be able to keep your head above water.

Make a budget

Budgeting helps you keep track of your money so you know what your hard earned money is being spent on. Making a budget will allow you to have a better understanding of your finances. It shows you how much you are making, how much you are spending and everything else pertaining to your personal financial health. In order to keep up with inflation, you always need to be on top of your finances so you can adjust accordingly. You would be surprised where you spend most of your hard-earned money. Which is why it’s important to do your budget every month to track your income and your expenses and make sure you are spending your money efficiently.

Cut out unnecessary expenses

After you’ve made your budget and have classified all of your expenses, you will have a better understanding of your financial situation. This will help you “trim the fat” on your budget and cut out unnecessary expenses. Eliminating unnecessary expenses helps you free up more money so you can better face inflation. Do you really need to eat and drink out every week? What about your coffee? Can you find a way to make it at home even a few days a week to avoid purchasing it every morning? These are all little things but they add up really quickly, especially if they are daily habits.

Pay off debt

Living with bad debt can really slow you down in your financial journey. If you mainly have credit card debts at high interest rates, it might be a good idea to pay it off. Most credit cards have about 20% interest rate and depending on how much money you owe, the interest payment can really add up. If you pay off your debt, not only will you have the satisfaction of being debt free, you will also free up a lot of cashflow in your budget to be able to face inflation better. This will help you achieve more financial independence and peace of mind.

Spend less

I know you are wondering how this can be possible when the price of everything has increased with inflation. However, it’s very important to find ways to reduces your expenses so you don’t drown with spending and inflation. You can always do your research to get the best prices of items you’d like to buy or get discounts. You can also make sure you absolutely need to buy something by allowing yourself to think hard about every potential purchase thoroughly. Here are 6 ways you can spend less to keep up with inflation.

Save for emergencies

If you’d like to be financially stable despite these price increases and inflation, it’s important to save for emergencies. You never know when your next emergency will be. Your car can break down at any time, or you can have plumbing issues you need to fix and you need to be ready for when this happens. And believe me, it will happen. They don’t call them emergencies for nothing. Put money aside every month for unexpected expenses. This will really come in handy if you have an unexpected purchase you need to make and it will prevent you from indebting yourself and derailing your financial plans.

Get multiple sources of income

With everything rising and the cost of living increasing with it, you really can’t afford to be without a steady income. Most Canadians were living paycheck to paycheck even before inflation started hitting record highs. So it only makes sense that the struggle is more difficult with these recent price increases. While it’s a great idea to reduce expenses and watch how you spend your money, it’s even more important to earn more money to be able to keep up with inflation.

So here are 3 ways to make more money to help position yourself better financially and facilitate how you deal with inflation.

Negotiate your salary

One of the quickest ways to earn more money is to find a way to tap into your current job’s resources. Talk to your employer to see if there is a way for you to earn more at your current job. If you know that you’ve been working very hard and efficiently, try asking for a raise. An employer usually knows how hard an employee is working and if this is true, they will consider this and give you a raise. Even a $1 an hour raise can be beneficial to your situation.

The second option would be to find out if you can work more hours. If there is overtime available and you are able to work more hours, then do so and this will increase your income potential instantly. One conversation with your boss can potentially help you earn a few hundred dollars more than you did before.

You can also ask your employer if there is something else that you can do to earn more at your current job, for example another type of work that you can do on top of your current one. If you need to learn more skills or be better at what you are currently doing, find a way to shadow with someone in your department who is doing better than you and learn tricks to be more efficient.

Being more efficient can help you earn more money.  This is especially true if you have a sales job and you get extra bonuses depending on the amount of sales you make. So in this situation, figuring out how you can make more sales will be very beneficial to you.

Switch jobs to make more money

If you can’t find a way to move up at your current job or earn more money with your current employer, try searching for another job. There might be a company out there willing to pay more money for the same job you’re currently doing. It doesn’t hurt to look elsewhere. Start tapping into your contacts to see if you can find a better paying job in your field. 

If you know you are not qualified enough to earn more money, or that you have reached the maximum amount of money people are willing to pay for your expertise, you might need to learn a new skill or get another diploma. Do your research to figure out the types of jobs you can easily find work in and if you can easily get a license or diploma to do that work and earn more money.

You might only need to do 1-year or 2-years of studying at the college to get a diploma and skills that will help you earn more money for years to come. So, sacrificing one or two years of going back to school either part-time or full-time, can be great a investment in your future earnings.

Start a side hustle

Do you have an area of expertise different than what you are currently being paid for? If so, do your research and figure out a way to turn it into a business. This can be anything, really, as long as you think people will be willing to pay for it. Create something that will help you earn some extra cash on weekends or in the afternoons after you are done working your current job.

For example, if you are handy around the house, start a handyman business. There is a lot of money to be made helping other people fix minor things in their home.

If you know how to cook, it can be a good idea to start cooking and selling the food you make. However before starting a cooking business, make sure you check your provinces regulations on what you need to do to be able to sell food to the public. Some provinces in Canada will require you to have a food license and a permit before you can sell prepared food to the public. So, make sure you do your due diligence and meet all the requirements before you start a food business.

There are a lot of different businesses you can start to earn extra cash. You just need to be creative and find that business idea you love that will thrive and potentially provide you a full time income.

Bottom line

Inflation is currently hurting most Canadians. However, knowing these small tips can help you keep up with it so you can come out a winner. In personal finance, it’s always best to prepare for the worst but hope for the best. So always make sure you are prepared.