Since inflation took hold in our economy, the increase in the price of food and other commodities has regularly made headlines. The subject undoubtedly also fuels many conversations in your families and in your friendly and professional circles. After all, the increase in the price of the grocery basket is — you’ll pardon the pun — really difficult to swallow.
While the obsession with the price of romaine salad looms over us — let’s remember the panic of last November — a visit to the shopping centers nevertheless allows us to see that household consumption is surprisingly holding up. Greed for travel and vacations does not seem to be abating despite the explosion in airline ticket prices, partly because of inflation, but also because demand is not weakening.
When it comes to changing our consumption habits, perhaps it is easier, in fact, to put the emphasis where it suits us…
Increase your ability to adapt
Let’s draw a parallel with the changing seasons. We all know that, despite a dragging summer, fall will inevitably set in. Some people proactively adapt to these changes by preparing for them: cleaning the yard, putting away the barbecue and garden furniture, closing the flower beds. Others live each summer as if it were their last, enjoying every ray of sunshine until they find themselves in the hallway, in sandals, with their summer tires on the first white morning…
It is useless to think that summer will last as long as we want in Quebec. The principle also applies to the general financial situation, which cannot always be rosy. Knowing how to adapt is an essential skill for managing your personal finances. This quality is deployed by showing foresight: building an emergency fund, maintaining savings or making difficult (probably temporary) choices regarding certain expenses.
If, for more than a year, the questions of the price of the grocery basket and access to housing have been essential issues that must be discussed collectively, these elements have proven to be not very constructive in terms of personal finances. And even if they disrupt the lives of the majority of households – and in a much more tragic way for some – it is up to each consumer to be responsible for their financial choices. If the cost of basic spending increases, the budget must be restored to balance by reducing discretionary spending.
Put the emphasis in the right place
Our many cognitive biases and the attraction of the status quo mean that we are perhaps our own worst enemy when it comes to adapting our personal finances. There has already been two years of economic uncertainty and life costs more, but everything suggests that the majority will wait until they have completely exhausted their savings or increased their debt before proactively demonstrating their ability to adapt.
Rather than wondering whether the theses of economists wearing rose-colored or dark glasses will materialize, everyone should ask themselves constructive questions in order to remain captain of their financial boat, no matter the magnitude of the storm that awaits them in the future. turning.
Here are a few to guide your thoughts.
What are my financial goals? Will I have the courage to make certain changes to achieve them? People generally underestimate the long-term impacts of their short-term choices. It may be relevant to surround yourself with experts, such as financial planners, to make this type of calculation.
What are my personal priorities? Making a budget — and, more importantly, following it — involves a difficult prioritization exercise. Very few households on the planet can incur all the expenses they would like. For others, even those who are financially privileged, choices must be made. In an inflationary context, it is necessary to determine which expenditures are priorities. Otherwise, the direct consequence will be debt or a reduction in savings.
The questions don’t have to stop there. You need to ask yourself: is my emergency fund adequate? We saw at the start of the pandemic that the majority of Canadian households could not survive very long without the state coming to their rescue. Have you learned from this experience by increasing the savings accessible in the event of difficulty? Is your family well protected in the event of inability to work following illness or accident?
Do you know the opportunity cost (also called opportunity cost) of the status quo? For example, family travel for the holidays this year, because it now costs three or four times more than before, represents a higher opportunity cost. Did you actually calculate this one?
There are no right answers to all of his questions. Except yours. Trust yourself.
Financial planner, Sandy Lachapelle is president of the independent firm Lachapelle Intelligent Finances.