How to Protect Against Inflation: Best Practices

How to Protect Against Inflation: Best Practices

Inflation in Canada ballooned to 5.7% this February, the highest the country’s inflation rate has been in 30 years. Unfortunately, that spike has caused the cost of living to skyrocket, and Canadians will see the impacts everywhere they look.

Gas, groceries, and other consumer goods are more expensive than they’ve been in decades, and Canadians need to know how to protect against inflation if they want to make it through these tough financial times.

Below, we’ll examine some expert tips on how to protect against inflation by saving money and adding to your revenue stream.

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Consider Your Investment Options

Putting money into fluctuating assets during times of economic hardship is an idea that turns many people away. However, it’s one of the soundest ways to produce a comfortable cash flow during uncertain periods of inflation.

Since money is tight across Canada, it’s more vital than ever to stay smart with your investment strategy and only put money into resources that hedge against inflation. These resources produce income faster than the rate of inflation grows, so increased living expenses won’t drown out their economic impact.

Investments that hedge against inflation can be anything, but houses and stocks are two of the most rewarding and traditionally stable.



Make Frugal Lifestyle Changes

Unfortunately, investing will always have minor risks, even if you have a carefully diversified portfolio filled with traditionally stable equity. If you want to know how to protect against inflation as risk-free as possible, your best bet is to make small lifestyle changes.

While these changes won’t make as dramatic an impact as increasing your revenue, they will help you save enough funds that navigating life with your standard cash flow will be more manageable.

Grocery Shopping

Big Purchases

Create Financial Wiggle Room by Paying Off Your Debt

Finding financial peace of mind with inflation risk constantly looming is challenging, but it’s even more demanding when you have debt and its own spiking inflation rates hanging over your head. However, if you pay off your debts now, you’ll get rid of that dark cloud and allow yourself to focus on navigating other living expenses.

Paying off your debt now can even make life easier down the road. For example, if inflation continues to spike and living expenses get even more demanding, you might not have enough money to comfortably pay your monthly credit card or loan expenses. However, if you have the budget to address them now, you won’t have to worry about the rate of inflation worsening.

Borrow Money for Secondary Income

There are two schools of thought on how to protect against inflation. Either you can pay off your debt, eliminate inflation risk from your life, and set a concrete budget plan, or you can borrow more money and leverage it to increase your revenue stream.

Despite inflation rates in Canada hitting record highs, loan interest rates remain low. You can use those borrower-friendly rates to your advantage by using your extra capital to invest in assets like property that increase your revenue. Some interest payments are even tax-deductible if you use your loan to boost your income.

Again, no investment is entirely risk-free, so you shouldn’t borrow money to produce secondary income if the extra debt isn’t within your budget or if you’re afraid of the potential consequences. However, taking on a loan to build capital can effectively offset inflation risk if you have the means.

Apply for a Credit Card with a Cash Back Rewards Program

Making it through economic hardships on a tight budget typically takes all the help you can get, and one reliable way to get a boost is to apply for a credit card with favourable cash-back rewards programs.

Cash-back credit cards refund a small percentage of purchases you make for certain products or at specific stores. For example, if you have a cash-back credit card that offers 2% back on food, you’ll get $2 for every $100 you spend at the grocery store with that card.

Though those might sound like small savings, those dollars add up if you use your card for most of your purchases, especially if you apply for one with more considerable cash-back savings or one that refunds for all purchases. However, not every cash-back card is worth the application, so it’s vital to research your options and look for favourable criteria.

Some cash-back cards don’t require annual fees, and applying for one with refunds in shopping areas you frequent can increase your savings and help you keep hundreds of dollars in your bank account every year.

Use a Real Return Bond

If our tips for how to protect against inflation feel too risky or small to make a difference, you can opt for one backed by the Canadian government.

Real return bonds are payments from the Canadian government designed to help you live comfortably as the cost of average expenses increases. They give funds to borrowers that change depending on the current interest rate and require biannual installments to pay back.

Though they aren’t a one-for-one replacement for standard bonds, real return bonds can give you the influx of funds you need to make it through an inflation spike. So long as you can pay them back, they’re a good option for times of high inflation.


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