As Canadians weave their way through higher interest rates and rising inflation, many are feeling more anxious and anxious about planning their finances, according to some financial planning experts. But there are ways to deal with the uncertainty by becoming more financially savvy, they say.
“One of the most important things you need to do is to start writing down and creating that budget, going over your recent expenses, checking how much you have as well as how much you owe and how much you own would be helpful,” said Jackie Porter, a board-certified financial planner.
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Porter says this is the year to reflect on whether budgets of the past still hold up given so much has changed for people in 2022 following the COVID-19 lockdown.
“Maybe people haven’t spent that much in the past few years…our finances have been pretty much on hold for two years (because of COVID-19),” she said.
Now that things are opening up again and people are dating or traveling abroad more, now is the time for a “reality check,” Porter said.
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We need to “review our finances to see what we can afford and what’s important to us,” she said.
“I don’t want to be the financial Grinch… I’m just really trying to encourage people to start thinking about ways to spend less… So maybe instead of going out for dinner, maybe have dinner in someone’s backyard.” .”
“So it’s not like the activity of collecting has to change. That’s how we’re going to approach costs,” she said.
Porter says the most important thing when you get too anxious is to get out of your head.
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“Budgeting helps you focus,” she said.
While budgeting can be helpful, said Millie Gormely, also a certified financial planner, we need to know what suits us best.
“I like to say that budgets are like diets in the sense that we try to follow them for a while. And if it’s not right for us, it won’t work. And you’ll just end up going back to what you were doing before,” Gormely said.
Gormley believes in what she calls “cash flow planning,” which requires clients to look through all of their income streams and expenses and see what they’re going in and out.
“People say if you just stop buying avocado toast at Starbucks, you could buy a house. It’s not that simple, but it matters where you spend your money. So let’s look at things like subscriptions to streaming services,” Gormley said.
She explains that sometimes people need to be a little “reckless” with themselves.
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“Not everyone needs cords when it really matters… And one would hope these are just temporary things to get you through a sticky situation,” Gormley said.
After getting a better picture of their expenses and income, Gromley and Porter say the next step a person can take is to seek professional advice from a financial advisor.
“They can have a conversation to see if there’s anything they can do to make you feel more secure about your financial circumstances,” Porter said.
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Porter explains that a financial planner can help with budgeting, but also offer advice on how to invest smartly, safely, and build wealth.
Compared to years past, Gormley says, “more people are looking for financial information now,” but not everything applies to a person’s unique financial situation.
“It’s one thing to read a book, visit a website, or read a blog to get an idea of the technical aspects of your investment decisions. But sometimes it’s very valuable to sit down with someone who’s been doing this all day, every day, and see how it affects you,” Gormley said.
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She said sometimes people look at what the markets are doing and get really upset when the market falls that day.
“I have a conversation with a client who is having that moment and I remind him that the market did that, but your investment didn’t do that because your portfolio is built in such a way that it doesn’t automatically do everything the market is doing,” Gormley said.
“Sometimes people need to remember that their portfolio is not the market, their financial plan is not society. We as individuals and as families have our own situations. And that’s what (we) need to look at (without) worrying about what’s going on.”
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Porter says rising inflation and higher interest rates have mostly hit parents whose incomes aren’t rising at the same pace.
“We’ve seen the cost of everything go up, especially basic necessities like groceries and petrol. So all of these things affect the bottom line for my clients and give them cause for concern. And I think fear is probably a great word because it just seems like things are crumbling under their feet not slowly, but quickly,” she added.
The food inflation rate, which hit 8.8 percent in June compared to the same time last year, continues to beat the broader rate of 8.1 percent.
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“In less than a year … we’ve also seen interest rates go up very rapidly (while we) have seen the housing market and house values go down,” Porter said.
The Bank of Canada has aggressively raised its benchmark interest rate from 0.25 percent to 2.5 percent over the past six months in a bid to curb inflation. But those things are beyond the control of the average Canadian, Porter said.
“I think what helps people feel less anxious is to focus on the things they can control. So you can control how much you spend. You can also control how much you don’t spend,” Porter added.
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https://globalnews.ca/news/9056696/canada-inflation-higher-interest-rates-financial-planning/ Afraid of rising inflation? Interest charges? Here’s what to do – National