I’ll explain how the Canadian dollar’s decline could affect your personal finances and share some helpful tips to make your money go further.
HOW LOONIE’S FALL IMPACTS YOUR FINANCES
The World Bank recently published a report indicating that Canada, along with the rest of the world, could be headed for a global recession in 2023.
This, combined with the falling value of the Canadian dollar, could have some negative effects on the daily finances of Canadians.
higher food prices
If you’ve been to your local supermarket recently, you’ve probably noticed that the cost of groceries and other essentials has increased due to inflation. As the value of the Canadian dollar falls, the purchasing power also decreases, which could result in spending more money on groceries. Be sure to budget accordingly to accommodate this.
More expensive foreign products
While Canada is certainly a manufacturing hub, many of the products we use on a daily basis are imported from abroad. According to the canadian encyclopediaHere are some of the most common Canadian imports:
- Auto parts for European or Asian import vehicles
- Electronics, such as phones, laptops, and televisions made abroad
- Overseas imported fuel and oil
When the value of the Canadian dollar falls, we can’t buy as much with it. This means that everyday essentials and items can increase in price, which can have a very tangible effect on our monthly account balance.
Other imported products that could become more expensive are household items and clothing.
Fewer buyers and customers for small businesses
If you own a small retail store or service-based business, you might see a reduced number of customers and clients.
Also, as a small business, you’ll likely find your day-to-day operating costs increase as office supplies and other essential business items also become more expensive.
TIPS TO COUNTER THE FALL OF LOONIE
Now that you have a better idea of how the Canadian dollar’s decline could affect your finances, here are some practical tips that can help you get control of your money.
1. Pay off high-interest debt quickly
If you have a loan or credit card balance with a variable interest rate, then you need to focus on paying down your debt as quickly as possible. If your lender or credit card company decides to increase your interest rate, then you could end up paying more money as a result.
The more money you pay on your principal balance now, the less money you’ll have to pay in interest later.
2. Buy essential groceries in bulk
Buying essential groceries in bulk is always a good way to save money. Today, however, I would say that it is more important than ever. Take advantage of your freezer space to store perishable foods and stock up on non-perishable items like canned goods.
The amount you’ll save by shopping with wholesale grocery providers far exceeds the annual membership costs to visit these stores.
3. Avoid major expenses
As essentials get more expensive, I recommend putting off major spending for now. It can be tempting to buy that new car, go on a vacation to the Caribbean, or renovate your kitchen. However, making these purchases could negatively affect your ability to pay for the things that matter most.
4. Cut down on non-essential purchases
In addition to avoiding major expenses, there are other ways Canadians can save money as their spending increases, such as:
- Eating in restaurants less often
- Find free sources of entertainment, like hiking local trails, getting a library card to borrow free books and DVDs, or listening to podcasts
- Get rid of expensive memberships
- Leaving lawn care or snow removal services
- Second-hand shopping instead of buying new clothes
The declining value of the Canadian dollar will undoubtedly affect the wallets of most Canadians. As long as you’re smart with your money, save more than you spend, and focus on the essentials, you should be able to stay on top of your personal finances.
Christopher Liew is a CFA Charterholder and a former Financial Advisor. He writes personal finance advice for thousands of daily Canadian readers on his Awesome Wealth website.
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