I’ll explain how the falling loonie could affect your personal finances and share some helpful tips for making your money grow.
HOW THE LOONIE FALL CAN IMPACT YOUR FINANCES
The World Bank recently published a report indicating that Canada, like the rest of the world, could be heading for a global recession in 2023.
This, combined with the decline in the value of the loonie, could have negative effects on the day-to-day finances of Canadians.
Higher food prices
If you’ve visited your local grocery store recently, you’ve surely noticed that the cost of food and other essentials has gone up due to inflation. As the value of the loonie declines, purchasing power also declines, which could lead to increased grocery spending. Be sure to budget accordingly to account for this.
More expensive foreign products
While Canada is certainly a manufacturing hub, many of the products we use every day are imported from overseas. According to Canadian EncyclopediaHere are some of the most common Canadian imports:
- Spare parts for vehicles imported from Europe or Asia
- Electronic devices, such as phones, laptops, and televisions made overseas
- Fuel and oil imported from abroad
When the value of the Canadian dollar goes down, we can’t buy as much with it. This means that the price of everyday items and basic necessities can increase, 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 business, you might see a reduced number of customers and customers.
Additionally, as a small business, you’ll likely find that your day-to-day operating costs increase as office supplies and other business essentials also become more expensive.
TIPS TO COUNTER THE LOON’S DROP
Now that you have a better idea of how the falling loonie could affect your finances, here are some practical tips that can help you get your money under control.
1. Pay off high-interest debt quickly
If you have a loan or credit card balance with a variable interest rate, you should focus on paying off your debt as quickly as possible. If your lender or credit card company decides to raise your interest rate, you may have to pay more money as a result.
The more money you pay for your principal balance now, the less interest you will have to pay in the future.
2. Buy essential groceries in bulk
Buying essential groceries in bulk is always a good way to save money. Today, however, I would say it is more important than ever. Use your freezer space to store perishable foods and stock up on non-perishable items such as canned goods.
The amount you will save by shopping at wholesale grocery suppliers far exceeds the annual membership fee to visit these stores.
3. Hold back big expenses
As the essentials become more expensive, I recommend putting major spending on hold for now. It can be tempting to buy that new car, go on vacation to the Caribbean, or remodel your kitchen. However, making these purchases could negatively affect your ability to afford the most important things.
4. Reduce non-essential purchases
In addition to avoiding major expenses, there are other ways Canadians can save money as their expenses increase, including:
- Eat less often at restaurants
- Find free sources of entertainment, like hiking your local trails, getting a library card to borrow free books and DVDs, or listening to podcasts
- Get rid of expensive subscriptions
- Lawn maintenance or snow removal services
- Thrift store instead of buying new clothes
The declining value of the loonie will undoubtedly affect the wallets of most Canadians. As long as you manage your money wisely, save more than you spend, and focus on the essentials, you should be able to control your personal finances.
Christopher Liew is a CFA charterholder and former financial advisor. He writes personal finance advice for thousands of Canadian readers daily on his Awesome Wealth Website.
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