With all the talk these days of impending high inflation, I find my thoughts turning to ways that I can reduce or avoid the impact of this, if it does indeed happen.  In many cases, it just isn’t possible to avoid the effects of inflation, but where there are ways to do so, I can show you how to go about it.

Let’s look at some common expenses most Canadians have and see what can be done to protect yourself.

Mortgage

Higher inflation leads to higher interest rates, sooner or later.  Locking your mortgage in for a long fixed term would protect you if rates do spike up.  Owning your home outright is a great form of inflation protection in itself, as well.

Rent

Renters in some provinces have inflation protection, to some degree, as there is often legislation that limits what landlords can increase rent by in any given year.  That limit is affected by inflation, but provinces generally won’t allow large spikes in rent.

Property Taxes

You can’t do much here, but what you can do is review your property assessment and ask to have it reviewed.

I’ve successfully reduced my assessment (and therefore my taxes) by disputing it, giving reasons for why I believe it should be lower.  It’s free to try!

Another option to consider is getting involved with your municipality and their budget committee.   There are several ways to go about this, but it can be as simple as voting for the officials who promise to keep spending in check.

Utilities

Electricity, natural gas, and water prices are generally highly regulated, but they will also be affected by inflation to some degree.  Cutting back is the obvious way to save here, but, beyond that, I think it is worth looking into alternative energy options.

Most of them have a high upfront cost, but with low or no ongoing costs, making it perfect for inflationary times.  You could put up solar panels, a solar water heating system, a wind turbine (if you have the land), an on-demand water heater, or get a woodstove, to name a few possibilities.

Phone/Cable/Internet

Sometimes you can get a better rate, and shield yourself from near-future increases, if you sign a contract for a set period of time.

Food

Stock a pantry now with non-perishables.

Not only is it good for avoiding price increases in the near term, but it’s also a good idea for all Canadians to have some stored food in case of an emergency.

Food prices have been escalating so fast lately, you’ll likely get a better ‘return’ (in the form of saved money) from stocking up on food than you would from putting that money in a savings account.

Debt

Inflation reduces the real dollar value of debt, in pure economic terms; but for most people, debt means exposure to rate increases that come with inflation.

For the debt you do have, you can lock it into a fixed rate loan via consolidation, hopefully at the lowest rate possible.

Another related strategy that is good in inflationary times is to hold inflation-tied assets.

Usually, hard assets like property and gold, as well as equities (stocks), will move up with inflation while other assets, like bonds and GIC’s will suffer from it.  This is a general rule, though, not something to live by.  Tread carefully here.

The Bottom Line

Note that I am not yet convinced that inflation rates will climb to any worrying levels anytime soon.  However, I like to keep all bases covered, and be prepared for anything that comes.