Yahoo Finance This Fall Could Be Rough, Economist Warns: Safeguard Your Finances Now and Have a Fun Summer
Written by Amy Legate-Wolfe at The Motley Fool Canada
Inflation continues to remain high for Canadians and indeed those around the world. Yet, if you thought rising inflation would mean cutting expenses for most, you would be wrong.
Economists are finding that despite rising costs, people continue to make large purchases when it comes to the fun experiences associated with summer. Whether it’s going out to concerts, travelling, or just fun nights out, rising costs haven’t held consumers back.
And now, economists worry this could lead to a fall filled with worry.
A summer of fun could lead to tougher policies
When fall comes, Canadians splurging on items and driving up costs could cause rising inflation rates, economists warn. In the past, rising inflation has forced consumers to cut back. Yet today, that hasn’t been the case. Some economists have called this continued spending “revenge spending” following the COVID-19 lockdowns, leading many to make up for lost shopping time over the last few years.
So with the Bank of Canada and other countries committed to getting inflation under control, that could mean another increase in interest rates beyond what’s expected. Right now, Canadians currently have an interest rate at 4.75%, after the Bank of Canada increased it recently by 25 basis points, and could again in July.
There is hope!
This is a lot of doom and gloom, but there are ways to manage your finances and still have fun this summer. And the easiest way? Create a budget, and make automated contributions.
A budget will tell you what you need to spend on essentials such as mortgage payments and utilities. But it will also tell you what you don’t need to spend on. That way, if a Taylor Swift concert ends up being scheduled in Canada (which, as of now, it is not!), you can put that cost in the budget. Simply go through and cut out the items you simply do not need such as takeouts, and expensive coffees and clothes, and assign cash towards your savings for fun.
But don’t stop there. Another method you can use to fuel your fun this summer is by using your credit card rewards. Try and make any type of payment, from lunch to bills, through your credit card to create points. Then, pay it off to zero immediately. This will create more reward points to buy items such as tickets, or even trips!
Invest for more income
If you’re still worried you won’t have enough cash come fall, I get it. That’s why part of every budget should include automated contributions towards your savings. Whether it’s a percentage of your income, or the amount you can afford each month, put it aside. What’s more, consider investing in a dividend stock that could create more passive income to set aside in times of trouble.
A great option these days would be Canadian Imperial Bank of Commerce (TSX:CM). CIBC stock is a strong choice as it’s a Big Six Bank with provisions for loan losses during this downturn. It also holds a 6.18% dividend yield as of writing, and trades at 10.8 times earnings. That’s lower than almost all the rest of the biggest Canadian banks.
Investing in a bank stock also leaves you open to large returns, as CIBC stock is down 10% in the last year. So you could be looking at a stack of cash from dividends along with your return on investment.
Bottom line
Summer in Canada should be cherished. We don’t get sunshine all year round, making it a special time. So make sure you go out and enjoy it. Just don’t break the bank doing it, and leave yourself open to a fall of misery.
The post This Fall Could Be Rough, Economist Warns: Safeguard Your Finances Now and Have a Fun Summer appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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