Managing Your Finances Through Inflation and Interest Rate Hikes


This is not breaking news, costs continue to be stubbornly high.

A recent Angus Reid Institute survey found that 80% of Canadians have scaled back, cut back or delayed spending, driving, saving, or even making charitable donations as they grapple with the soaring cost of living. To make matters worse only 48% of respondents said they’d be able to manage an unexpected $1,000+ expense this month.

The reality is many Canadians are living very close to the margin without a great deal of financial flexibility in their life.

Debt levels of those 55+ continue to climb and evidence suggests there is no sign of this slowing down.

For those nearing retirement or in retirement the perfect storm continues to brew with the cost of living escalating, pension income declining and lifestyles being compromised.

In a perfect world you would enter retirement debt free. However, life has a way of throwing you a curveball when you least expect it. Even if you tried to plan for all the potential wildcards that could derail your retirement plans such as, fear of outliving your money, investments falling in value, healthcare costs escalating and the list goes on, you simply can’t plan for everything. And the one wildcard I can almost guarantee most didn’t factor in was a pandemic.

The economic landscape has changed and it is tough for those who are most vulnerable and those living on a fixed income.

As households look closely at how much money they have coming in and what it is they are spending their money on, the shortfalls are glaring. While households desperately look for ways to improve their financial health, there is an additional element I’m worried about, the knock-on effect to their mental health.

For those in retirement, isolation can set in when gym memberships, club memberships and costs associated with socialization including family get-togethers are eliminated and money is redirected towards life’s necessities. Those on a pension may not have adjustments for cost of living and even if they do, there may be a lag effect not reflecting today’s reality.

As costs continue to escalate frustration, fear and in some cases anxiety increases over the lack of money and that can lead to feelings of hopelessness.

But it doesn’t have too.

For those who own their home and want to stay safe and secure in that home, there is an opportunity to unlock some of the value and redirect that money to your lifestyle today. This is a whole new way of looking at diversification. You know the saying, “don’t put all of your eggs in one basket.”  It applies here as well. If all of your money is tied up in your home with little left over, it is very hard to eat a brick in retirement.

A reverse mortgage isn’t for everyone but it is absolutely the right product for some.

These are your golden years right now and yet these are difficult times. You aren’t to blame for interest rates heading higher, costs going up and money being tight. These are simply the wildcards that can compromise your lifestyle and impact us all.

But there is good news because you have an option.  You were savvy enough and had the resources to purchase a home. A home that has likely increased in value. A home you want to stay in and a lifestyle you want to secure.

I’ve often recommended people have a rainy day fund or emergency fund for unexpected expenses. The irony is while you may not have access to the funds sitting in a bank account, you do have an emergency fund. You have access to funds via your home. It is just a different type of “emergency fund”. You are better off than you might have realized.

I think we owe it to ourselves to explore every option in today’s environment to secure peace of mind financially speaking at a critical time in our life.

I will leave you with a thought my father shared with me years ago. “Go ahead and spend your money, because if you don’t your heirs will.” Go ahead and unlock some of the value in your home, you have earned it.

~ Pattie Lovett-Reid

Chief Financial Commentator

HomeEquity Bank

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