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Personal Finances are Challenged with Continued Increase in Inflation

Personal Finances are Challenged with Continued Increase in Inflation

August 7, 2022

The world of personal finance for many Canadians is spinning quickly these days, writes Peter Watson.

Recently, the Bank of Canada made a significant increase in interest rates. The reason for the increase was its attempt to control inflation.

After digesting higher interest rates, the attention shifted to the effect this will have on the real estate market. People purchase a house based on affordability and a large part of that depends on mortgage interest rates.

Inflation is the culprit. Interest rates are just the solution to try to get it under control. This recent interest rate increase was based on an inflation rate of 7.7 per cent.

Now the challenge of inflation keeps on growing. The recently released inflation rate as of June is 8.1 per cent over the previous year.

Several questions come to mind. Will this additional increase in the rate of inflation continue to push up interest rates? Or how much more of an increase in inflation will be required before rates do rise.

The financial planning strategy for many households is shifting to defensive strategies. How can you make ends meet when interest rate costs keep rising?

Adding fuel to the fire is the underlying affect that inflation has on everyday spending. Things cost more. Add in higher interest rates and at some point, personal finances can become unmanageable.

We are in a fundamentally different economic environment. Managing household finances is more challenging and should be well planned out.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Only investment-related products and services are offered through Watson Securities of ACPI. Peter Watson provides wealth management services through Watson Investments. He can be reached at