4 Tips During Q4 with Rising Interest Rates & Inflation

“You make most of your money in a bear market, you just don’t realize it at the time.”  – Shelby Cullom Davis                      

Inflation has cooled slightly over the past two months from June’s shocking 8.1% but remains a primary concern for the Canadian economy. Dropping from the almost record-breaking highs seen during the peak of summer, September brought slight relief with a total CPI of 6.9% after a series of interest rate hikes from the Bank of Canada.

With some economists flagging concerns over the risk of Canada’s rising prices becoming ingrained for the foreseeable future, we wanted to give you some insight on how to better prepare yourself. You may not be able to alter global finances, but you can better position your own.

1) Make a 12-Month Plan

While it’s important to batten down the hatches and weather the storm, it isn’t the only appropriate response to navigating choppy waters. According to Craig Ellis, vice president of Bellwether Investment Management, “opportunity is still on the table” for successful investors who “are able to ride through such times and remain focused on their long-term strategy.”

Making and adhering to a plan in anticipation of an economic downturn is not only responsible, but potentially lucrative as well. Finding a trusted advisor to help you align your means with your goals is crucial to taking control of your future.

2) Create a Budget

With the Canadian dollar on the decline and core inflation on the rise, introducing a stricter monthly budget would be a shrewd decision. Proactive choices often outperform reactive ones, and in finance, this can be doubly so.

Simple changes like dialing back unnecessary expenses are a good start, but taking things a step further can significantly help you out in the long run. An open and honest conversation about your spending habits with your partner can help clarify boundaries and doing so with your Family Wealth Advisor can cement those agreements.

Whatever budgeting split you land on, always set a portion aside to pay off high-interest loans and tuck some away for the future if possible. As Ellis says, there “will be attractive investment opportunities that surface for those in a position to add to their savings.”

3) Max Fund Contributions

Given that the deadline for maximizing your RRSP contributions is March 1^st, 2023, and that there is no technical deadline for contributing to your TFSA as any surplus room is carried forward to the following year, we still recommend maxing both as soon as possible.

Our reasoning for this is two-fold. Of primary concern is the fact that you will thank yourself once retirement approaches. Secondly is that by depositing said capital you’ll be less likely to withdraw it prematurely. Our favorite benefit? You’re also accumulating tax-free income sooner.

Something to consider – if you are financially able to do so – is establishing a readily available emergency fund. Having one in place can help leave your previously mentioned accounts untouched and allow them to mature over time. This two-pronged approach can float you through a tough spot during the interim without sacrificing your future.

4) Assess, Reassess, and Stick to the Plan

Ellis credits the “challenging year for investors to the substantial rise in interest rates.” These conditions have led to a broad sell-off in both stock and bond markets, and if you are not on good footing the losses can be distressing. Having a plan, monitoring it, and making any necessary adjustments for the conditions at hand is paramount to your financial freedom.

Due to their capability to make trades on your behalf (alongside their legal and ethical obligations to do what is in your best interest) the benefits a fiduciary can provide their client become even more pronounced in volatile markets, much like the one we find ourselves in today. Bellwether’s dedicated team actively endeavours to protect and preserve your investments so you can focus on other priorities in life.

Once you reach out for a free review and consultation, our goal becomes helping you achieve yours through holistic financial planning. Inflation or not, why not let us turn your dreams into tangible investment objectives?