How cash-strapped Canadians can navigate rising grocery prices
Given the challenges this year has presented, Canadians don’t need any more bad news. But it appears yet another crisis is about to hit home for many households. According to a recent report from the Agri-Food Analytics lab at Dalhousie University, the food inflation rate is now outpacing the rest of the economy and on pace to nearly double it by the end of the 2020.
If you’ve noticed your grocery bill going up in recent weeks, you might take solace in learning your eyes aren’t bigger than your mouth after all. But that’s small comfort given this is part of a growing trend that will likely worsen as the impacts of COVID-19 continue to permeate through the economy.
Like the other crises facing Canadians right now, there is not a lot most of us can do to control the sudden uptick in food prices. However, we all need to be even more mindful of how we budget and spend our money in the months ahead.
Re-thinking Canadians’ budgets
Most experts recommend budgeting between 10 and 15 percent of your monthly income for groceries. This normally keeps food costs affordable, but rising food prices threaten to throw that out of balance. At the current pace, many Canadians could be spending 20 percent of their budget or more to purchase the same volume of food by the end of the year.
That means finding ways to both save on groceries and reduce spending in other areas.
Cutting back on junk food, shifting away from organic, avoiding foods that always seem to expire, and consuming less meat can all provide short-term relief. Buying in bulk and freezing, canning, and smoking staple foods is another longer-term solution. Growing your own food is ideal — though not always practical.
At the end of the day you need to eat. And you can only cut so far before the medicine becomes a poison.
It may feel punitive given the deep cuts you’ve likely already made, but you’ll need to revisit your household expenses to find out where further reductions are possible. Prepare to eliminate any non-essential spending like cable, subscriptions, mobile data plans, and takeout food.
Also, despite malls, restaurants, theatres, and shops opening across the country, now may not be the best time to begin patronizing these establishments again. It’s not just the lingering health concerns; you need to think about the immediate financial dangers as well.
And if you’re paying a lot to maintain any outstanding debts, consider speaking with a Licensed Insolvency Trustee about your options.
Pay closer attention to credit card spending
A lot of credit card providers offer cashback or rewards bonuses at grocery stores. Provided you pay your balance off by the end of the month, these incentives are often the thing that makes having a credit card worthwhile. However, that benefit is also getting considerably riskier to collect.
Consider how easy it is to lose track of your spending at the best of times. With grocery prices rising, you need to be even more on top of your budget. One transaction can throw your whole financial plan out the window. And a single 20 percent monthly credit card interest charge can easily erase several months worth of points earnings. Not to mention the cumulative cost — and stress — of a balance that keeps going up month, over month, over month.
Switching to debit is the easiest way to reduce your risk. You’ll still need to be diligent about tracking your expenses. But there’s a greater margin of error. Especially if you’ve declined the option for overdraft protection, which charges similar rates to most credit cards without any of the perks.
If you’re adamant on using your credit card, at least commit to two new habits if you haven’t already:
- Pay your balance off after every purchase — Immediately after you pack your groceries into your pantry, open your online banking and transfer the exact amount on your receipt from your chequing account onto your credit card.
- Track your spending every day — Download a budgeting app or spreadsheet template that subtracts your expenses from your total available budget for every category. Record all your transactions every night before you go to bed. Check it before you go grocery shopping so you know exactly what you can afford to spend.
Economic challenges will continue
Factors that are pushing grocery prices higher are the same ones responsible for continued job losses and recessionary pressures around the world. It’s likely these issues will continue, and perhaps even worsen until a COVID-19 vaccine becomes widely available.
We usually expect to see uniform inflation and deflation with the economy’s boom and bust cycles. But this is a unique situation. Grocers have had to offer pay incentives for front line workers and shoulder increased costs for PPE and sanitation. Farmers, packagers, and distributors that incurred similar costs have passed them onto grocers — and grocers are now passing them on to you.
And though it may seem counterintuitive, reduced spending at grocery stores may even cause price increases to accelerate as grocers seek to recoup more costs from fewer transactions.
At the same time, employment insecurity is still a going concern across most sectors and provinces. Many households also need to face unanswered questions around how they will cope financially with the end of federal COVID-19 and other income supports. While many employment insurance recipients will continue receiving benefits until early 2021, the final Canada Emergency Response Benefit (CERB) and Canada Emergency Wage Subsidy payments are currently slated to expire in late 2020.
The pressure is going to be unavoidable and you need to begin planning now for how you will address the coming pinch.
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