6 tips to beat inflation

Sébastien Mc Mahon presents the current situation and, above all, proposes concrete strategies to thwart inflation.

Ashleay: Welcome to the “In Your Interest!” podcast from iA Financial Group, where we discuss your need-to-know economic news and how it affects your finances. All this in under 10 minutes. The word inflation is on everyone's lips these days. It seems like it might be a good time to give solutions on how to beat inflation and how to take a good look at your personal finances. Are there any concrete solutions that we can use to beat inflation? My name is Ashleay. I'm here with my colleague Sébastien Mc Mahon, our Chief Strategist and Senior Economist here at iA Financial Group. Hi, Sébastien.

Sébastien: Hello, Ashleay.

Ashleay: So, first of all, if we situate our listeners a little bit and we speak about a couple of statistics, is inflation at its peak?

Sébastien: Well, when we look at the data, we see that the peak was probably reached in June. Since then, the growth rate of the total CPI or the Consumer Price Index is slowing down. And that is good news in itself. But however, we're still talking about inflation quite a bit in 2022, in October of 2022. And it's very important to clarify two things. First is that even if inflation goes back to 2%, the price level will not fall after this inflationary surge. So, it won't start to cost less at the grocery store. And the battle of central banks is far from being won, because when we look under the hood, we see that inflation is spreading to more and more goods and services, and it's getting stickier, meaning that there are some products and services where inflation continues to rise. And even though we're hiking rates, there is no changing that trajectory.

Ashleay: I see. And I saw a quote that says that the Bank of Canada estimated that in June, the average Canadian household was nearly $250,000 richer between the end of 2019 and 2021. Can you tell us a bit more about that?

Sébastien: Yeah, three components. Real estate. So, the average household that has a house. So, the price of the house grew by about 50%. That’s the Canadian average for those two years. Markets were also up in late 2020 and in 2021. So, anyone with a pension plan saw their wealth grow. And also, everyone saved a little bit more because we had restrictions and we couldn’t spend as much as before. So, if you didn't have a house or you didn't have a pension fund or neither of these, then you didn't benefit as much. But everyone is facing a higher cost of living. So, the fight is not done for central banks. They need to bring inflation back to 2% because it's not everyone that benefitted from what caused this inflation.

Ashleay: I see. And do you have any advice on like what are the first things you would take charge of in your personal finances?

Sébastien: Sure. So first, I'm an economist. I'm not a financial advisor. So, I have the benefit of talking to many planners and advisors, and I asked them for their most important advice and I'm passing them along here. First, on top of the list is to prepare a budget; make a list of your expenses and try to reduce them. The idea is to really break down all of your income and expenses, and it's not uncommon for people to find when they go through this exercise that the budget is in deficit from the start. A situation that's not sustainable, of course, for the long run. And as the saying goes: what goes out is more important than what comes in. So, in times of high inflation, it can be a good way to identify where you spend the most. For example, restaurants are getting more expensive, and you may be surprised to see that the portion of your budget dedicated to restaurants is increasing without your knowledge. Discretionary expenses, everything that we like to spend money on, should be maybe revised. So, outings, leisure activities, restaurants, they are expenses that can be cut quickly. And, if you, to the extent that the desire to treat yourself exists, it's preferable to maybe go to the restaurant yourself rather than an abuse of home delivery services.

Ashleay: Absolutely. Might seem a bit easier that way. And so, is there anything we can anticipate also, I'm assuming yeah.

Sébastien: Yeah, sure. So, planning your finances means anticipating the future as well as possible. No one has a crystal ball but managing your budget well, reducing your day-to-day allows you to avoid having to resort to high interest rate credit down the road. So, making room for savings, starting an emergency fund, getting informed and educated on investment products, talking to a financial advisor, it gives you a much better picture to anticipate where you're going with your personal finances.

Ashleay: Right. And when you say educate yourself, what do you mean?

Sébastien: Well, don't try to read or listen to everything at once. Over information can be harmful. But, you know, listen to the news, read more about the state of the world, the state of the markets, but remember that finance is just like, you know, eating an elephant. You need to go small bite by small bite. So, little by little, getting invested in understanding the state of the world, probably you’ll get better at anticipating where things go, how much you need to save. So, it's good to have a basic education in the state of finance.

Ashleay: Absolutely. And getting help from a professional, I assume, would be a good way to go.

Sébastien: Yeah. The value of advice is important depending on the studies that you look at. Someone who has a financial advisor along the way will grow their capital by two, three, four or five times more. So, it's important to work with a financial advisor and it's been proven time and again that it leads to better results in terms of savings accumulation, in terms of discipline. So, taking our personal situation into account, having good advice, adapting your budget to your situation and your goal according to the stage of life, that's the recipe to get it done.

Ashleay: I see. And speaking of saving, for example, I do know a lot of people that have stopped their automatic savings because they feel that they're losing money right now due to the current situation that we're living in.

Sébastien: Yeah, investing and seeing the markets drop, for some people, it feels like they're losing money on purpose. But this is all about managing your emotions. You need to understand that markets don't always go up, that the best time to buy is often when you're, you know, fearful because markets are falling and the best time to sell is sometimes when you feel you can go wrong and everyone around you seems to be making money. So, you should never make a decision based on emotions. Judgment is not key in that moment. You should always be consistent with your investor profile and these actions of managing your emotions can lead you to really keep step with the state of the markets.

Ashleay: I see. So, we would want to aim to save smart, basically.

Sébastien: Yeah, exactly. Avoiding inflation is not only about salary increase, it’s also about saving intelligently by moving part of the liquidity in your current bank account to probably a high interest savings account, instantly increasing the yield from 0.25% to 3-4% depending on the products that you find while keeping access to your money at all times with, for some products, no management fees.

Ashleay: Absolutely. So, the advantage would be to start saving early. Speaking of saving early, I believe you had mentioned something about a parallel between investments and, for example, a house. Can you tell us more about that?

Sébastien: Yeah. Real estate. Two lessons from real estate. The first one is that when you're able to buy a house early, when you're fortunate enough for that, you pay upfront 5, 10, or maybe all the way to 20% upfront on the house. When the value of the house appreciates quite a bit, then there's a leverage effect, meaning that if you sell the house down the road, you'll be making money out of the value of the house. But based on money that you borrowed at a lower interest rate. So, it's a good way to get a start, a quick start at life when you have access to real estate at a young age. So, investing early, saving early, buying a house early, if you can afford it, it's always a good way to get started in your financial life. The other parallel is that, you know, when you look at the value of your house and in 2022, for most of the cities around the country, we hear that house prices are starting to move lower after rising quite a bit over the last two years. Well, I'm sure pretty much everyone listening to this today is not thinking that they need to sell their house now because markets are going down. When the value of your house falls, you stick to the plan. The house, it's a long-term investment that you're making and it should be the same thing for your investments. Sticking to the plan, or, as I like to say, investing should be the most boring thing that you do in your financial life.

Ashleay: Absolutely. Thank you so much, Sébastien. That was very interesting. Lots of good tricks for us and I will see you soon.

Sébastien: Thank you.

Ashleay: Love this podcast? Want to know more about economic news? Follow our “In Your Interest!” podcast available on all platforms, visit the economic news page on ia.ca, or follow us on social media.


Sébastien Mc Mahon joined iA Financial Group’s economy team in January 2013. Throughout his career, Mr. Mc Mahon has held various positions in several prominent financial institutions, notably at Quebec’s Ministry of Finance and the Autorité des marchés financiers, Quebec’s financial market regulator.

Sébastien Mc Mahon also serves as Vice-President, Asset Allocation, and Portfolio Manager for our subsidiary, iA Investment Management Inc. (iAIM), with assets nearing $15 billion. Mr. Mc Mahon is also a member of the firm’s asset allocation committee.

Sébastien Mc Mahon

Chief Strategist and Senior Economist

This podcast should not be copied or reproduced. Opinions expressed in this podcast are based on actual market conditions and may change without prior warning. The aim is in no way to make investment recommendations. The forecasts given in this podcast do not guarantee returns and imply risks, uncertainty and assumptions. Although we are comfortable with these assumptions, there is no guarantee that they will be confirmed.

Share prices

2022-12-02 12:00 EST
  • ^TSX $20,485.66 -$39.79
  • $CADUSD $0.74 $0.00

Stay on top of the economy with our weekly newsletter.

I agree to receive emails and other electronic messages from iA Financial Group about their products and services.

You are signed up

In a few minutes, you will receive the most recent iA Newsletter at the following email address:

An error has occurred. Please try again.