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  • Writer's pictureFisherman Financial


With the new year around the corner, it’s a good idea to start thinking about your 2022 financial plan. The plan is a goal and commitment that will act as a guide throughout the year to keep your financials healthy. This is more important than ever as the cost of living is expected to significantly increase in 2022.

What to expect – a higher cost of living

Unfortunately, the cost of living is expected to increase in 2022 primarily driven by inflation and interest rate increases. Inflation increases will be reflected in the cost of food and everyday goods, we can assume this will be about 10% across the board to be conservative. Interest rate increases will be reflected in monthly mortgage payments and other debt and could be significantly greater than 10% as the Bank of Canada may increase the prime rate by over six times in the next couple years.

Where to start – reflect on 2021 spending

To create your 2022 budget, it’s best to review 2021 spending to understand where spend is occurring and to identify opportunities for improvement. Get all your transactions in one place and categorize them into buckets that will help you make sense of your spending habits. If you can review prior years as well, it’s even better as trend analysis can be leveraged. 2021 spend by category will be the starting point for your 2022 budget.

Create your 2022 budget – identify opportunities for improvement

Starting with 2021 spend by category, factor in the expected increases for 2022 including inflation and interest. A good goal would be to remain at your total 2021 spend or to reduce further. Due to the expected increases in the cost of living, opportunities to reduce spending are critical to break even with your 2021 spend. Look for cheaper alternatives for your purchases or lower the frequency of certain spending. Factor these decreases into your 2022 budget and make notes for your reference. There may be some strategies to increase your cash flow (if required) by leveraging your investments and property.

Track 2022 spending against your budget

Once you have your 2022 budget by month, it’s important to track against it each month. Allocate your transactions to the same categories as your budget and compare the variance to determine if you are on plan. Take note if you are over budget and act to course correct.

Not sure where to start? Talk to one of our professionals today

The guidance above is high level, creating a good budget means getting into the details and truly understanding your trends and habits. There are tools, templates and expertise that can help with this process. If you are interested in speaking to one of our professionals, sign up with Fisherman Financial today for a free consultation.

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