Cost of living is a significant component of financial planning. The cost of living may dictate where people live and work, and a high cost of living can influence how individuals spend their free time.
Data from Statistics Canada indicates that consumer prices rose 4.1 percent and 5.3 percent in August 2021 in Canada and the United States, respectively. As Canadians headed to the polls in late September, a survey from Abacus Data found that 38 percent felt reducing their cost of living was a key factor affecting their vote. Similarly, a 2020 survey from TD Ameritrade found that 47 percent of Americans feel that cost of living is the biggest threat to their financial security and long-term investments. It’s worth noting that the survey was conducted prior to the pandemic. Since the onset of the pandemic, cost of living has increased considerably.
Though the fight against a rising cost of living can feel like an uphill battle, individuals can take steps to prepare for such increases.
· Apply lessons learned during the pandemic. A recent Pew Research Center analysis of U.S. government and Eurostat data found that roughly 9.6 million workers in the United States lost their jobs in the first three quarters of 2020. That period coincides with the onset of the COVID-19 pandemic. When forced to confront sudden and unexpected job losses, millions of individuals learned how to get by on less income. Cost-saving measures adopted during the pandemic can be continued or reimplemented, helping individuals to combat higher energy costs and other rising expenses.
· Look for a new job or fresh income streams. A rising cost of living is a concern for people from all walks of life, but it may be especially concerning for retirees or individuals with costs like childcare that can be hard to pare back. In such instances, individuals can look for new a job or fresh income streams. According to the Q3 2021 CNBC | Momentive Small Business Survey, 50 percent of small business owners say it’s gotten harder to find qualified people to hire compared to a year ago. And nearly one-third of survey respondents indicate they have open roles they have not been able to fill for at least three months. Individuals can explore local employment opportunities in an effort to find a new, more lucrative job that can help them combat a rising cost of living. Others who want to remain in their jobs can look for part-time work to supplement their existing income.
· Consider relocating. The pandemic forced many companies to transition from in office working to remote working overnight. That trial by fire could have lasting results. A 2020 survey of 317 Chief Financial Officers and leaders in the finance industry found that 74 percent will move at least 5 percent of their previously on-site workforce to permanently remote positions after the pandemic ends. The survey, conducted by Gartner, Inc., also found that nearly one-quarter of respondents will move at least 20 percent of their on-site workers to permanently remote positions. That could make it possible for millions of working professionals to relocate to regions with a lower cost of living than their current towns or cities.
The cost of living might be on the rise. But individuals can combat that increase in various ways.