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Purchasing Power Depreciation - How will I survive 2023?

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@rmsadkri
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Inflation is a huge issue all over the world at the moment. The Canadian market is affected as well and there is no sign of a shrinking economy in government statistics. The Consumer Price Index (CPI) rose 6.3% year over year in December 2022. On a monthly basis the index fell 0.6% in December last year from November. After all those interest rate hikes that happened in the year 2022, I am still surprised the inflation data is not buzzing. Some are arguing that the inflation data will come crashing down from its high (last summer) in the next 3-5 months. Let’s hope that’s true.

My predicament

No matter the prediction, I can feel my declining purchasing power at the household level. It is scary how much I am spending on my house including the mortgage debt and home maintenance. The scarier situation would be to have the Bank of Canada deciding to increase lending rates further.

My mortgage rate went up from 1.5 to 5.75 in the last 9 months. Clearly, the extra money I had to fork out to pay my debt would otherwise go to investments or personal consumption. It seems I have contributed to cooling down the economy by not spending at all. I do not have spare money to spend on items that are not emergency. I imagine this is the situation of every other household in the country.

In addition to that, legacy banks are providing higher rates on savings accounts and are luring customers to deposit and lock liquid cash with them for one or two years. Not only legacy banks but the exchanges and apps that are offering crypto exchange services are coming up with schemes for customers to deposit cash with them.

The Shakepay earn program was introduced by Shakepay recently to lure customers to depository cash with them. They are earning interest in BTC. It does not matter how but it is obvious that cash liquid is not out there and institutions will soon suffer the ultimate pain.

What does this mean?

It could mean that the economy is shrinking. Yet, the banks are saying the employment rate is not going up and there is still higher demand in the market. I am not sure who is driving the demand higher when the average household is almost strangled. I also understand the fact that the higher percentage of the mortgage owners have fixed rate and may not have been as impacted as us who chose to stay with the variable rate mortgage loan. At this point, I am not sure if I made the right choice by going with a variable rate. That’s a debate I want to have by the end of 2023.

The January 2022 vs January 2023

I have some household analytics based on the data I collect daily. It is obvious that my household purchasing power shrunk in the last 12 months - rather significantly. The caveat here is that I changed my job in June 2022 with a significant pay raise. Even after the pay raise, I can safely say that my purchasing power lowered this year compared to last year.

2022 January(40% Mortgage)

2023 January (56% Mortgage)

Surviving 2023

There is nothing I can do. I don't want to bring my crypto earning to the fiat world. I don't have enough cash power to bring fiat to the crypto investment. That means, I am always on the sideline no matter which side the market goes this year. I will be a witness but not a major player. I hope the rates won’t go higher and rather start to come down by the end of 2023. That means. I will have extra cash when the bull market is on the rise. I will have to keep my head down, control extra purchases and wither the wind this year. While all this is happening, I can be busy on Hive and keep stacking.

Posted Using LeoFinance Beta