The Future is Going to Cost More

I’ve got a laminated poster in my storage room that provides a pretty simple explanation of inflation.  Three gas pumps are labelled 1979, 1999 and 2019.  The 1979 pump shows gasoline at 26.7 cents/litre.  The 1999 pump shows gasoline at 67.5 cents/litre.  The 2019 pump has a question mark.  The tag line is “will you have enough to retire on 20 years from now?”  With gas at $1.399 I suspect it is safe to assume that gas and most everything else will cost more in the future.
Sure, our buck buys a lot more electronics, computers and even travel to Mexico and other points south than it ever did before.  However, if you are on a fixed income and don’t travel you know that your cost continues to rise and you are making do with less.   From property taxes to hydro, cable to ferries, medications to property insurance your dollar buys less.
Inflation simply defined is a loss of purchasing power for your dollar.  A universal truth that is hardest on those with a fixed or shrinking income.
One of the roles of The Bank of Canada is to implement monetary policy.  This is partly achieved by controlling inflation by making incremental adjustments to the interest rates.  Their goal is to keep inflation low, stable and predictable so as to provide confidence in the economy and the purchasing power of money.  Their current mandate is to keep inflation in the range of 1-3 % with 2% being optimum.
Inflation is measured by comparing the retail price of a representative “shopping basket” of goods and services at two different points in time.  In our global village prices can move pretty fast so 8 of the most volatile CPI components (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products) and their indirect taxes are stripped out.  Again, the goal is stability.
Programs administered by the federal government (CPP, OAS, GIS, Disability etc.) are indexed to inflation quarterly but you likely still fall a little behind if these are your only or largest sources of income.
With Canadians leading more active and longer lives it is encumbent that your financial health match the economic reality of retirement.  The future will cost more.