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The economy is this year’s edge-of-your-seat summer blockbuster.

Explosions? For that, we have inflation. Threats to our way of life? Rising interest rates play that role, with extra suspense generated by rising concern about a recession. The next six to 12 months will tell the story on how well we maintain our financial equilibrium after the highs and lows of the pandemic period. Here are five rules to help guide you:

Pay down debt

With the Bank of Canada’s overnight rate up, shockingly, by a full percentage point Wednesday, debt is no longer a tool for doing smart things with your money. It’s now an ever-increasing tax on people who need help affording what they buy.

The single best thing you can do to improve your finances right now is reduce your vulnerability to rising interest rates. Owe less, worry less about how much more you’ll have to pay for a mortgage, line of credit or loan.

The story on debt over the past 15 or so years was that it was both cheap and predictable. Now, neither is true. If the Bank of Canada can’t get inflation under control soon, rates could increase quite a bit from where they are now.

Don’t be an inflation piñata

One of the prime reasons why inflation won’t back down is that we keep paying up for things that are rising in price. Groceries and gasoline used for work and errands are examples of non-discretionary purchases. But since the pandemic began, we’ve been paying more for optional things like puppies, home reno materials, restaurant meals, new vehicles and, recently, hotels and rental cars.

Where you can, put off purchases of things that are soaring in price. Looking for a new vehicle, particularly an EV? Wait it out. Hungering for a big trip? Maybe travel in Canada for this summer, and put off something bigger for a while.

There’s a YOLO – you only live once – feeling this summer because the urgency of the pandemic has receded for now. Where you can, opt out and wait for a less frenetic time to buy. It may not take long if inflation and rising interest rates keep grinding away at the economy.

Stop obsessing about housing

The golden age of Canadian housing is either on hiatus or done – we’ll know more when we see how high interest rates rise and whether the economy avoids recession and rising unemployment. For now, the market is falling. Week by week, your house will be worth less.

Mortgages 101: What to know about fixed vs. variable rates in Canada

How does the Bank of Canada’s interest rate hike affect variable rate mortgages?

Welcome back to reality. Houses are a financial asset that rise and fall in price over time, just like stocks, gold and commodities like oil. We had a great run, and another is coming at some point in the future.

For now, clear thoughts about the amazingness of housing from your mind. Houses are a great place for a family, and over time they will appreciate nicely over the purchase price. Live with that.

Bonds and GICs are worth a look

Rising interest rates have vastly increased the interest paid by bonds and guaranteed investment certificates. We’re finally at a point where locking some money in for a period of one to five years makes some financial and investing sense.

You can get yields of as much as 5 per cent or more from five-year bonds and GICs, which leaves you short of the most recent inflation rate of 7.7 per cent. But inflation is expected to decline eventually. Two or three years from now, 5 per cent returns from near risk-free investments will probably look fantastic in retrospect.

Investing 101: A beginner’s guide to growing your money

For now, rising rates are depressing the price of bonds. That’s why the bonds and bond funds in your investment account are delivering such rotten results. What you need to know about bonds is that prices and yields move in opposite directions. Lower prices mean a chance to lock in money at higher yields.

You know all about buying stocks on sale after a market decline. After their recent slide, bonds, too, have been marked down.

Try one thing to make more money

Ask for a raise, bonus or improved benefits, or look for another job. You can try cutting your way to a more comfortable match between your spending and income, but making more money is better.

Can’t get any traction with a raise or a new job right now? Take the long view by upgrading your résumé in a way that will improve your job market appeal. Invest in the course, certificate, diploma or skill set that will best improve your earning power.

Coming up in my Saturday column: An investor’s guide to the second half of 2022.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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