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Shoppers ride down an escalator in Sherway Gardens mall during the stage two reopening in Toronto on June 30.ALEX FILIPE/Reuters

Be smart about how you spend and borrow in the months ahead because your living costs will soar.

We are entering a tricky stretch of the pandemic – in a personal finance way. There has been a lot of upside so far for the fortunate households that haven’t experienced a drop in income, as some definitely have. Now, it’s time to prepare for some downside – specifically rising prices, the likes of which we haven’t seen in decades.

Gasoline prices soared to record levels in some parts of the country heading into the Thanksgiving weekend, and natural gas prices are spiking as well. Inflation over all is well established, while wage increases lag. A big reason for inflation is the disruption in global supply chains, a problem that is going to make for some frustrating holiday season shopping.

Overlaying all of this is a further reopening of the economy that will present opportunities to spend that people haven’t experienced since early 2020. For example, sports stadiums, concert venues and cinemas in Ontario are open to full capacity, and the Canada-U.S. land border is reopening for fully vaccinated Canadians early next month.

Billions of dollars in savings were parked in bank accounts during the pandemic, houses have jumped in value, and stocks have done likewise. But even well-off households can experience a collision between higher living costs and amped-up spending.

Some thoughts on how to prepare: One, ration your splurges. Don’t try to make up for lost time through the quantity or extravagance of the events or trips you book. This holiday season doesn’t have to set a new family standard for spending.

What you should do with your holiday shopping is start, like, today. I tweeted a picture on Tuesday of an Ottawa home reno store with a huge Christmas display and got lots of amusingly mocking comments. But with global supply chains disrupted by the pandemic, what you see on store shelves today might not be restocked for months. That’s an argument for buying now, not later.

As with your spending, contain your borrowing. The Better Dwelling blog, always a good read if you follow the housing market, reported recently that borrowing through home equity lines of credit is increasing at the fastest rate since 2019. HELOCs are generally a smart way to borrow, but the signal that you shouldn’t use one is not being able to repay it in fairly short order – say, one to two years.

Will you be able to repay your HELOC balance that quickly if inflation drives up your monthly costs? Long-term debt carried on a HELOC is much cheaper than on a credit card, but it tells the same story of living beyond your means.

Apply the same critical thinking to car loans. J.D. Power reports the average monthly vehicle payment in September was a bit less than $700, and that 52 per cent of loans were for terms of 84 months and longer. This is a big, long commitment to take on right now unless you are very sure of your near- and longer-term financial strength.

If you’re weighing whether to return to the office or work at home, consider the trade-offs for your household spending. If you’re office-bound, there are costs related to both public transit and your car. A resumption of commuting would – if reported to your insurer, as it should be – end the discount you got for minimal driving during the pandemic.

Working at home means keeping the heat at normal levels all day instead of letting the temperature fall a bit while you’re out. Natural gas utilities in Ontario and Saskatchewan have already applied to regulators for permission to raise rates for customers. You might as well start the household discussion now on where to set the thermostat.

Higher gasoline and heating costs contribute to an inflation situation that seems unlikely to fade in the near term. The U.S. inflation rate hit an attention-grabbing 5.4 per cent last month over the same period a year earlier, while Canadian inflation was 4.1 per cent in August.

Unless your wages are rising in sync with inflation, every price increase is a hit to your household budget. House prices and stocks may continue to rise, but the financial windfall period of the pandemic is over.

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