Is inflation significant for employees and owner/managers?

Inflation is a measure of price changes over time. The existence of inflation is addressed by the Income Tax Act, which adjusts personal tax credits by the rate of inflation; and, the Bank of Canada whose stated inflation target is 2%. Inflation exists.

Not adjusting for inflation means less purchasing power in as little as a year because:

a) your gross revenue is less; and,

b) your expenses are higher.

On $80K this could be $1,600 [=2%* $80K]. Losing 2% on inflows and paying 2% more on outflows is a 4% variance or $3,200.

Over two years, not adjusting, could have a significant material impact on your operations. Also, making a 2 or 3 year retroactive adjustment at once is not always an easy sell but understandable.

If you require assistance assessing, calculating or implementing a strategy for an inflation adjustment; then, contact us! It could make you thousands!! Show this to your employer/customers.

 © - Jacob Rawski, 2015

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