US Inflation Rate is at 8.5%, compared to 6.45% last month and 7.48% last year. This is higher than the long-term average of 3.28%. The most significant change is the cost of school lunches, which rose by over 254 %. The purchasing power of consumers is reduced by high inflation, which also hinders income growth. Pent-up spending amid a backdrop of high inflation could have significant effects on financial wellness.
According to economists, external inflationary pressures will undoubtedly persist as long as global commodity prices remain high, with persistent supply chain challenges brought on by both the conflict in Russia and Ukraine and the local pandemic scenario.
Is there anything we can do to keep our pockets in check amidst this crisis? Here are 10 ways you can adapt to cope with inflation without taking drastic measures.
1. Determine how much inflation is affecting you
We advise you to compare your spending on the same items in the first two months of 2022 and the first two months of 2023. And by doing this, you’ll be able to tell with great clarity whether you’re spending a lot more of your hard-earned money.
You will undoubtedly benefit from sitting down and creating a personal finance budget if you discover that you are spending much more on the same things while still making the same amount of money.
Because every one of us has a different life and set of circumstances, everyone is impacted by inflation differently.
2. Minimize unnecessary expenditure
Your expenses can be divided into “fixed” and “negotiable” spending. Utility costs, loan repayments, and rent are examples of fixed expenses, whereas entertainment, gym memberships, and wants are typical “good-to-haves.”
You can try to spend less on “wants” since they are not absolutely necessary since each person’s spending habits will be affected by inflation differently.
Yet, if their presence severely affects your life, you do not have to go to the extreme of cutting them out completely. Every little bit helps, so you can think about limiting the frequency or the amount you spend each time.
3. Inflate proof your savings
Your purchasing power won’t be preserved by putting your savings in a straightforward savings account, particularly at a time when inflation is at an all-time high. This is due to the negative effects that inflation will have on your idle cash savings.
When there is a lot of inflation, money rapidly loses value. It’s crucial to at least maintain the value of our money over time because, with an inflation rate of 5%, $100 in a savings account from the year 2022 will only be worth $78 in ten years.
4. Hold out on big purchases
Not everything will inevitably cost more. Price increases that seem transient can be worth waiting out for. Purchases that are not immediately necessary can be postponed.
For instance, the price of smartphones, which had been a significant factor in inflation rises, has decreased by 23%.
5. Go for unbranded merchandise
By choosing the house brands of major retail chains or unbranded goods instead of well-known names, you can avoid paying excessive prices.
You can safely choose unbranded homecare products like floor cleaners and detergents even though this may not apply to personal care items like soap and toothpaste or some foods.
Reduce your waste as an added bonus and stay away from paying more for packaged spices and condiments.
6. Wait for sales and discounts
It’s crucial to look for better discounts and bargains while purchasing in order to offset rising pricing. These are just a few strategies to help you save that additional dollar, along with rewards and cashback.
You can negotiate a better deal on almost anything by simply asking sometimes. A good strategy to increase value for the same price is to get more for your money.
7. Form a carpool
Do you feel the squeeze of fuel prices? To split the costs with others traveling in the same direction, consider organizing a carpool.
Although some planning is necessary as the majority of Americans drive alone to work, the arrangement can be quite beneficial for the carpoolers.
8. Increase your income
If you have the time and room in your life to start a side hustle, this is the ideal moment to do it. Use any special abilities you may have to earn the extra dollars to support you in the rising inflation.
Here on this site, I’ve listed more than enough ways to earn via a side hustle, consider looking at those to chalk out what works best for you.
9. Have an emergency fund
If inflation rises, you might need to boost your savings efforts to cover your expenses. You might want to hold off on taking out any more loans due to the high borrowing fees.
Hence, it’s essential to create an emergency fund that can provide at least six months’ worth of expenses and is readily available right away.
10. Start investing
The ideal moment to start investing if you’ve never done so is right now! You should keep looking to investing as a way to create larger returns above the rate of inflation in an environment with high inflation.
This will lessen the negative effects that inflation will have on your money. Here are some investment options that will yield you benefits in the inflating market.
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