How to Budget for Inflation
If it seems like everything is more expensive these days, that’s because it is. According to the Consumer Price Index, the cost of groceries has gone up 11.9%, electricity is up 12% and gas prices rose 48.7% over the last year. Overall, the average family is spending $311.78 more per month on essential goods and services than the previous year, found Moody’s Analytics. Here are some tips on how to modify your budget to account for inflation.
- Adjust your budget: When it comes to your budget, unfortunately you can’t just “set it and forget it.” You need to routinely review it to see where you need to adjust. If your grocery bill is creeping up and you’re spending more at the pump, you need to be realistic about the actual costs and allocate more money in those categories.
- Curb your energy usage: On the days it isn’t too hot, open your windows instead of turning on the air conditioning. Program your thermostat to warmer settings when you and your family are out of the house. You can also swap your lightbulbs for more energy efficient ones and seal cracks around doors and windows reduce leaks.
- Save on groceries: Write a list so you only buy what you need, take advantage of sales, clip paper and electronic coupons and buy in season. By being intentional and planning ahead, you can trim your grocery bill.
- Make more meals at home: When you eat out, you’re not just paying for the cost of the food. You’re also paying for the cost of labor, service and overhead. That doesn’t mean you have to isolate in your kitchen. You can dine al fresco in your backyard, picnic at the park or take turns hosting potlucks with friends.
- Evaluate your subscriptions: How many music and video streaming services do you have? Each individual monthly payment for a streaming service might seem manageable, but they all add up over the course of a year. Drop any service you aren’t using regularly.
- Shop around: Just like you check different stores to see if you can find a cheaper price on toiletries or clothes, you can shop around for bigger ticket items too. Check at least once a year to see if you can find a better deal on home and auto insurance. You can also refinance your mortgage or auto loan for a lower rate.
- Use credit cards wisely: It can be tempting to use credit cards to pay for things you can’t afford, but stick to using them for purchases you can pay back so you don’t end up in debt. That way you can enjoy the perks of cash back or rewards without the pitfalls.
- Pick up a side gig: If you’ve cut out nonessential expenses but you’re still coming up short, you can pick up a side gig to bring in more income. You could sell your crafty creations, give music lessons, tutor, walk dogs or drive for a rideshare service, to name a few ideas.
There is no way around it. Inflation is rough on everyone’s pocketbook, but if you trim unnecessary spending and save where you can, you can adjust your budget to weather this financial challenge.