While the Federal Reserve claims inflation’s bubble will pop soon, experts anticipate the CPI won’t fall below 4 percent by the year’s end. That means you can expect another year of high inflation bumping up prices.
Record-Breaking Inflation
Inflation is not a product of the pandemic, although it may initially seem that way. On the contrary, between lockdowns and labor shortages—and now the Russia-Ukraine crisis—the past 2 years have kept inflation well-fed.These special circumstances allowed inflation to grow to dizzying heights, but it’s been around a lot longer than the COVID-19 pandemic.
Americans Are Living Paycheck to Paycheck
Now that everything costs more, many Americans are feeling the financial crunch, with nearly two-thirds of Americans living paycheck to paycheck today. This isn’t necessarily new. In fact, survey after survey has revealed people have been living this way for nearly a decade.Don’t Deflate Your Savings
It’s hard to keep up with your savings goals when you live like this. You might even hit pause on savings altogether. And without contributing to savings, Americans increasingly turn to credit cards and short-term personal loans for help in an emergency.While credit cards and short-term personal loans function as emergency backups in unexpected cash crunches, they’re meant as temporary stopgaps for singular expenses. Moreover, borrowing money won’t solve the issue that high inflation is an ongoing problem that will long outlast most cash advances and personal loan terms.
Updating Your Budget with Inflation in Mind
Americans point to high costs preventing them from saving as much as they want, regardless of whether they rely on credit cards or short-term personal loans as crutches.Unfortunately, there’s no telling just how long high inflation will hang around. Still, one thing is for sure: a higher-than-normal inflation rate will affect prices for the foreseeable future.
1. Make a List of Priorities
When things are tight, you need a plan of action to understand your next move. So sit down and write out your list of priorities. These expenses are the absolute essentials you need to pay each month to keep a roof over your head and food on the table.Besides housing costs and groceries, this list may include insurance payments, utilities, basic household items, and toiletries. In addition, the minimum payments for personal loans, cash advances, and lines of credit also belong on this list. These minimum payments will help you avoid late fines, extra interest, and credit damage.
2. Cut Discretionary Expenses
As judge, jury, and executioner of expenses, you should be looking to slash non-essential spending until you have more wiggle room in your budget. Then, the unnecessary expenses (i.e., those you don’t need to lead a safe or comfortable life) should be on the chopping block.Which expenses didn’t make it on your list of priorities? It can be daunting to say goodbye to the fun things in life, but it’s easier to let go knowing it won’t be forever. You can reintroduce the non-essentials when you start to feel less pressure.
- Streaming services: If you have multiple streaming subscriptions, pare them down to the one you use most often.
- Subscription boxes: While the average subscription box doesn’t cost a lot, it may be too much if you’re living paycheck to paycheck. Put them on pause until you have more wiggle room in your budget.
- Gym memberships: The average gym membership costs about $600 a year. You can pocket that change by switching to a free at-home workout.
- Takeout: According to The Fool, the average American spends $2,375 on takeout a year. If you eat out multiple times a week, you stand to save a lot by eating at home.
- Alcohol: Happy hours after work and wine with dinner add up. Going dry can help you free up more cash for bills.
3. Automate Savings
Even at this time, savings are an essential part of your budget. It can help you weather unexpected emergencies, reducing how often you tap into credit cards and short-term personal loans.Admittedly, saving through high inflation is challenging, so you might want to ignore the usual advice to save 3 to 6 months. But that’s a goal for another day.
4. Tweak Your Phone and Internet Package
Having a phone and access to the Internet is as close to essentials as possible nowadays. You might need them for work, or it may be the only way you can contact the outside world. So cutting these expenses for the sake of saving money just doesn’t make sense.5. Update Your Insurance
Like your phone and Internet packages, insurance is another essential with some wiggle room. But first, you’ll want to do some research. Go online to compare other insurance companies to see what they offer. Then, when talking to your current provider, you can leverage this info to know if they’re willing to match the competition.Another thing you can leverage is your loyalty. If you’ve been with the company for a long time, bring this history up while talking to your provider. They might be willing to cut you a better deal knowing you’re thinking about jumping ship.
6. Eat Better for Less
Putting food on the table has never been more expensive. But, unfortunately, you can’t precisely cut groceries from your budget!Plant-based eating promises some financial savings at the grocery store, especially if you stay away from costly prepared meat replacements. Instead, focus on tried-and-true cheap ingredients like lentils and rice.
7. Use Less Energy
Your utility bills are taking a bigger bite of your budget as electricity, water, and gas cost more. Actaully, utility prices in the U.S. rose by 33 percent last year.Reducing energy consumption across these utilities can help you control runaway expenses.
8. Reduce Your Fuelling Costs
With surging inflation, drivers can expect to spend more at the pumps. If you can’t reduce how often you’re behind the wheel, you should download an app like GasBuddy to find the lowest gas prices in your area.More often than not, this ends up being Costco, but they don’t get a membership just to qualify for their gas. So you probably won’t save more at their pumps than what it costs to become an annual member.
9. Learn How to Negotiate
The art of negotiation is a hard-earned skill that can do wonders for your budget. Depending on your strategy and your creditor’s policies, you can push out due dates to take the pressure off your budget and reduce what you owe.10. Investigate Financial Assistance
Let’s face it—juggling all your bills as inflation nudges them higher, and higher is hard. Sometimes, not even your best attempts at negotiating bills and saving money at the grocery store will be enough to help you balance your budget.The Takeaway
Although inflation is beyond your control, there are ways you can get back in the financial driver’s seat. As prices continue to rise, your budget is your most crucial resource throughout it all. You can refer to this spending plan to understand your priorities and focus on areas of your spending that need work.You can reduce your monthly spending and save more, whether it’s unnecessary splurges or excessive fuel spending. Keep these tips in mind for the rest of the year.
But more importantly, know that you aren’t alone in facing these prices. There are resources you can fall back on for more guidance if you can’t balance the budget, no matter how hard you try.