Inflation involves price increases in goods or services over time. It occurs due to an imbalance between the demands and supply of production and can put consumers under enormous pressure since it reduces their purchasing power.
This year has seen inflation rising rapidly as the Consumer Price Index increased by 8.5% in March 2022, which is the largest annual advance since December 1981.
Rising prices can largely effect consumers’ budgets so it is important to be more strategic when it comes to spending. There are certain steps you can take to protect yourself from the negative effects of inflation. This guide presents 5 key ways to help you save money so that you can budget carefully against the costly impacts of inflation.
5 Ways To Budget During Inflation
1. Eliminate Any Unnecessary Spending
The most straight forward way to budget effectively during inflation is to eradicate any unnecessary expenses. It is possible that you may be throwing money down the drain on subscriptions you do not even use. For instance, it may be worth pausing your gym membership if your attendance has been slacking recently and going on long walks or runs instead. Reducing the number of streaming services you pay for each month could also be a sensible option if you do not use them all regularly.
You would be surprised how much money you could save by cutting out daily coffee purchases. Making a hot drink at home instead could save you around $1500 a year!
Carefully look through your bank statement and check if you are paying for any bills that you do not particularly use. Having a thorough check can help you pick up any unessential payments which you can then cancel if you no longer need them.
You could also consider switching banks if your fees are particularly high. Finding a new checking account could be an effective way of adding money back into your budget when trying to offset the negative impact of inflation.
2. Analyze Your Energy Habits
Energy prices have recently seen a big increase and so it is worth considering how to save money on your energy bills. When budgeting for higher prices, you should consider how much energy you use in your home and find ways to curb the costs as much as possible.
Reducing your energy expenses is sensible since it will allow you to put money back in your budget. Ways to decrease your energy usage at home include using energy-efficient lightbulbs, sealing air leaks around doors or windows and turning off lights or equipment when they are not in use.
The same can be applied to travelling in your car as reducing energy use will in turn use up less fuel and reduce your need to fill up with petrol. Methods to do this include avoiding unnecessary acceleration, keeping your tyres well inflated and keeping your boot empty to reduce the drag. Alternatively, you could save on transportation by carpooling if you can, taking a bus or riding a bike.
3. Shop Smartly
Being savvy is extremely important during inflationary periods. For instance, you should budget carefully for your groceries when food prices are rising. Ways to manage increasing costs include bulk buying to get items at a lower unit price and using any store coupons, discounts or loyalty points you may have. Swapping out brand-named items for generic products as much as possible will also help to combat the effects of inflation, especially since this also applies to household essentials such as washing powder and detergents.
It is also worth meal planning in advance so that you know exactly what to get and do not purchase any unnecessary items that can go to waste. It will also help you resist the temptation to get a quick take away which can get expensive.
Incorporating more vegetarians meals into your meal prep can also help keep costs down since they tend to be cheaper than meat based meals. In particular, staple items such as pasta, bread and rice offer a filling option at an affordable price. You could also look into cash back apps and websites which can help you gain back some money on inflationary products.
4. Try To Increase Your Income
To try keep up with or even outpace inflation, it is worth looking at ways to try grow your income. Whether you can sell unwanted items at a garage sale or online, negotiate a pay rise with your boss, apply for a promotion, start a part-time job or set up a small business, there are many ways to gain extra cash. You could also consider investing any spare money you have, just make sure you diversify your investment plans to avoid the risk of any financial losses.
5. Be Strategic
It is worth being strategic and thinking carefully about your finances. Look at your short term and long term financial goals and make adjustments if necessary. For instance, it may be worth delaying a home renovation project or waiting to book a vacation during a sale period. Likewise, you may choose to temporarily pause taking on any new debts such as a credit card.
Cutting your expenses as much as possible can help you save money and in turn handle inflation. Reviewing your budget regularly and adjusting accordingly should stand you in good stead during more expensive times.