Dealing with Inflation

As most of us are well aware, trips to the grocery store and the gas pump are emptying our pockets and draining our bank accounts more than ever before…


People talk about “inflation” all the time, but what does that really mean?  In plain terms, inflation simply refers to the increase in prices over time.  The inflation rate is a measure of how quickly those prices go up.  When the inflation rate is high, consumers lose purchasing power, meaning your dollar won’t go as far tomorrow as it did today.  The current annual inflation rate for the United States is 8.6%, up from 7% in 2021 – the largest annual increase since December 1981.  It averaged 3.27% from 1914 to 2022, reaching an all-time high of 23.7% in June 1920, and a record low of -15.8% in June 1921.


Inflation can have a serious impact on everyday expenses.  Energy prices have risen 34.6% and food costs are up 10.1%, but most of us likely have not seen wage increases to keep up with those rising costs.  So how can we manage our own financial situations to minimize those effects?  Here are four tips:


1. Consider (strategically) downsizing


Do you own any assets that may be worth more now because of inflation?  If so, now could be a good time to get rid of them.  Some items to consider could be used vehicles, furniture, equipment, and recreational goods such as toys and games, since these items have all seen major prices increases due to inflation.


2. Reduce or delay certain purchases


Many items, including everyday essential expenses, have seen drastic price increases.  Here are some examples that you may want to consider reducing or eliminating:

  • Gasoline
  • Cars
  • Clothing
  • Restaurants
  • Hotels
  • Toys/games
  • Furniture/home goods
  • Travel
  • Entertainment


3. Keep investing in your future


When money feels tight, it’s normal (and easy) to focus only on immediate needs and lose sight of longer-term goals.  You may be tempted to stop saving for retirement.  Even during difficult times, keep in mind that continuing to contribute to retirement and other long-term investments can be one of the best ways to fight the effects of inflation because it helps your money increase in value.


4. Review your budget


Any time prices go up, it’s important to revisit your budget – which can be as simple as making a list with all of your monthly income sources and current monthly expenses.  Budgeting may feel like it’s all about decreasing expenses, but it can also be a good opportunity to revisit your income and consider ways to bring in more money or resources.


Some questions to ask yourself about your expenses:

  • What can I reduce or eliminate?
  • Is there something I can put on hold, even if it’s just for a few months?
  • Am I being charged for services I don’t even use?
  • Can I negotiate or shop around for a lower price on expensive items?  Or perhaps consider secondhand?
  • Am I eligible for any discounts based on my individual situation (income-based, military/veteran, senior citizen, etc.)?


Some questions to ask yourself about your income:

  • Is there a way I can temporarily (or permanently) bring in more money?
  • Am I eligible for a pay raise or a promotion?
  • Do I have a product or service I could sell?
  • Am I eligible for any government benefits or other assistance?
  • Can another member of my household earn money or qualify for financial assistance?


If creating a budget to fight the effects of inflation seems impossible, you’re not alone!  Only about 1/3 of US adults say they have a plan for how they’ll spend each paycheck.  Instead of avoiding the task, why not get help from a professional?


Call CCCS of Buffalo, your Money Mentors, at (716) 712-2060 today to schedule an appointment to speak with one of our knowledgeable certified financial counselors!

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