Making Changes When Inflation Takes a Bite

High inflation is causing financial hardship in much of the world. When prices go up and your income stays the same, it can be difficult to make ends meet. Here are some ideas for making changes in response to rising costs.

Step back, and look at your income and expenses.

Do you know where your money goes every month? Do you understand where inflation is pushing your household budget out of balance? If not, now is a good time to step back and get a clear picture of your income and expenses.

Add up how much money you earn every month, and compare that to what you spend. Make a chart breaking your expenses down into categories like rent or mortgage; utilities; phone/internet; transportation; groceries; clothing; insurance; medical care and prescriptions; child care; education; pet care; eating out; and extras like subscriptions, entertainment, and travel. Include payments toward any debt balances. You may need to track cash spending for a week or two to get the full picture. A budgeting worksheet or an app can help you organize the information.

This project can take a little time and effort, but whenever your income or expenses change—and inflation can bring significant changes to your household budget—it's important to step back and take a realistic look at what those changes mean for you. Continuing with old spending habits as prices rise could spell financial disaster if you're living close to the edge.

Look for the changes that will have the biggest impact on your finances.

As you look at your income and your expenses broken down into categories, some ideas for change will probably be obvious to you. If you're spending a lot of money eating out, going to concerts, or buying things you don't need, those are opportunities for change. Other things—like the cost of housing, heating, or transportation—may be more difficult to change, but these might be more significant opportunities.

Then there's your income. Your budget is the balance between your income and your expenses. Finding ways to increase your income may be another way to take the bite out of inflation.

Ways to Increase Your Income to Counter Inflation

You may have more opportunities than you realize to increase your income. These might include

• Earning more money at your current job by working extra shifts or volunteering for overtime
• Applying for a promotion or a higher-paying position within your organization (e.g. perhaps in another department)
• Taking a second job, perhaps a part-time position that fits around your primary job's schedule
• Earning money from an outside activity or "side hustle"—freelance work, tutoring, teaching a skill, consulting, renting a room in your home, selling things you don't need, selling things you make (such as crafts, art, or prepared foods), driving for a ride service, or shopping for a grocery delivery service

Depending on your income, you might be eligible for government support, which may be available to help offset the costs of food, heating, housing, or child care.

Ways to Change Spending in Response to Inflation

As you look for opportunities to reduce your spending in response to inflation, look first at your discretionary spending, where small changes in your behavior might bring immediate savings, and at your biggest expenses, where savings might have the most significant impact. You might find expense-cutting opportunities in the following areas.

Energy

• Reduce heating and air-conditioning costs by adjusting your thermostat down in cold weather and up in hot weather.
• Use programmable thermostats to reduce energy use when no one is home.
• Seal drafty windows, and block gaps under doors.
• Regularly clean air-conditioner filters.
• Open windows on nice days.
• Request an energy audit of your home to find out about insulation options. Wash clothes in cold water, and hang them to dry.
• Look into fixed monthly billing to reduce the seasonal swings in your energy expenses.
• Find out if you're able to switch to a less expensive energy provider.
• If you're struggling to pay your energy bills, contact your supplier to agree on a payment plan and find out if you're eligible for any financial support.

Gas/Transportation

• Combine errands into a single trip.
• Carpool to work or work from home more often.

Phone/Internet

• Ask about the least expensive options from your provider, perhaps a prepaid or capped data plan.
• Shop around for a less-expensive service provider.

Food

• Shop from a carefully planned grocery list, with meals in mind, to avoid impulse purchases.
• Use coupons, and look for items that are on sale—but only to buy food that you need.
• Buy local produce in season.
• Buy staples in bulk when there's a good discount.

Housing

Consider shared housing—renting with roommates or moving in with parents.

Debt

• Pay attention to changing interest rates on your credit cards and other outstanding debt.
• Pay down debts, focusing on those with the highest interest rates.
• Find a debt-repayment strategy that you can stick with and that makes you feel like you're making progress. That might be by paying off your smallest debt first while keeping current with payments on the others.
• Contact your lender if you're struggling to keep up with payments. You may be able to work out a manageable payment plan.
• A debt-counseling service may be able to help you negotiate with lenders and perhaps consolidate debts.

Discretionary Spending

• Review subscriptions and streaming services, and cancel those you rarely use or can live without.
• Eat out less often. Prepare healthy and economical meals at home instead. Bring your lunch to work.
• Restrain yourself from making impulse purchases. Make it a rule that you'll wait a week before buying something you see that you want.
• Consider what you spend on entertainment, such as movies, concerts, and sports events, and balance those costs against what you need for basic living expenses. Think of free or low-cost ways to entertain yourself and your family. Go for walks in a local park. Play games. Watch movies on just one streaming service.

Ask for professional help.

Credit counseling and financial planning services offer expert guidance on money matters. They can help you get a realistic picture of your financial situation and how it is changing with inflation. Mental health counselors can help you deal with the stress of money worries and change behaviors that may be contributing to your financial strain. Your employee wellbeing program can provide stress management counseling and referrals to financial and mental health professionals.

For More Information

Horne, B. (2022, February 3). How to manage the rising cost of living. Retrieved July 1, 2024, from NerdWallet UK: Link opens in a new windowhttps://www.nerdwallet.com/uk/personal-finance/cost-of-living

Jones, D. (2022, July 6). In a turbulent economy, here's how to weather the inflation storm. National Public Radio (NPR). Retrieved July 1, 2024, from Link opens in a new windowhttps://www.npr.org/2022/07/06/1107732282/inflation-personal-finance-recession

Lake, R. (Updated 2022, August 11). 8 ways to budget during inflation. Forbes [online version]. Retrieved July 1, 2024, from Link opens in a new windowhttps://www.forbes.com/advisor/personal-finance/how-to-budget-during-inflation