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Rising Inflation and How to Prepare

Posted by Advocate Debt Relief Team

1 month ago / May 13, 2022

The effects of rising inflation have seemed to infiltrate every aspect of our lives. Grocery store shelves are less stocked while prices get higher. Filling up the gas tank feels like a second car payment. Add in health care costs, utilities, and other general living expenses, and we can feel the vice grip clamping down on our wallets.

The Problem

Why are we feeling the economic crunch more than ever? We live in a time when the central bank has raised rates more than in the last 22 years. The root cause stems from gasoline, shelter, and food costs. According to the March Consumer Price Index (CPI), the gasoline index rose 18.3 percent, contributing to the rise in other necessary items.

The CPI measures the average price changes paid by urban consumers for goods and services. Energy and food are the two major categories that are assessed. Trends over the last 12 months aren’t looking good. 

Another critical indicator of rising inflation is the Gross Domestic Product (GDP). The GDP measures the total market value of goods and services produced within the country. IN THE LAST TWO YEARS, the US had the worst decrease in GDP — 1.4%, in Q1.

When we zoom out, inflation is at the highest it’s been since the early 1980s. Although many of these factors are out of our control, it’s essential to focus on what we can do to mitigate the damage. Rather than allowing panic to dictate your every financial move, consider some practical approaches to keep your bank account from feeling the squeeze.

Budget with Purpose

We’ve all heard how important it is to budge our finances. Do you stick to it? This can be a determining factor in your future success, especially in an unstable market.

The harsh reality of a reasonable budget is addressing your needs over your wants. Needs are in the same categories that are skyrocketing in costs: energy, housing, and food. Aside from insurance or child care costs, most other expenses are wants. Prioritize your spending on all the needs that fit your current income level.

When it comes to frivolous spending, low-hanging fruit often falls under those auto-renewal subscriptions we don’t use. Go through all your online subscriptions like streaming services, magazines you don’t read, evaluate how much cell phone data you use, and anything that might be unnecessarily draining your account. If it’s not being used, cut it.

Use your weekly visit to the gas pump as a reminder of your purpose for creating a budget in the first place. You will be more invested in sticking to your budget, but you’ll also continue to find more ways to refine your spending. If you’ve never strictly operated on a budget, don’t get discouraged if you don’t get it right on the first try. Remember, it’s not a failure when we go off track. As long as we keep trying, it’s called growth.

Stop Impulse Buying

How often does your social media or Amazon account recommend products you like? This is because of computer programmed problem-solving calculations made by companies to target you, the consumer, with products you’re likely to buy. It’s called an algorithm. We must rise above the algorithms!

Let’s face it, Amazon and other online vendors make appealing purchases extremely easy to get. The best way to not fall into that trap is to set a 24-hour rule. If you think you want the item, put it in your online cart and step away from it for a day. When you revisit the cart, maybe you’ll forget about it altogether and bounce the item off your budget. If it falls in the needs category, take an extra step and look for a better deal. With all the online offers, a different look will likely save a few bucks to pump into the gas tank.

Another impulse buy happens by window shopping. It can be outright dangerous to our bank account. Before heading out to your favorite mall, look for sales first. Certain items are on promotion on different days of the week or seasons. Unless you need it today, plan accordingly. 

Like the 24-hour rule, pause and find out when local stores release their ads. Sundays and Wednesdays are typically the best days of the week for promotions. Loyalty programs can save a buck, too — just don’t get sucked into the department store credit card the cashier is eager to suggest. The short-term percent off can hurt your overall credit score and create long-term interest hikes.

Leverage the Job Market

Employers are struggling to retain employees. Although this alone doesn’t justify a raise, creating a business case that demonstrates your value might. Use some objective information, alongside a few impactful anecdotal data points, to prepare a summary for the boss. You can even top it off by making the case that current inflation equals a pay cut. Regardless, your boss has to justify a raise to their boss. Every detail can help push for an increase.

The Debt Obstacle

No two budgets or income levels are the same. We all have our challenges, and we all deserve a chance to achieve an abundant life. Consult a debt relief professional if you’ve gone through the numbers but seem to fall short because of crushing debt. Despite rising inflation, it’ll likely be your first step toward financial freedom.

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Filed Under: Budgeting