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How to Adjust Spending for Inflation

Posted by Advocate Debt Relief Team

3 months ago / July 6, 2022

Financial security is becoming more out of reach for many people these days. Inflation has griped essential goods like gas, food, and shelter with no signs of letting up anytime soon. Most people are forced to make adjustments to how they spend and save.

Understanding today’s inflationary environment and what is being done about it can help determine your next steps to weather the storm.

Today’s Inflation

In short, current inflation was triggered by governmental fiscal policy in response to the pandemic. Nearly five trillion dollars were spent on covid relief, including checks to people and businesses. All of this money was borrowed against the debt we already possessed.

While people kept receiving the money to stay home, manufacturers, packaging and processing facilities, and many retailers significantly slowed down in producing or vending goods. We still haven’t recovered from supply chain shortages, and demand remains constant. High demand with buying power combined with low inventory equals a higher cost of goods — inflation.

Monetary-Policy & Recession

The Federal Reserve’s responsibility is to regulate the US economy. Their biggest tool is adjusting federal interest rates. Elevating rates make loans in the public and private sectors more expensive. The hope is to discourage the continued spending enough to offset that initial stimulus boost and give manufacturers and the supply chain a chance to catch up.

Manipulating federal interest rates is a tricky process. Raising it too high will trigger an economic downturn, slow business growth, and create higher unemployment while prices remain high. Not raising federal interest rates will continue current spending habits and disrupt the supply chain more profoundly.

What Won’t Work

Governments around the world want to lower inflation. Many chose to handle it by borrowing more money to help people pay their bills and continue business growth. On a strained supply chain, this will only make matters worse. Some have accused corporate greed of being a leading cause of inflation and call for price controls. Lower prices on a stressed supply chain will make it worse. More stimulus checks and bailouts will only drive the economy further into debt.

Spending Adjustments to Make

Uncertainty is the only certainty in today’s economic landscape. Although we can’t control the government’s response to inflation, we can control our actions. Understanding the problem is half the battle; how we need to pivot will determine our economic success. Focus on these practical adjustments to your spending that will lighten the burden of inflation no matter how bad it gets.

Fundamentals

Start with assessing your current spending habits. Record every transaction for a couple of months to understand where your money is going. Many apps and programs can help with the process, but the key is being disciplined enough to take note of everything you spend money on. Then categorize each purchase in a needs and wants section.

Once you’ve divided up all your purchases, take a more complex look at your wants section. Try to rethink how you can attain those items while paying less. Packing a lunch daily and brewing your coffee from home are practical money savers in this category.

Freebies

One person’s trash is another person’s treasure. Even in an inflationary economy, people get rid of items that are no longer of use. The trick is to tap into where people give away the things you need.

Buy-nothing groups on social media platforms like Facebook can yield excellent furniture and baby items results. Many restaurants offer free meals, or BOGO offers when downloading their mobile app. Another often overlooked resource is your local library. They’re filled with ebooks, music, and movies already covered by your tax dollars.

Repair Over Purchase

Apparel has been a heavy expense on people in our high inflation economy. All too often, usually for convenience, many people will buy a new item because something made it less desirable. A small tear in clothing doesn’t have to ruin the apparel. An inexpensive sewing kit and some YouTube videos can work wonders to repair your favorite pair of jeans.

Shop for Car Insurance

You’re likely overpaying for car insurance. Only because providers will often take you at a lower rate than what you’re currently paying. A general rule is to shop for new car insurance every year or two. You’ll likely get a better rate or at least validate you’re getting a good one now.

Side Hustle

In the digital age, it’s never been easier to make extra money. Mobile apps like Doordash, Wag!, Uber, and more make earning a buck easy. Many social media platforms simplify selling goods to your neighbors and surrounding area. 

Eliminate High-Interest Credit Cards

The number one money drainer is high-interest credit card debt. No matter how relentless inflation gets, shelling out cash for high minimum payments buys you nothing. Prioritize getting these debts paid off as soon as possible.

 

If you’ve run through your budget and still can’t figure out a way to pay down high-interest debt, Advocate Debt Relief can help. Knowledgeable, patient, and thorough analysts will help you craft a plan to set you up for success. You deserve a win, and we’ll help you get one.

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