There’s no escaping the impact that inflation is having. As prices have gone up, and the purchasing power of money has gone down, the consequences to both the economy, and individuals, are far reaching.
As an individual, you can’t control periods of high inflation. But what you do have control over is finding ways to spend smarter.
These four tips will help you think about ways to offset the increase in the price of goods and services we are all facing.
1. Deep clean your spending and saving habits
When was the last time you went through your spending and saving activity with a fine-tooth comb? While the current economic situation is making many people feel uneasy, could you use it as an opportunity to get a better handle on your finances?
One thing many of us fear is financial uncertainty. So, ask yourself: What can you calculate? What can you plan for? And what does your budget look like?
There are many spending and inflation calculators available to help you. Our New York Life inflation hub is also a rich resource of information. Choosing a pattern of conscious spending and saving is a great first step to dealing with inflation.
2. Audit your shopping cart
One of the main ways inflation is measured is using the Consumer Price Index (CPI). The CPI is calculated by checking the prices of an imaginary shopping cart of goods and services, and recording any changes.
Your own weekly shopping cart, meanwhile, is a great place to start when it comes to saving. Often, when we shop, particularly for goods we buy regularly, we don’t carefully look at every price, or compare the price of different brands.
Start by noticing the price of each item you put in your cart. Then challenge yourself to pick five items that you could replace with a cheaper alternative. Then see how much further you can go with this.
3. Targeted budgeting
Rather than simply making an intention to “spend less” on everything, one approach is to target certain areas of spending that you will cut back on, while prioritizing other areas that you will continue to spend in.
What you choose depends on your lifestyle and circumstances. For example, for a family with two children, you might decide that after-school sports classes are non-negotiable – something that you’ll keep spending on. However, you might reassess digital subscriptions and find out where you could save via family deals. Meanwhile, a retired couple might choose to prioritize spending on travel – but decide to look for tickets at off-peak times.
4. Focus on ways to make more
If your expenditures have gone up due to rising costs, is there a way you could make more to compensate? When was the last time you talked to your employer about a salary adjustment or pay rise? Remember, if you don’t ask, you don’t get.
Another way to add to your funds is to expand your income streams – there are many ways to do this, including creating passive income streams--selling items you no longer need, or renting out your parking space or spare room if you have one.
High inflation rates can create some financial difficulties, for both individuals and the overall economy. At New York Life we are committed to providing useful information to help navigate every situation we can. If you need further assistance managing through high inflation, connect with one of our financial professionals.
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