Before we dive into budgeting for the new year we should first go over some of the basics. Inflation is defined as an increase in the prices of goods and services in an economy over a period of time. When inflation occurs, the value of money decreases since each dollar can purchase fewer goods and services than before. Budgeting is the process of planning how to use your income to meet your expenses.
When budgeting, it is important to take into account the potential effects of inflation on your expenses. By planning ahead, you can better manage your expenses and avoid being caught off guard by unexpected inflationary costs. In this blog, we outline how to budget for inflation going into the new year.
Where Is Inflation Affecting People The Most
Inflation is a significant problem that is greatly hurting people's finances by putting pressure on everyday expenses that are necessary like food prices, oil and natural gas prices, car prices, and more. These are all essential areas of life where people have to spend a lot of money, and when prices increase, it causes a lot of financial strain.
All of these increases in prices are causing people to have less money to save or spend on other things. As a result, many people are struggling financially and facing difficult decisions about how to make ends meet. Despite these rising costs, you can prioritize these essential expenses and find ways to save money during inflation for the new year.
How to Adjust Your Budget To Protect Yourself From Inflation
If you are not careful, inflation can really take a toll on your budget, but there are ways to fight back. Below we break down the specific areas in which you can leverage your budgeting to protect yourself from inflation.
Tips For Budgeting Groceries
As prices continue to rise, it's more important than ever to be smart about how you budget for groceries. Here are some tips for keeping your costs down:
- Compare prices between stores and brands. Generic products are often cheaper than brand-name items, so try to swap out as many items as possible.
- Buy in bulk if it makes sense financially. If you can purchase an item at a lower unit price, it's generally worth it to buy in bulk. Just be sure to have enough storage space!
- Plan meals around what's on sale. Using grocery store weekly sales flyers to plan your meals is a great way to save money.
- Take advantage of money-saving apps and rewards programs. This can help reduce your overall grocery spending over time!
Tips For Budgeting For Energy Bill
When prices for energy commodities like heating oil, natural gas, and gasoline are on the rise, it can be hard to keep your budget in check. Here are a few tips for budgeting your energy expenses during times of inflation.
- Take a look at your energy usage and find ways to conserve. Turn off lights when you’re not using them, unplug electronics when they’re not in use, and make sure your home is properly insulated.
- Educate yourself about government assistance programs that can help low-income families pay their energy bills. There are many programs available at both the state and federal levels, so be sure to research what’s available in your area.
- Finally, be proactive about monitoring your energy usage and make changes where necessary. If you know that you’re going to be using more energy than usual in the coming months, try to budget for it ahead of time.
Tips For Budgeting Car Expenses
When it comes to budgeting for vehicle expenses during periods of inflation, there are a few key things to keep in mind. First, new and used car prices are likely to continue increasing, so it may be wise to wait if you can. Additionally, car repairs are also likely to get more expensive, so it’s important to save up for those costs as well. Here are some tips for reducing car expenses:
- Consider repairing your current car instead of buying a new one.
- Try to carpool with others whenever possible to reduce the amount of gasoline you need to purchase each month. And if public transportation is available in your area, take advantage of it! It can save you a lot of money in the long run.
- Look for ways to save on car insurance like raising your deductible to lower your monthly premium, reducing coverage if it’s appropriate, and comparing quotes from different insurance companies.
Additional Ways To Save
Although the above areas are the most common places people feel inflation putting pressure on their budgets, they are by no means the only areas. Inflation will affect prices across all industries so every aspect of your budget will eventually feel the effects. Below is a list of some other simple things you can do to get ahead of inflation for next year’s budget.
- If you have any subscriptions that you don't use, cancel them. This could be anything from a gym membership to a magazine subscription.
- Make room for investing. Even if it's just a small amount each month, start putting money away so that it can grow over time.
- Coupon! There are tons of great deals to be had if you're willing to clip a few coupons.
- Learn coffee shop or restaurant savings hacks. For example, many places offer discounts if you buy food or drink items in bulk.
- Keep a closer eye on your monthly budget to pivot if necessary. If your expenses suddenly go up, see if there are any ways you can cut back on your spending.
Get Professional Help Budgeting for Inflation
If you're reading this, chances are you're responsible for making financial decisions for your household and wondering how to survive high inflation. These decisions can be intense and daunting, especially when inflation makes things more complicated. That's where Benefit and Financial Strategies comes in. We're a resource that you can turn to for help with financial planning. We have years of experience in the field, and we're always here to answer your questions. So don't hesitate to reach out to us if you need help getting started on your financial plan. We're happy to assist you!