Surviving Inflation: 6 Tips to Weather High Costs

Surviving Inflation: 6 Tips to Weather High Costs

Inflation is causing the prices of goods to go up. Last month, in March 2022, the price of gasoline rose over 18% compared to 2021. Luckily, there are small steps you can take to go...

Inflation is causing the prices of goods to go up. Last month, in March 2022, the price of gasoline rose over 18% compared to 2021.

Luckily, there are small steps you can take to go about surviving inflation.

Use this inflation survival guide below to help you deal with the increasing costs of everyday items.

Quick Look: What is Inflation?

Inflation is the increase in the price of consumer goods over time.

The Bureau of Labor Statistics tracks US inflation using the Consumer Price Index (CPI).

The CPI calculates the price real consumers paid for goods and services over the last year.

Current Inflation Factors

From March 2021 to March 2022, consumers paid an average of 8.5% more for goods and services. That’s the highest increase since 1981. So, how did we end up here?

No one issue or event caused the current high inflation. Instead, a perfect combination of factors created increased prices.

The COVID-19 pandemic kept consumers at home and lowered the demand for goods.

As the pandemic slows, consumers are ready to spend money. The problem is that the supply can’t keep up with demand.

The surge of demand, coupled with worker shortages and supply chain issues, means businesses are increasing prices.

Additionally, Russia’s invasion of Ukraine caused additional bottlenecks in the supply chain.

And industry-specific problems are causing shortages. For example, an outbreak of the Avian Flu has increased egg and chicken meat prices throughout the U.S.

How to Survive During Inflation

The good news: You can take steps to reduce the impact of higher prices on your overall finances.

Even better, putting these six tips into practice can help you build better money habits in the longer term.

1. Skip Frivolous Spending

If prices are going up, it’s a good idea to stop unnecessary spending.

Remember, your money isn’t going as far as it did before. Anything extra you buy is going to eat more of your budget than it did in the past.

Stick to buying what you need and reducing or eliminating buying things you want.

Try waiting at least 24 hours before buying something non-essential to help cut out impulse buys. 

2. Lower Necessary Expenses

While you might be able to cut out unnecessary spending, some expenses are 100% necessary.

You still have to pay living expenses, like rent or mortgage payments, car insurance, and grocery and utility bills. You may, however, be able to reduce these costs.

Take car insurance, for example. Are you getting any discounts available for your policy? Multi-vehicle and good driver discounts can help lower your monthly premiums.

Even if you don’t qualify for discounts, you can change your coverage to lower your costs.

Most policies cost less when you lower your coverage or increase your deductible.

Look into possible discounts you could qualify for with all of your monthly expenses. You could be surprised what kinds of savings you can get.

It's also a good idea to evaluate any and all subscription services you use.

For instance, switching internet or cable providers could get you six months or even a year of savings, which could help offset gas costs until things calm down.

3. Stick to a Budget

Financial planning is the key to surviving inflation.

You don’t have to pay big bucks to a financial planner to benefit from planning, either. Most Americans simply need to create a budget—and stick to it.

There’s a lot of uncertainty in the world right now, which can lead to reckless decisions.

Having a financial plan and budget in place helps you stay grounded as situations change.

You can always tweak your budget to fit your current financial situation. Just make sure your changes still keep you aligned with your financial goals.

4. Build Emergency Savings

Having a reserve of cash to cover unexpected expenses is more important than ever.

If you don’t have an emergency savings account, now is the time to start saving money.

Even a few dollars a month can help you build protection against emergency bills, such as your car breaking down or a medical emergency.

Those with existing emergency savings should plan to add more to them. As your living expenses go up, your emergency fund should increase to keep 3-6 months of expenses available.

One thing to note, however, is you don’t want to save too much in cash.

Inflation lowers the buying power of a dollar. The interest rate you earn on a savings account won’t be enough to keep up with the current rate of inflation.

If you’re lucky enough to have extra money to save, consider investing to help diversify your assets.

5. Increase Your Income

Many employers offer a yearly cost of living increase to help employees keep up with inflation.

Unfortunately, a 2-3% raise won’t be enough to maintain purchasing power for the current inflation.

With gas prices increasing so quickly, for example, there’s only so much you can do to save money on gas. Combining cost-saving measures with a raise or additional income could help you keep up at the pump.

While you may not be able to get a raise because of inflation alone, now is still an excellent time to increase your income.

To illustrate, you could approach your boss about a raise based on the added value you bring to the company.

You may also want to look at other ways to make more money. This could mean getting a second job, working in the gig economy, turning a hobby into a side hustle, or looking for a new, better-paying job altogether.

6. Have a Backup Plan

A well-mapped financial plan may not be enough for surviving inflation.

Sometimes, it’s best to have a backup plan in case you need immediate access to funds.

Say you have an emergency fund of $1,000. Your car breaks down and needs several repairs.

Car parts are more expensive because of inflation—and so is your repair bill. It comes out to $1,200.

You’ll have to explore your options to decide how to cover the remaining $200.

You might use a credit card or get a short-term installment loan. Or, the shop may work with you to create a payment plan.

Surviving During Hyperinflation

In addition to inflation, you may have heard about hyperinflation.

Let’s take a quick look into surviving hyperinflation and why you shouldn’t worry too much about it.

What is Hyperinflation?

Think of hyperinflation as inflation on steroids. It’s when prices of goods increase rapidly and significantly—usually over 50% in a month.

True hyperinflation is considered rare and usually comes from extreme turmoil within an economy.

The most notable example is post-World War I Germany. The country faced economic distress after the war and the government overprinted money.

This hurt the value of German currency and caused mass inflation.

Will the U.S. See Hyperinflation?

Despite internet rumors of hyperinflation in the U.S., many economic experts consider it highly unlikely or nearly impossible.

While political, social, and economic rifts exist in America, it generally takes a much more extreme event to cause hyperinflation.

In fact, the current regular inflation is thought to be a more pressing, immediate issue than the potential of hyperinflation.

Surviving Inflation and Saving for the Future

It’s easy to let anxiety over the current inflation rate overwhelm you.

However, higher inflation won’t last forever.

Being smart and building good personal finance habits during this instance of inflation will make your finances stronger when prices start to come back down. It can also help you survive future times of economic strain.

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