Welcome to Personal Finance Insider, a biweekly newsletter that connects you with the stories, strategies, and tips you need to be better with money.
Here’s what: Inflation is unavoidable, but there are ways to deal
The other day I woke up to a rude little news alert on my phone: Electricity prices would be rising in my area by 6.4% as of December 1. I talked to a friend in Los Angeles later that day who told me that, in her beach-adjacent neighborhood, gas was up to a whopping $6 a gallon. And a couple weeks before that, I read about a restaurant owner in my community who’d had to raise the base price of his sandwiches to $12 from $9.75 pre-pandemic. Thanks to inflation, his roast beef sandwiches cost him $7 in ingredients alone, nevermind the cost of labor and operating his store. “Dude, I’m losing my mind,” he told The Philadelphia Inquirer.
If your grocery bill or receipt from the gas pump has given you minor heart palpitations recently, you’re not alone: Inflation has come for us all. An October report from the Bureau of Labor Statistics showed consumer prices were up 6.2% year over year (the
we thought inflation might be temporary, caused by sudden demand for products and services in a post-vaccine world, the last several months have made clear that inflation is here to stay, at least for the foreseeable future. That means holiday meals are costing more, as are gifts, travel, and everything in between.aims to keep inflation around 2% annually). And while back in the summer
So how do you deal? The unfortunate truth is there’s no way to get around inflation, but some strategic budgeting, planning, and cost-cutting can help reduce the impact on your finances.
Kristin McGrath, editor and shopping expert at RetailMeNot, told me that, to get as much as you can out of every purchase, she’s recommending that everyone join store rewards programs (like Target Circle, for example) and cash-back programs that can put money in your pocket.
“You’re still paying what you end up having to pay at the register, and you might not like that number,” she said, “but then you’re getting some cash back, some rewards to spend on a future purchase, that can alleviate things down the line.”
The key, though, she said, is to make sure you’re only buying things you actually need when you’re earning those rewards. If you’re impulse shopping or buying something just because it has more rewards attached to it, you’re overextending your budget unnecessarily — and letting inflation win.
If you need to make more room in your budget to account for inflation, financial planner Chloe A. Moore of Financial Staples recommends getting strategic with your spending. Start with meal planning and prepping, she said, and buy your necessities in bulk when they’re on sale. “You’re less likely to blow your food budget when you plan ahead and make a list. You can also save money by planning your meals around what’s on sale.”
She also told me now is a good time to look carefully at your spending if you haven’t done so in a while. Review your bank and credit card statements, and see where you might be overdoing it. “Once you understand where your money goes, you can decide on a realistic budget that prioritizes what’s most important to your household,” she said. And if you have an opportunity to ask for a raise or pick up a side hustle, bringing in some extra income can only help.
The good (ish) news is that prices aren’t likely to remain this high forever. Treasury Secretary Janet Yellen predicts these highs will only last through mid-2022 before cooling down. That’s just a few more months — hang in there.
— Stephanie Hallett, senior editor of Personal Finance Insider
A quick programming note: I’ll be heading out on parental leave soon. While I’m gone, you’ll hear from a rotating cast of Personal Finance Insider’s reporters and editors. Enjoy it, and I’ll see you again in the spring.
Stories you might have missed
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The renting versus buying debate will always be a hot topic, but especially now while mortgage rates are low. Writer Kevin L. Matthews II says he’s happy as a homeowner, but he considers it a lifestyle choice — not a sound investment.
Sometimes a splurge becomes a regret, but sometimes it’s worth every penny, as writer Olivia Christensen discovered when she built her inground pool.
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