Inflation fear is everywhere. Prices are rising higher and higher and, you cannot listen to the news without hearing the word inflation. Inflation and your spending plan, what does it all mean?
What Is Inflation?
Inflation is the decline of purchasing power of a currency over time. It’s reflected in the increase of an average price level of a basket of selected goods and services in an economy over time.
The rise in prices, expressed as a percentage, means that your dollar buys less than prior periods.
Inflation can raise the value of tangible assets like personal real property and erode the value of cash holdings.
What Causes Inflation?
An increase in the supply of money is the root of inflation, and this can play out through several different mechanisms in the economy. However, in all such cases, the money supply increases and your money loses its purchasing power.
Working With Inflation and Your Spending Plan
Below are some tips to help you stay with your spending plan during times when your money loses some of its purchasing power.
Create a Spending Plan
One of the best ways to beat inflation is to get on and stick to a spending plan to ensure you are paying attention to how much you are spending.
This will ensure that you are watching what you spend, and only spending what you plan to spend. Regardless of how inflation affects the cost of something, like gas.
Be sure to set spending plan limits for things inflation might affect, such as clothing, food, gas, and housing.
Allocate your money at the beginning of the month, and then stick to the spending limits you have set.
Be flexible by adjusting spending amounts between budget categories if need be but resist the urge to dip into emergency savings and other funds.
Your spending plan will help you determine your spending priorities. And your spending plan priorities will help you decide what items are the most important for you to spend money on and which you can pass on.
Look for Cheaper and Free Alternatives
You can beat inflation price increases by looking for alternative and less expensive store brands. Additionally, using coupons and shopping at bulk stores can help you save money on your spending plan.
Consider cutting out unnecessary expenses like the gym membership or your daily coffee if rising prices are eating into your spending plan.
Explore free and cheaper things to do in your area to help beat inflation. You could take advantage of free shows and events, and some museums that offer free admission.
Choosing to rent a movie and stay in and cook a meal instead of eating out is always cheaper.
Remember Your Priorities
And always keep your financial priorities and goals top of mind.
Do not overuse credit cards and pile up debt during inflationary times that you will have to take care of later.
Additionally, if you are saving or investing your money, continue to save and invest. Always pay yourself first.
What are some ways you beat inflation in your spending plan? Comment on this and let us know. Contact me here if I can help you with your spending plan.