Don’t Let Inflation Deflate Your Accounts
Oct 1, 2021
Have you been to a fast-food restaurant lately? Sticker shock is the new side dish.
Prices are rising all around us. During the summer, the inflation rate jumped to rare levels. Escalated prices are part of the pandemic’s impact on society. How long will this last? The U.S. Commerce Department reports that the foundation for the economy to recover remains strong, so it’s simply a matter of holding on for better times — and prices — to arrive. In the meantime, these important tips will help you survive the squeeze.
How inflation affects your bottom line
The International Monetary Fund projects a roughly 2.25% annual increase in prices until 2026. This means that a product bought today for about $100 will cost about $102.25 next year, and that price will continue to rise each year according to the year’s percentage. But let’s consider 2021’s monthly inflation rates. Over the summer, they hit nearly 5.5% — a dizzying altitude for soaring prices.
An added dollar or two may not seem like a lot, but combine the increases in everything you buy and then continue that expensive pattern for months — at least — and it’s as if your earnings have been fluttering out an open car window … for miles.
To know how these losses affect your bottom line — your financial stability — you must:
- Track how much money you have — your bottom line.
- Control where you spend money.
- Have available savings to see you through until prices stabilize.
With the availability of Honda FCU’s digital banking, tracking your financials is easy. And now, more than ever, it is essential to your wallet’s health.
The Importance of Budgeting
No one can predict with absolute certainty when — or how much — prices will stabilize. Meanwhile, spending money during these inflationary times is risky for those who lack savings to cover emergencies. And even a solid savings account could dwindle under prolonged mismanagement. So, while some spending is necessary and even good for the economy, it’s more important for you to manage your money wisely.
Setting a precise and reasonable budget is the first step to controlling your finances. Consider the following aspects of planning your budget:
- Do you cover regular expenses first, such as your mortgage?
- Do you have funds automatically deducted from each paycheck for savings?
- Do you set aside a few dollars out of each paycheck to cover some fun expenses? If you plan for some indulgences, you’ve limited their power to empty your wallet.
- For every purchase, do you consider the urgency of the expense? Can that new dining room set wait for better times?
Make it a point to manage your bottom line’s damage, no matter how high inflation rates rise.
Shop Smart to Save Money
Always ask yourself one question before buying any item: Do I really need this? Make a shopping list for all purchases — from a school wardrobe to automobile accessories — even when shopping online.
Implement these additional measures to control your expenses:
- Follow less, lead more. Following fashion trends can be more expensive than it’s worth. Instead, set your own classy, comfortable and affordable style with a couple of basic, plain fashion essentials. Then, add your own accessories for variety.
- Check the tags. If that blouse comes with a dry-clean only tag, include that cleaning cost in the purchase. It’s more economical to buy washer-friendly clothes, especially for your daily wardrobe.
- Skip “shop therapy” to escape anxiety. That new sweater will not solve your problems. Instead, try taking a walk, calling a good friend to chat, or simply picking up a book.
Consider Shopping at Discount Stores
Sometimes, lower prices mean shoddy workmanship and products that don’t last. However, by the same token, expensive brands don’t have a corner on quality. Enter value — a balance between what you spend to purchase the item now, and what you save over time by not having to replace it so soon.
Discount stores are everywhere, so if it’s a local trip to a store, you’re better off buying a lot of goods there. Generic green beans are green beans. And small savings applied regularly do add up. Additional options include:
- Farmers markets offer some value deals on produce.
- Warehouse memberships empower you to buy in bulk and save. Look for them online and comparison shop. Note: Their hours are limited, so ensure that their schedule works for you, or you can shop there online.
Some grocery stores have become so adept at following your purchases, they’ll send you targeted coupons just to keep you around. Look for a “coupons” page if you shop online. It can help you save, if you follow your shopping list.
Follow these suggestions and also check out Honda FCU’s financial wellness tools to protect your earnings from inflation’s current squeeze.