Budgeting During Inflationary Times
by James Fitzsimmons
We all know prices go up, but "an extended period of rising prices," which is how a Forbes article defines inflation (1), puts great stress on our budgets.
Experts acknowledge that inflation rose steadily during 2021, but the inflation rate published on June 10, 2022, shows that goods and services now cost 8.58% more than they did this time last year (2), alarming economists and national leaders. Many economists consider a rate of only 2% to be a reasonable amount of inflation (3).
Regardless of the inflation rate, we still need to purchase goods and services. So how can we trim our budgets to keep up? Let's start at the grocery store. How much should we be spending on food? One guideline says to devote 10% of our income to food, and adjusting as needed (4). Buying generic or house brands in place of name brands, buying in bulk to lower the unit price, and decreasing meat in our meals are all ways to save money (5). Coupons and flyers help, but we should be careful they don't induce us to buy food we won't eat or goods we won't use.
Food waste is a problem for many households. One source claims that the average household throws out $640 of food per year, when menu planning, eating leftovers, and using the freezer can help reduce that waste (6).
It's common sense that grocery shopping while hungry results in overbuying food. But studies are showing that shopping while hungry affects how we shop for everything. One study of mall shopping found that hungry shoppers spent up to 64% more on all items due to a phenomenon called "embodied cognition." When the body is hungry, it creates in the mind a need to consume food and anything else (7). So grab a bite before shopping. But what if you don't have time to eat before running to the store, or you need to shop so that you can make that healthy, home cooked meal, or you have to get an ink cartridge to print that paper for an urgent school project due now? Just be aware to think twice before you buy.
Another area for pruning is streaming services, which sometimes grows like shrubs. According to one estimate, the average household has 4.5 streaming services with an average total monthly payment of $55, topping $600 per year (8). Sometimes we subscribe to a streaming service because we want to watch a certain mini-series or movie. Sometimes we accept a trial offer. Sometimes we just forget we have them. Canceling services you don't use will help bring down this monthly recurring cost.
Inflationary times are painful, and some price increases are caused by world events not under our control. But inflation reminds us to examine what is under our control now and to act.
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1) https://www.forbes.com/advisor/banking/how-to-budget-for-inflation/
2) https://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp?reloaded=true
4) https://mint.intuit.com/blog/food-budgets/how-to-budget-groceries/
5) https://www.forbes.com/advisor/banking/how-to-budget-for-inflation/
6) https://mint.intuit.com/blog/food-budgets/how-to-budget-groceries/
8) https://www.forbes.com/advisor/banking/how-to-budget-for-inflation/