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Inflation is everywhere. You can feel it at the grocery store, when you pay your electricity bill, and when you fill up your tank. It costs more money to travel, buy a car, and go out for a bite to eat with friends. With prices soaring to highs not seen in 40 years, many are finding it difficult to manage the increase in cost of living, and this isn’t only in the U.S. A recent study by Ipsos listed inflation as the number one global concern for the 11th month in a row. While there’s no escaping inflation, there are strategies you can use to combat its effects. Here are nine actionable recommendations.
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What the experts recommend you do to fight inflation
1. Review your budget
If you don’t have a budget, it’s time to create one. If you do have a budget, this is your reminder to review it. A budget is simply a plan for your money. Without a plan, it’s easy to let those hard-earned dollars slip through your fingers. As the cost of everything goes up, a budget can help you to make more informed and inflation-friendly decisions. During your review, look for opportunities to cut items. While there’s likely nothing you can do about the cost of rent or your mortgage, you might be able to reduce the size of your subscription or entertainment budget.
2. Diversify your income
When inflation is high, finding ways to cut and save is important, but so is increasing your income. Diversifying your income to include a side hustle or part-time job can help you to keep up with rising costs. Plus, if you are faced with layoffs, you have something to fall back on. Take inventory of your skills and consider if there's an opportunity to start your next side hustle. If you have extra space in your home, you can look into renting out a room on Airbnb, or if you're a skilled content writer or like to post your collection of photos, you can start your own blog with SquareSpace.
3. Pay down high-interest debt
Thanks to inflation, there is less money available to spend on everything, including debt repayment. Aggressively paying off high-interest debt, including personal loans, payday loans, and credit cards, can help free up cash to spend on other items. If you have good or excellent credit, you can consider transferring your high-interest debt to a 0% balance transfer credit card. If you’re able to pay off your balance before the end of the introductory rate (often six to 18 months), this can help you save a lot of interest. Before committing to a balance transfer credit card, make sure you understand the terms and if there is a transfer fee or annual fee involved. Once your high-interest debt is paid off, try to avoid wracking up any new debts.
4. Consider a cash back credit card
While a cash back credit card isn’t going to eliminate the pressure of inflation, it can help you earn a little extra money off your regular spending. Many cash back credit cards offer an opportunity to earn 1% or 2% on regular purchases, and 5% or more on specialty purchases like travel, dining or fuel. Before getting a cash back credit card, have a plan for how you intend to use it. Don’t get another credit card unless you can pay it off in full each month. Now is not the time to take on additional debt. Look for a card that has no annual fee and offers cash back on items that make sense for you.
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5. Open a high-yield savings account
Thanks to inflation, if you aren’t earning interest on your savings, you are losing money. A high-yield savings account (HYSA) is a savings account that offers a higher rate of return than an average savings account. Online banks can often offer an even better interest rate than traditional banks since they don’t have to pay expensive overhead costs. A HYSA is a great place to store your short to medium-term savings, such as your emergency fund.
6. Create a meal plan
If you feel like you can’t afford to feed yourself, this is because food prices are soaring. As of January 2023, food prices are 11.3% higher than they were in January 2022, according to findings by the USDA’s Economic Research Service. To save money on groceries without cutting out snacks or a full meal, start meal planning. Meal planning involves creating a schedule of what you are going to eat that week or month. Then you shop according to your plan or even according to specific recipes. This helps ensure that you only purchase the items you intend to use. It can eliminate unnecessary items entering your shopping cart and can cut down on food waste. You can complement this strategy with a credit card for grocery shopping.
7. Batch errands
With the price of gas, commuting or running multiple errands in a week can get expensive. Rather than driving back and forth to the store whenever you need something, try batching your errands so you can accomplish all of them in one trip. The same goes if you use public transit or a ride-sharing service. The more errands you can do in a single trip, the more you can save.
8. Invest in TIPS
Treasury Inflation Protected Securities (TIPS) is a government security designed to help protect you against inflation. What sets TIPS apart from other government securities is that the principal is not fixed. Instead, it can go up and down with inflation as measured by the Consumer Price Index (CPI). When inflation rises, you can benefit from higher income payments. TIPS come in terms of 5, 10, or 30 years. At maturity, you either get the higher adjusted principal or the original value, so the benefit is you never risk losing your initial principal investment.
9. Speak to a financial advisor
If you’re concerned about how inflation is affecting your finances, or you want help creating a budget for your money, consider speaking to a financial advisor. A financial advisor can work with you to create a personalized plan for how to save and invest your money, helping you to achieve your short and long-term goals. SmartAsset’s no-cost quiz helps match you with up to three financial advisors. By completing a quick survey about your financial goals and planning preferences, you are connected with an advisor who will reach out to you by email or phone.
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How will you fight inflation?
Thanks to inflation, daily necessities, including food, housing and transportation are all more expensive. While you may have already implemented some changes to adapt to the new cost of living, consider adding in a few of the strategies from this list to try and reduce the impact of inflation. Start by reassessing your budget to see if you can make any cuts or changes. In addition to trying to save more, look for opportunities to bring in more money. Try to pay down high-interest debts to free up more room in your schedule and avoid taking on any new debt. If you feel overwhelmed by the effects of inflation or you just need some help creating a financial plan, consider speaking to a professional financial advisor.
What is inflation?
Inflation is the increase in the price of goods and services over a certain period of time.
What is the Consumer Price Index (CPI)?
The Consumer Price index (CPI) measures the average change in prices on a predefined basket of consumer goods and services. It includes items such as food, energy, commodities, transportation and medical services.
What happens when inflation is high?
When inflation is high, the cost of many goods and services increases. For the average consumer, this means a loss in purchasing power. It becomes more expensive to live day-to-day.
What are the main causes of inflation?
Inflation is caused by a surplus of money in the economy. When there is too much demand or not enough supply, prices tend to go up.
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