Top 8 Simple Budgeting & Spending Tips to Help You Beat Inflation

By Chika

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Last Updated: September 28, 2021

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Since 2020, the world has faced having to provide life support in more ways than just our physical bodies. In the wake of the pandemic, we are seeing the effects of governments having to decide how to provide financial aid to those who need it.

The monetary policies from the US Federal Reserve, which involved increasing cash printing and distribution to provide financial support means one thing at the end of the road: inflation.

We are starting to see the signs of these monetary policies, some of which could be difficult to reverse.

Inflation is at record highs, reaching levels not seen before. Data from economic activity such as the CPI and PPI show that costs of production and prices of items are also on the rise. 

While the world is waiting for the Federal Reserve to take some decisive action on combating inflation as exemplified from the rising costs, there are things you can do now to lower your expenses at a time when the price of everything is going up. 

 

What is Inflation?

Inflation seems to be a buzzword, but do you really know what it means and how it can impact your finances?

In economics, inflation (or infrequently, price inflation) is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy - Wikipedia

Inflation, simply defined, refers to increases in the price of goods. When the price of goods rises, the currency loses value, because consumers purchase less the amount of goods through the nominal value of the currency may remain the same. 

Inflation can be caused by rising demand in the short term, though in the long term it is caused by monetary policies.

Because inflation erodes the value of your currency, this makes it more challenging to meet your present obligations.

More worrisome is that it limits your future financial power. As such, you may come to the shocking realization that after working tirelessly and saving to guarantee your future financially, the money would not be able to meet your needs or fulfill your obligations. 

Because inflation leads to rising costs of items, one of the first places to tackle it is through your budget. Here are some budget tips which would help you beat inflation.

 

8 Simple Ways to Start Saving Money Now

1. Get on a budget

One way to beat inflation is by strictly adhering to your budget.

Allocating finances to meet our needs is easy and seamless on paper. However, when the money hits our account, it is easy to let our guards down, and start buying things on impulse, thereby affecting our budget plans.

As such, discipline is an integral ingredient following your budget strictly.

One way to avoid straying from your budget plan is by constantly reminding yourself why you are operating a tight budget.

Think of those future goals you intend to achieve. Constantly remind yourself of the reason you are sticking to a strict spending regiment. This will help you watch how you spend your money.

2. Cut off unnecessary expenses

The reason we keep budgets is to cut down on unnecessary expenses.

There is no time when this is more important than during inflation. Since rising costs accompany inflation, it is only logical that you try to save as much money as you can since you are already spending more on your necessities. 

A budget lays out your income and expenses in black and white.

You notice where your income is going and what you are spending your money on. The clarity that comes with budgeting allows you to pinpoint expenses you don't need and cut them off. You can improvise on some things you spend your money on.

For example:

  • Instead of buying your cup of coffee from the local coffee shop, make yours at home.
  • If you eat out every weekend you can reduce this to two times monthly or better still cook at home.

These little sacrifices add up into something worthwhile for your finances over time.

3. Double down on necessities

What makes many people feel the effect of inflation is the increase in the price of basic necessities.

Items such as food, clothing, toiletries, groceries would increase. This is a category that takes the bulk of our spending and the area where inflation pinches our pocket the most.

As such, you should try to use any possible opportunity to stock up on these items. Buy as much as you can to offset future price increases. You can even get a discount for these items if you buy in bulk, thereby saving you more money. 

4. Look for cheaper alternatives 

The only time you can stick to a brand is if its quality (or value) can't be replicated by a competitor. 

If the value you get from a product cant be found in another, this should be the reason why you chose to be loyal in times of inflation.

If however, you can get that same value from a cheaper product, then by all means switch. 

Most of us are blind loyalists to particular products, no thanks to intense advertising and marketing campaigns that have reinforced our bias for certain brands.

However, if we can experiment more, and try out new products we would notice that there is not much difference. As such, inflation should be a time for bargain hunting and knowing where you can bet the best deals.

5. Consider buying used, older or refurbished models

There is no shame in buying used or refurbished items, not when you are battling the rising cost of living.

Buying used items is not only cheaper but also most of these items work just as well as new ones.

Most of these refurbished items are just as good as the brand new. Perhaps you don’t want a used or refurbished item, you can go for an older model which is usually cheaper than the latest model.

The irony is that even if you buy the latest model, you would keep using it for years and would not change it even if there are newer models. As such, why fret over buying an older model of an item you know you would use for several years?

6. Go for discount deals 

Keeping an eye on discount deals can help extend the lifeline of your income.

That 20-40% off an item can go a long way in freeing up cash for other necessities. It also means extra cash is saved at the end of the month which can be channeled to investment.

However, to take advantage of discount deals, you need to have saved up some money. Though collecting coupons can be time-consuming, the small contributions from each coupon will accumulate over time to bring a significant reduction to your expenses. 

7. Avoid taking on more debt

You should try as much as possible to avoid taking on more debt during inflation.

This has a double-edged impact on your finances. While inflation erodes the value of your money, taking on more debt means you have to pay more (in terms of value) to service your debt.

As such, you are placing yourself in a financial quicksand if you do not avoid taking on more debt. Rather than using credit cards more frequently, opt for cash payment. Instead of servicing or consolidating your loans, why not try to make extra payments on the loan?

8. Don’t save, invest

The best way to protect your finances against inflation is by investing.

Saving your money only reduces the value of your finances. Worse still, when you save, you are indirectly allowing the banks to make more money on your deposit through interests changed on lending to other customers.

So, why not put that money to good use by investing? Investing in stocks is a good alternative, though most analysts propound that inflation is bad for equities, historical records show that the stock market has always beaten inflation.

As such, while there may be a sell-off in equities during an inflationary period, the market would always rally and erase those losses in the long term, thereby increasing the value of your investment. 

 

Final Word

Inflation is a silent thief that steals from us in the least suspecting manner.

While the nominal value of your money remains the same, the shopping bag gets lighter over time. While we may not be able to escape the effects of inflation, there are ways we can manage its effects on our finances.

It all starts with seeking creative ways to optimize our budget. The tips outlined above can go a long way in helping you beat inflation. 

Photo by Tara Winstead from Pexels

 

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