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  • Writer's pictureMichelle Kopp

Let’s talk inflation...

So, we know prices are going up on pretty much everything around us, but do you know why? When prices keep rising over a prolonged period this is what is known as inflation.

Inflation is normal and happens every year in our economy. A healthy rate of inflation is considered 3-4%. 2% has been the average. However as of April 2022, we are experiencing a rate of 8%. That means prices are eight times higher than they were last year! There’s lots of reasons why inflation happens, but what I want to discuss it what we should do when inflation happens.

When inflation happens, it means that a dollar isn’t going to buy you as much as it once did. We’ll use gas for example. Gas prices have gone up about 50%. So, if last year it only took $30 to fill up my tank. This year it’s going to take $60. That’s a BIG budgeting difference – don’t you think???

What do we do? Well, if you were just able to meet your expenses, you might have to make some drastic changes to even meet your needs. If you had extra income every month, maybe you won’t have anything left over or maybe you won’t be putting as much toward your goals as you would have liked. First, don’t forget high inflation can be temporary and that might be the case here. The goal is not to worry, but instead be prepared and start taking action to adjust your lifestyle. You can make changes now that will ease the stress you might be feeling with your money.

What can you do?

Again, remember this is just temporary, but I would make sure everything you are spending your money on is actually needed. Your goal at a minimum could be to lower your expenses by 8%. To calculate that, take your total expenses – let’s say $1200 for the month. Multiple $1200 by 0.08 (8%), and you come up with $96. Your goal should be to lower your expenses by about $100 per month.

Since you are already looking at your expenses, I would take it a step further. Look at your expenses as "needs versus wants" and "important versus unnecessary."

Needs = Basic necessities

  • These are your basic four walls: food, shelter, clothing, transportation + other essentials (medical, etc.)

  • Be careful not to include eating out in this category – that’s a want ?

  • Transportation would include gas and maintenance. It would not include buying a new model car to get the newest features.

Wants = Things we like to have but don’t need it

  • These expense may seem like they are essential, but consider if you didn't have them, would you still be able to function.

  • This includes eating out, haircuts, entertainment subscriptions, high end clothing/shoes, etc.

Important = Value based spending

  • These expenses would be things that you value in your life that help you live a more fulfilled life. They aren’t a necessity, but you value them enough to spend money on them to make them part of your life.

  • Gym memberships, kids' extracurricular activities, supplements, etc.

Unnecessary = No added value, no importance, just extra for entertainment/comfort

  • These are expenses that honestly you don’t need to spend on. These expenses can happen when everything is going great, and you don’t have to worry about the potential long term outcome.

  • Coffee, Amazon, purchases, etc.

Once you analyze your spending into these 4 categories, you’ll be able to that you could clearly eliminate some. You could also, just reduce the amount you spend. If you are tight, you can even save on the needs category.

Here are some examples:

  1. How about try bulk meal planning? Or shelf cooking like Jordan Page suggests! Or eat a vegan diet like me and save tons on meat?

  2. Start carpooling or use apps like GasBuddy to find the cheapest gas. Plan out your car trips by mapping it out to make it the most efficient use of your time and gas!

  3. Try finding to a less expensive salon or at least spread out your appointments longer. I usually go once every 6 months? (#momlife).

  4. DIY your home décor items instead of going to the store and buying items full price.

  5. Review your entertainment subscriptions and just pick your favorite. Cancel the rest.

  6. All those unnecessary expenses – just cut them out for now - don't worry! They don't have to stay gone forever!

There’s lots of ways to save with just a little review and analysis of your spending. Don't stress about what you can't control. Inflation is out of your control. But what is in your control, decide to make a change.

I hope this helps! Until next time!

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