5 Tips to Save During Inflation

Inflation — a period of rising prices — can take a bite out of your budget. This year has seen a rapid rise in inflation. The factors causing it include government stimulus, increased consumer demand, COVID-19 and supply chain issues.

During these inflationary times, it’s important not to panic. The best way to combat rising inflation is to return to the basics: Know what you’re spending your money on, have a long-term investment plan and consider ways to reduce your debt. Below are five tips that will help trim some expenses and make your dollars last longer.

1. Reduce Your Expenses 

   Here are several ways to lower your expenses:

   • Shop for less expensive internet and phone plans.
   • Search for a better deal for homeowners and car insurance.
   • Repackage streaming services for a lower fee.
   • Buy store brands and buy in bulk.
   • Cancel gym memberships and exercise at home.
   • Take advantage of coupons.
   • Use cashback credit cards.
   • Cut back on your clothing budget. 
2. Save Money on Transportation

   Gasoline prices have risen substantially in the last 18 months. If surging prices are blowing your budget, you can try to limit your driving as much as possible. If your work allows it, ask to work from home more often. Carpooling, using public transportation, biking or walking can also save you money.

3. Reduce Your Debt

   As the price of just about everything increases, it can be tempting to rely on credit cards to cover your expenses. Create a plan for managing your debt. You should also make more than the minimum payment on your credit cards. Consider the following:

   • Debt repayment strategy — Paying off the smallest accounts first can give you the momentum to eliminate debt. Another tried-and-true method is to pay off the debt with the highest interest rate first.
   • A balance transfer — If you have good credit, a balance-transfer credit card offer with a 0% introductory APR may help you consolidate your debts and save on interest while you make payments.
   • A debt consolidation loan — Consolidating your credit card debt into one loan allows you to make just one payment a month, ideally at a lower rate. 
4. Increase Your Income

   While it may not be easy to increase your pay overnight, in today’s job market, employees are better positioned to shop their services around or to negotiate for better pay. It could pay off greatly in the long run.

   Explore the possibility of picking up a part-time job to supplement your overall income flow. You can also make extra money by selling things on eBay or Facebook Marketplace.

5. Invest in I Savings Bonds and TIPS

   Instead of letting money sit in your savings account, where it earns interest at a rate that is far below the rate of inflation, consider investing in Series I savings bonds. I bonds have two rates: a fixed rate and a variable rate. The variable rate shifts with inflation and adjusts every six months (or twice a year — May and November). The current composite rate is 9.62%. You can purchase up to $10,000 of Series I savings bonds per calendar year and can use your tax refund to invest up to another $5,000. You must own these bonds for a full year before you can sell; if you cash out before holding them for five years, you’ll forfeit the previous three months of interest. You can purchase Series I Savings Bonds at TreasuryDirect.gov.

   Treasury Inflation-Protected Securities (TIPS) mirror the rise and fall of inflation. The principal increases with inflation and shrinks with deflation. Interest is paid at a fixed rate, but the payments rise and fall based on the adjusted principal. Because TIPS are backed by the U.S. federal government, they’re one of the safest investments for your money. They can be an effective way to diversify your investments while also supplementing future retirement income.

   Inflation can make household budgeting more of a challenge. Knowing how to prepare for it starts with analyzing your spending and debt along with reviewing potential increased income opportunities. Finally, by reallocating any liquid investments into higher yielding instruments, you can maximize your earning potential.

   Remember, higher inflationary times are historically temporary. There will be light at the end of the tunnel. A CERTIFIED FINANCIAL PLANNER™ professional can help guide you through these challenging times. Visit LetsMakeAPlan.org to find a CFP® professional near you.