Good news…well, maybe. The inflation numbers for April overall were down slightly from March. It may mean that inflation has peaked, but what it doesn’t mean is that things will be returning to normal soon, or ever. Prices that go up, in general, never go down as time moves on. That’s the real problem with high inflation.
Strangely though, on the surface, inflation 2022-style isn’t like you father’s inflation days of the 1970s and 80s. Sure, there is the biggie: gasoline prices soaring now to a record high average of $4.47 a gallon nationally (even higher than that in places like California topping $6.00). But even so, that number isn’t making as much of an impact as buying a tankful did when the average paycheck could barely afford one at $1.00 a gallon!
Why is this inflation just a little bit different today than in yesteryear? It is probably because of the impact of COVID-19 and its effect on the supply chain, for starters. The 2+ years of the pandemic and its effect on life here in the U.S. and around the world has been dramatic.
The Big Difference This Time Around
A big difference right now with inflation 2022-style is that it seems that everyone who wants to work and earn a paycheck is doing just that and those paychecks are actually bigger than they have been in decades. In addition, the government has been doling out literally thousands of dollars to individuals and families for the past two years, even to those who you can question whether or not they even needed it.
But the basic question for most of us, young families, low and moderate income earners, seniors and those trying to plan retirement (isn’t that just about everyone?) is still the same old, same old: How can you save any money when inflation is so high?
Basic Steps to Save Money Right Now
Step #1 – Discretionary Spending
Step #1 with a bullet is simply this. And this isn’t brain science so don’t be shocked when I tell you that the number one way to save money is to put a lid on your discretionary spending. That’s right. Stop spending so much of your money on things you don’t actually need. Not only are you spending money that you don’t have to spend, you’re overspending on its real value in inflationary times.
Discretionary means just what you think it means: you decide to spend money because you want to and not because you need to. If you just make a few small concessions to these whims, you can cut your expenses and save a substantial amount when you do.
I’m willing to concede to you that no matter where you fall on the financial scale, you don’t want to, nor can you go through every day and not treat yourself to a pleasure or two by spending money that you don’t have to spend. But when it’s done without thought, without a plan, and out of control every day, it’s a real problem that has a simple solution: just stop doing it.
Step #2 – A Plan for Your Money
Step #2 is fairly obvious after you read Step #1. Make a plan about your money and look at it, use it, and revise it as necessary. Call it a plan, a budget, or any name you like, but if you don’t actually sit down and figure out what you need to spend like on food, clothing, and shelter, and what you want to spend like on dining out, baseball tickets, and getting your car detailed every couple of months, then you may be doomed to failure during inflationary times.
Step #3 – Check Your Priorities
Reprioritize your spending. We all have some recurring expenses that are reasonable when general expenses aren’t as high. But right now, retaining some of those add-ons may not be as appropriate.
Look through your budget and prioritize your spending categories. You may have no choice but to spend a certain amount of money on things like food for your family and fuel for your car. But it could make sense to drop a streaming service, or if you have kids, replace an expensive extracurricular activity with a lower-cost alternative until inflation calms down.
The point here is that if you look at these expenses, you can see clearly where you can save. No one needs to order Grubhub for dinner four times a week. You may not need that gym membership in the summertime if you can do that exercising in your backyard with your radio providing the music backdrop.
And yes, it’s true that food and gas costs are way up. But if you put in the time, you can set yourself up to pay less for them. Planning pays big time here too.
If you need help, GasBuddy is a great resource. You can find the best prices for gas not only in your neighborhood, but as you travel around on your regular route (be it at work or home). With a plan, you won’t be fueling up desperately at these gas stations that sell gas at ridiculous prices making you wonder if they are in the money-laundering business and not selling gasoline.
Step #4 – Saving on Food
These days, supermarkets still do a great job of advertising their upcoming sales, both online and in the flyers they supply. That makes it easy to plan your shopping trips accordingly based on the items you need for your fridge and pantry. This gives you a real saving opportunity if you track prices and then stock up on those items you regularly use and prepare at home.
You spend thousands of dollars each year on food and if you save just 10% of that by eating out less and stocking up and planning meals around the best priced items, you would have quite a nest egg.
Similarly, if you need clothing, household items, or supplies to do home maintenance or repairs, spending some time researching store prices could go a long way. Don’t ignore doing it and become lazy, it’s that important if you are trying to save.
Step #5 – Saving and Investing
This step is all about getting the most return on your attempts at saving. When you save, you need to do something with that money to make it work and earn for you.
If it’s a retirement fund, that means it’s easy when you are investing in your 401(k) or other plan at work where it comes right from your paycheck and goes into some form of return you will use when you retire. If it’s other forms, then the burden is on you to find the best return.
When inflation goes up as it has, so do bank interest rates, although not as much or as quickly. But something is better that nothing so shop around and you’ll find online banks have the best returns and also offer bonuses for your initial deposits if they are substantial.
I bonds are one of my favorite ways to get a step up on inflation as they are literally inflation proof. Check out my post on I bonds to learn more.
Investing is also an alternative to earn more with your savings, even in a market as unpredictable as this one is currently. Buying solid dividend investment stocks with a great track record for the long haul is always good advice even when the market is down. Think of it as opportunity to buy low and sell high someday down the road.
Don’t let your guard down when high inflation times like these are upon us. Better days will return, but will you be in a position to enjoy them if your finances are getting battered now?
These five steps are not new ideas, but they are generally ignored by those who aren’t go-getters or who have just plain given up. If you have an income, you can find ways to save some money and that is just a fact.
Of course there are even more ways to save and I think I have covered hundreds over the past eight years. So if in doubt, try looking through some of these posts and apply what you can to your life—unless you enjoy struggling and not taking any action to fix it. I hope that’s not you.
Can you try some or all of these five steps? Can you convince your family to try, because you need everyone to be on board for saving money? When will you start if you haven’t already?