One of the core beliefs in our financial planning practice is that you should focus on what you can control.
You can’t control the rising gas prices. You can’t control that grocery prices have increased nearly 9 percent over the past year. You can’t control that the cost of rent and housing is skyrocketing across the Nation, either.
And while how much money you earn is somewhat within your control, increasing your earnings is a long-term play. It’s not something that happens overnight.
So what is in your immediate control? How you spend and save your money.
To Combat Inflation, Focus On Your Cash Flow
When it comes to staying within your budget among rising costs outside your control, first focus your attention on how you spend money. Where does your cash go throughout the month?
Don’t worry: you don’t have to give up your daily lattes if stopping for a cup of coffee every morning is an important ritual for you. Maintaining a rice-and-beans lifestyle isn’t required to save extra cash. And honestly, being as frugal as possible isn’t sustainable for now people. Instead, the strategy we suggest
What you need to recognize are the items in your budget that are not high priority to you, and make changes from there. It’s all about being intentional and mindful about the choices you make.
Here are 7 ideas to help you do exactly that:
1. Evaluate Discretionary Spending
Look over your budget and consider if the category (or perhaps simply the amount of money in the category) aligns with your values and goals.
For example, perhaps family time is an important value. In that case, a weekly dinner out with your siblings and their kids might be a non-negotiable ritual for your family – even though someone else could argue it’s not an essential expense since you could just cook dinner at home.
But what you get from that experience could provide far more value than what it actually costs. Therefore, it’s probably worth keeping that expense in your budget. To offset that cost, you could commit to bringing your own lunch from home during the workweek so you can fully enjoy the meal out with the family.
That’s just one specific example that isn’t universal to everyone; What shows up in your budget will be unique to you. The point is that we all have different values, which means our discretionary spending should look different.
There is no objective way to say “spending your money this way is right, but spending it on that is wrong. ”
That’s where so much financial advice on saving money falls short: it makes a judgment call on what’s worth it, and what isn’t. But only you can decide the specific items that should remain in your budget, and what needs to be eliminated.
2. Switch Up Where You Shop
Instead of going cold turkey on purchases you’re accustomed to making, look for ways to switch expensive products for cost-effective alternatives. Choose the Generic brand over the name brand; go for the plain mid-range option instead of the pricier high-end choice (where the only difference is in the marketing and branding!).
Or change up where you shop to save extra cash. Switch from shopping at Whole Foods for all your grocery needs and instead try some lower-cost grocery chains where you can purchase high-quality food for more affordable prices.
This strategy can be applied to other places where you spend money, too. Instead of eliminating, try switching first.
For example, do you need a $ 200 monthly gym membership, or could you still achieve your fitness goals if you switched to a gym with a $ 50 per month membership? Do you need to play on the most expensive golf course in Sundays, or is there a more reasonably priced course in your area that you’ll still enjoy?
3. Hit Pause on Upgrading Your Gadgets
It seems like there’s always a new upgrade coming out for every piece of technology we own. But if you’re feeling pressured by inflation resist the urge to upgrade your devices right now.
Unless you’ll be entirely without a functional device you need, consider holding off on spending extra for something brand new. Stretch out the life of your technology as much as possible, and save the extra cash you’ll have by simply waiting.
Delaying doesn’t mean you can never get the latest and greatest. It just means slowing down the rate at which you get yourself new tech. And when you do decide to upgrade, you may be able to trade in your current device or sell it on an online platform to earn money for the new one.
4. Borrow or Bargain Before You Buy
When you’re feeling the pressures of inflation, it can be smart to find alternative ways of getting the things you need. There are plenty of occasions when it can make sense to borrow items or purchase them second-hand.
An example that feels especially relevant for our family right now is baby gear: from furniture to clothing to toys and more, this is an area where we’ve loved getting hand-me-downs from relatives with older children. Babies grow and change so fast, and it’s amazing how many sizes we’ve already run through with our 7-month-old!
We’ve bought a few things brand new, but we’ve saved hundreds if not thousands by simply accepting gently used items for our daughter.
Of course, you still want to make sure the things you’re buying are nice, well-made, and of value to you. Thanks to the internet, it’s easier than ever to join second-hand communities and find valuable items such as toys and games, kitchen gadgets, furniture, and more for a lot less than retail prices. If buying second-hand isn’t your thing, borrowing and swapping items with friends and family can work just as well.
5. Automate Your Bills
If you haven’t already, make sure you don’t give up extra cash for no reason – like paying late fees because you Forgot to make a payment or pay a bill. Enroll in an automatic payment plan or set a calendar reminder so you don’t pay more money than necessary towards your bills.
That will help ensure you don’t lose money while you’re trying to save a little extra. But even your savings can be adjusted if the pressure of rising prices is putting serious strain on your budget right now.
In addition to adjusting how you spend, you can also take a look at your short-term spending goals and see how you can adjust them to fit your current budgeting needs.
6. Adjust Your Savings Strategies
If you’re currently saving up for a big purchase but skyrocketing prices have you feeling like your goal is out of reach, consider extending your timeline. That will mean you can save a smaller amount each month while still making progress.
Let’s say your goal was to save $ 12,000 over 12 months, requiring you to save $ 1,000 to meet that deadline. If you push your goal to 20 months, you can $ 600 a month and still reach your goal in the future – while also freeing up $ 400 per month to put forward current needs while costs are higher.
7. Put Your FSA and HSA Dollars to Work
Now could be a good time to leverage your Flexible Spending Account (FSA) or Health Spending Account (HSA) if you have either one.
The money you contribute to these accounts allows you to pay for out-of-pocket healthcare and childcare costs with pre-tax money.
Adjust Your Spending Realistically to Live the Life You Love
When it comes to staying within your budget among rapidly rising inflation, there are many ways you can adjust your spending while still living a life you enjoy.
Take some time to examine your budget and spending habits and remember that the best way to use your money will be unique to you. What works for your sister’s family may not work for yours, and vice versa.
Understand what you value and figure out if there is any discretionary spending you can pause or change. Find areas where you can swap high-end items for lower-cost alternatives so you can still enjoy the things you like. And adjust your savings goals as needed.
But above all, remember that making major sacrifices to your lifestyle is usually not a good long-term strategy. If nothing else, now may be a great time to return to your values and priorities list to ensure that your spending habits are still aligned with what’s most important to you.