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The first half of 2022 has been eventful, to say the least. One of the most notable changes we’ve seen is the surge of inflation to 8.5%*. It’s the highest we’ve seen in over 40 years! While some are saying that this inflation rate is only temporary, we’re all feeling the effects. Things are more expensive and it’s putting strain on our monthly income. While we might feel powerless to impact these abnormal inflation rates, we can however take control of our individual situations. Here are some practical ways to use smart budgeting to minimize some of these effects of high inflation on our money.

Watch Your Variable Expenses

Everyone needs to have a budget to see the money that is coming in and the money that is going out. Within that budget, you will track both fixed and variable expenses. Fixed expenses are things like your mortgage/rent or car payment. Variable expenses include things like gas or groceries.

Tracking all of your expenses (especially variable) becomes even more important when inflation is high because it’s costing you more money to purchase those same goods and services. A year ago, it may have cost you $50 to fill up your gas tank and now it costs you $75. You still have to drive to work each day but now it’s costing you 50% more money to do so. Having that budget helps you to identify some of these variable expenses affected by things like inflation and allows you to plan accordingly.

Think Outside of the Box

So, what are you going to do about those gas prices? Don’t be afraid to get creative and think outside of the box. It might mean simply getting rid of some unnecessary expenses like a streaming subscription service (you don’t need Netflix) or some other form of entertainment. This alone might free up the money that you need. You could also explore the option of working remotely once or twice a week or maybe even carpooling with a co-worker. And don’t forget to take advantage of gas reward programs and smartphone apps like GasBuddy that help you to find the cheapest gas in your area. Figure out whatever works best for you and try to be as proactive as possible. Make the right decision, at the right time, for the right reason.

Don’t Set It and Forget About It

Budgeting is designed to improve your financial clarity, reduce stress and help you to achieve short-term and long-term goals. But it will only work if you also put in the work. That means that you must revisit your budget more often than once a year. If you take a few minutes each month to check on your budget, you will be able to identify any changes and make the necessary adjustments.

Let’s go back to the example from earlier about gas prices. If you had noticed the increase in your transportation costs as soon as gas prices started to go up, you could have made a small adjustment to your spending and likely minimized the overall impact. But since you hadn’t looked at your budget in several months, you are just now finding out that you have overspent by more than one hundred dollars. Make it a habit to review your budget more frequently and be sure to account for any changes to your financial situation.

These smart budgeting tips are a simple but impactful way for you to combat this high inflation environment that we are currently in. We have all been affected differently and that’s why it’s so important to have a personalized plan for you and your unique situation. Financial Fitness for Life is here to help on your financial wellness journey. If you are interested in learning more about any of our financial wellness tools and resources, please contact us at 855-937-3578 to set up your no obligation appointment with a member of our team.

Be sure to check out our June FIT4Learning Bootcamp where we will be discussing more about what’s been happening in 2022 and ways to improve your outlook and reduce the overall negative impact of these current economic conditions.

Kyle Bingham, CRPC
Financial Fitness Consultant
[email protected]

*Source: https://www.bls.gov/opub/ted/2022/consumer-prices-up-8-5-percent-for-year-ended-march-2022.htm

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