By: Jeff McDermott
- Inflation readings in 2022 have been the highest in over 40 years
- High inflation can be a real budgeting challenge when it hits day to day necessities
- Consider packing a lunch more often and searching the grocery story for lower cost alternatives
- Lower cost entertainment can often be found near home and still provide fun, new experiences
- Prioritizing savings whenever possible helps to keep your long term plan on track
Without question 2022 has been the year of inflation. Supply chain issues (the theme of 2021?), pent up pandemic related spending that didn’t happen over the last two years, and employers raising wages in a tight labor market are all possible explanations. Combine that with years (and years) of money being added to the financial system through low interest rates and other government interventions it all creates a recipe for inflation rising like a cake in the oven.
You and I, the individual consumers in this mess who are just trying to get by are now in a position where everything from gas to baby formula (if you can find it) is more expensive. Is there any way to mitigate this steep raise in day-to-day costs without changing your lifestyle too drastically? Here are a few ideas. If you have your own unique strategies, I would love to hear them in an email to email@example.com.
Pack a Lunch
Alright you knew this one was going to be on here – but food costs are simultaneously one of the hardest to cut (we all gotta eat), and one of the most volatile with price changes. Food prices are so volatile in fact the government even has a special measure of inflation that excludes food and energy. However, there are some things we can do to try to bring down the cost of food.
- Make more food at home – whether it’s bringing lunch to work or cutting back on dining out one night a week, it’s easy to see that for the cost of one sandwich from a chain sandwich shop you can probably buy a pound of lunchmeat from the grocery store for multiple meals. Buy a nice loaf of bread and your favorite dressing and make the sandwich shop equivalent for a much lower price.
- Substitute ground beef for steak – if you already do lots of cooking around the house, try substituting a lower cost ingredient where possible. Chicken thighs instead of chicken breasts. A pork shoulder you can throw in the pressure cooker instead of pork chops. Revisit whether the organic label is a must on some of your staple fruits and veggies.
- If you’d prefer not to substitute, you could also opt to add additional, lower cost ingredients to stretch out a meal. Think more beans in your chili or more potatoes in your stew.
- Don’t know how to cook? – Your local grocery store probably has more meal kits and ready to eat items than ever that are still a fraction of the cost of dining out.
See if you can substitute one or two trips to the restaurant each week with food from home or from the grocery store and bring down your monthly food bill.
Look closer to home for entertainment
Whether it’s vacationing closer to home this year or finding a great family experience in your own home, rethinking your entertainment options can help you find new experiences on a budget and maybe even reconnect with your family in a different way!
- Trade a cross country trip for daytrips from home – I bet there is LOTS of stuff within 100 miles of your own home that you haven’t done, or haven’t done in a long time. We often define “vacation” as heading to some far-off place, but what about all the state parks, museums, historical sites, and amusement parks that are within a day’s drive that don’t require a hotel room and airfare?
- Make a night out a night in with game night – our family loves playing board games and card games together. Old favorites from our childhood like Clue and Life and new games alike find a place on game night.
- The bad news: I hate to tell you but the new versions of old games we buy now are very cheaply constructed. They really don’t make ‘em like they used to.
- Have a week of vacation coming up? No problem. One Spring Break our family “staycationed” and picked a different local adventure to go on each day for a fun filled break that still had us sleeping in our own bed every night.
- Sometimes “cheaper” versions of popular activities are just as much fun or better! – If you ask my kids what sporting event they want to go to, they’ll probably pick minor league hockey almost every time. Minor league sports are just one example of an event that can put you closer to the action (smaller venues) with a smaller crowd (shorter lines and less traffic), for a lower price than their major league cousins.
- Free activities around town – Have you taken the dog to the dog park lately? Taken the kids to the public library? Found discounted or free activities for locals on off-peak dates? Cheap fun is out there in a town near you if you take the time to look!
- Look for subscriptions you don’t use – My wife and I recently did this and found multiple Amazon Video subscriptions recurring each month for services we weren’t watching, and frankly didn’t even know we were paying for. Yes even the financial planner loses track of what we’re spending sometimes. Services like Truebill (now Rocket Money), Mint, Pocket Guard, You Need A Budget (YNAB) and others can help monitor this. (Note these apps themselves may have a fee or may collect other data as part of the process. We are not specifically endorsing any one service.)
- Batch your trips to save gas – Gas was one of the worst drivers of inflation in early 2022, and even though the price has come down it’s still a higher than has been for the last decade. Make your trips out of the house multi-purpose when you can, batching multiple nearby errands into the same trip to avoid burning gas unnecessarily on single-purpose outings.
When all else fails – pay yourself first
As I’ve written in the past one of my favorite strategies for long term success is making saving the first thing you do each month, not the last. Owning assets such as stock and real estate remains one of the best ways to keep up with inflation over the long term even after we account for volatile times like what we have experienced in 2022. Saving first prioritizes putting money into the investments that will grow your balance sheet in the long run, and the money that’s left over is the money you have to put towards expenses every month. There may be times when cash flow requires you to scale back on your savings goals, and that’s a good time to check in with your financial planner on what to prioritize and what the long-term implications of a reducing your savings are.
Inflation is an unfortunate reality of the economic world we live in. A little bit of inflation is typical, and usually something we can manage OK. Inflation that approaches double digits is another story, and the kind of thing that can require more aggressive attempts to cut your expenses. Email me with your best savings strategies and I will share a few of them anonymously in our next Create Wealth Financial Planning Newsletter. If you’re not receiving it already, make sure to sign up for the newsletter below!