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How to Control Inflation

How to Control Inflation

March 17, 2022

In case you haven’t heard, inflation is the highest it has been in over 40 years.  The price of gas, food, housing, etc. seems to be going higher and higher each week.  What are you supposed to do?  With most people’s budgets there are two things you can do.  Reduce your expenses or increase your income.  I’m going to talk about a few ideas that might help you save a little money without feeling too terrible.

1.       Know Where Your Money is Going


I still think most people don’t know where their money goes.  You know your fixed expenses like your house payment, your car payment, maybe the amount you spend on health insurance, and you can guess on the cell phone bill.  Beyond that, people make super rough (inaccurate) guesses on what they spend on groceries, eating out, going to bars, kids’ activities, utilities, gas in the car, car repairs, home repairs, gifts, etc., etc.!  My question is, if you don’t know what you are already spending, how are you going to know you are saving any money?

Step number one is you need to know exactly how much you are spending each month.  It is better if you can do this over 6 months to a year.  For my family, a lot of the expenses are pretty much the same every month.  We spend around the same amount of money on the cell phone and the insurances.  Our grocery bill doesn’t vary that much.  The utilities are seasonal, so I spend more on electricity during the summer months and more on gas during the winter.  Want to know how I know this?

We use a budgeting app called YNAB.  You Need A Budget.  I’ve talked about it before.  It doesn’t matter what you use for this part of the exercise.  You can use a spreadsheet, or Mint or maybe your bank has some money tracker, or you write down ALL your expenses on a piece of paper.  The thing is YOU MUST figure out where your money is going each month. 

2.       Does Your Spending Align with Your Values?


Now that you see where you’re spending your hard-earned money, ask yourself, do I want to spend my money on that?  Some things you have to spend money on like house payments and taxes and insurance.  But beyond that, you can decide.  Do I really value getting a $5.00 cup of coffee at Starbucks every morning?  Am I spending money on a gym membership I’m not using? With the $600.00 per month we are spending eating out, could we have better food and more family time eating at home?  Maybe you could turn the thermostat down a bit.  One of my Spanish teachers lives in the mountains in Peru and her house doesn’t have a heater or a fireplace.  The other morning it was 40 degrees in her house.  If you turned the heater down a little or turned it off when you went to work, it could save a few bucks.

The key to this is to spend your hard-earned money on what’s important to you.  I spend $150.00 per month on my Spanish lessons and $15.00 per month for my Zwift bicycle subscription.  If you don’t ride bikes or want to learn Spanish, that would not align with your values.  But people do basically the same thing every month.  They have the big cable TV package and they don’t watch most of the channels. 

3.       Budget for the Unexpected


Shit happens!  Our house flooded last summer.  The car breaks down.  The dog gets sick.  You have to go to Texas for a funeral.  Whatever!  Even though you don’t know what’s going to happen, you still need to plan for it.  In our budget we have a category called Stuff I Forgot to Budget For.  We also have one for home repairs and car repairs.  We also have an emergency fund category.  Because we have been budgeting for a couple of years now, we can look at our budgeting reports and see how much we spend in a year in those different infrequent categories.  Then we put aside a little bit each month to cover these unexpected, expected expenses.

If you find it difficult to pay $75.00 to fill up your car, just think how it feels when you find out the deductible on your house is .5% of the insurance company’s appraised value of your house? That’s one you might want to know, by the way.  Take it from the voice of experience.

I realize things are more expensive than they used to be but having something big and unexpected happen can really mess you up.  If you have money set aside, it takes away that terrible, how the hell am I going to pay for this feeling in your stomach.

4.      Things You Might Do


One of the reasons the price of gas is so high right now is during the pandemic, nobody drove.  When demand went down, the price of the existing supply went down.  Now that people are back to work, traveling and doing their normal lives again, demand is up.  When demand is up and supply is down, guess what happens?  The price goes back up!

You don’t have any control over the price of gas, but you can control how much you drive.  My sons are starting to ride their bikes more instead of driving to work or to the store.  I know that’s extreme, but I’m just trying to think out of the box a bit.

When you go to the grocery store, take a list.  I know that sounds stupid, but it helps eliminate impulse buying.  Also, don’t buy bottled water at the store.  We used to do that then my oldest son suggested we buy the 5-gallon jugs of filtered water from the water store and we got one of those water coolers.  Not only is the water great, it’s less expensive and it’s cold!

Everybody knows eating out is expensive and we talked about that.  Drinking alcohol and even soft drinks when you eat at a restaurant or bar is really expensive!  We like to drink wine.  We can buy a very nice bottle of wine for $10.00.  But if you get a glass of the very same bottle of wine, it can cost close to $10.00 or more just for one glass.  You can buy a case of soft drinks at the store for less than $5.00, I guess.  We don’t usually drink them but when you get a coke at a restaurant it cost $3.00 for one drink.  If you take your family out, it’s easy to spend $30.00 just on drinks for one meal.

Last one.  Don’t spend money on stuff you don’t use.  If you’re paying $2.50 per month for some stupid app and you never use it, that’s $30.00 per year.  Big deal, right?  But when you save the $2.50 here and drop the $50.00 month gym membership because you have a free gym membership through your health insurance, it adds up. 

In all honesty, I was the worst when it came to this stuff.  But when we started doing our budget and I saw exactly what I was spending money on, I was able to make decisions for my financial world and my rate of inflation.  I might not have control over the price of gas, but I know I can look in my budget and make choices to save a little here and spend a little more there that align with my goals and values.  I think a lot of people have more than 7% inflation in their current spending.  Take a little time to figure out what you are actually spending, decide if it aligns with your values then make some minor changes and you will be surprised by your progress.  If you have any questions or want to talk about your situation, feel free to reach out to me HERE.  As always, thanks for reading!  KB