Slow and steady inflation is an expected part of a healthy financial system, but high inflation means high prices, rising interest rates, and lots of concerns about the best choices for our financial future.
Inflation Refresher - Inflation is the value of currency dropping over time. There are a lot of interesting economic concepts that detail why this happens, but ultimately if inflation happens too suddenly it can put a huge burden on the consumer.
Nobody likes seeing the price of their favorite cereal going up, and it’s even worse when the price of everything else goes up along with it. But that's the reality of high inflation. When the dollar is valued less, prices everywhere are going to rise.
What You’ve Saved
Budgets are hit hard during high inflation, especially for those that need to count every dollar in order to get by. If high inflation puts you in a tight financial squeeze, the best way to respond is to take a deep look at your spending and find non-essential, flexible expenses you can cut. Food is essential, caviar is non-essential—hobbies are flexible, houses are non-flexible.
You might find things to cut that you won’t even miss like unused online subscriptions, greasy fast food, or forgetting to go to the gym.
You might need to cut things you enjoy like YouTube without ads, unlimited data phone plans, and greasy fast food.
This process can be hard so here are some resources if you need help.
If you are having trouble finding things to cut from your budget, remember, you can always cut tickets—Opera tickets, sports tickets, concert tickets, movie tickets, lottery tickets, they are all optional and they add up.
What You’re Worth
A big problem with high inflation is our expenses get bigger, but our wages don’t. In an ideal world, our wages would automatically increase as the dollar loses value, but the reality is companies are not required to raise wages to match inflation (and often don’t). So we have to bear the burden of higher prices until our economy evens out.
You can also find extra forms of income to increase your budget. This is often harder and takes longer than cutting expenses, but finding extra sources of income can strengthen your budget while making fewer cuts.
And it could be a good time to consider earning more money by doing something you’re passionate about on the side. If you can comfortably handle rapidly rising prices, you could probably risk doing your stand-up at an open mic, send that novel to a publisher, or make your reality tv show tryout tape.
While we have little control over when inflation will strike, we can control how we respond to it. High inflation and rising prices is a bummer for everyone, but do what you can to turn those over priced lemons into reasonably priced lemonade.
This article has been republished with permission. View the original article: Handling High Inflation.