Everywhere you look, prices are higher. Clothing costs are up about 1.1%. Household furniture costs are up about 1.6%. Utilities are up about 4.2%. Meanwhile, PwC’s Health Research Institute (HRI) projects a 6.5% increase in medical costs in 2022.
Altogether, the average household in the United States now spends about $250.00 more per month. This rise in prices comes from inflation, which is at its highest in nearly 40 years, with prices rising about 7.5 percent from last year.
Sure. We’ve been through worse inflationary times than now. But we’re still feeling the erosion of the dollar’s buying power. Learning to live with inflation is a challenge—no doubt about it. It is imperative to understand inflation and set a timely spending strategy, which can help us mitigate the impacts of inflation, sail your family through this high inflation tornado.
These two things aren’t the same, but they’re related. Inflation gauges the change in the price of goods over time or the dollar’s buying power over time. Inflation is neither good nor bad in and of itself. It’s normal for prices to inch up yearly.
A movie ticket in 1980, for example, cost about $2.90. Today, a movie ticket costs over $13.00 for adult ticket. What’s critical is the rate of inflation. If the rate is low, that’s normal. If the rate is high, that’s a problem. The U.S. inflation rate is about 8.54%, the highest rate in quite some time.
High inflation rates impact our cost of living dramatically. Cost-of-living measures the change—up or down—in cost for the necessities of life—food, clothing, taxes, healthcare, housing, and so on. The cost of living differs depending on location.
For example, it costs about $100,000 to live in New York, NY. In Chapel Hill, NC, it costs around $42,000. That’s about 58% less, according to PayScale.com, a leader in compensation management.
Increases in our cost of living can be challenging. Unfortunately, the inflation rate has a huge impact on the cost of living, so people are feeling it these days. Factors impacting the cost of living include higher food costs, higher gasoline costs, higher utility costs, and higher interest rates on home loans. It’s hard to keep up with increases in the cost of living if your paycheck hasn’t increased in a while.
The critical difference between these two concepts, however, is simple: Inflation rate is the general rise in overall price levels in the economy. The cost of living is the standard of living you enjoy. With inflation at really high levels right now, many people find their previous standard of living hard to keep up. They also find they have less discretionary cash to spend than before.
If that sounds like you, take heart. All is not lost. Below are nine simple strategies you can use to combat the ravages of inflation and maintain your standard of living:
- Look for substitutions for products you buy often. For example, buy lesser cuts of meat at a lower price or stay in and rent a movie instead of going to one.
- Repair things instead of replacing them. Things that used to be simple to replace aren’t so any longer.
- Simplify your lifestyle. For example, attend a yoga class at home with help from YouTube instead of driving to a studio, saving gas and money.
- Instead of paying for private lessons for your kids, check out the local community center or YMCA. They may be able to provide lessons at a lesser cost.
- Become more self-reliant. Produce things yourself, like making homemade food or growing vegetables.
- Create a budget and follow it. That’s especially helpful when it comes to things inflation might impact more than other things.
- Try new stores, use coupons, and buy in bulk from big box stores like Sam’s or B.J.’s. Shop at less expensive grocery stores, like ALDI, instead of Whole Foods.
- Cut unnecessary expenses. Work out at home or your apartment complex instead of at an expensive health club. Make coffee at home and bring it to work instead of buying it from Starbucks.
- Look for free alternatives. Find inexpensive things to do with the kids, like going to concerts or museums that are free.
The Federal Reserve raised interest rates to slow the inflation rate. That will help by driving money from the economy. But it takes time for this move to impact the economy. So, the inflation rate will remain high for a while. Nevertheless, implementing the strategies above and others like it can help you maintain the standard of living you enjoy now.