8 Steps to Budget During Inflation

Posted on Nov. 1, 2023

IMAGE: Couple looking at laptop together

When the price of groceries and other goods increase, it’s challenging to manage your budget. In 2022, inflation peaked at its highest level in over 40 years. Despite a slight reduction in 2023, economists believe inflation will continue in 2024 and beyond.1 Follow these creative budgeting strategies to navigate inflation.

1. Continue to Pay Down Debt

It’s tempting to use a credit card when you’re feeling budget constraints. However, interest rates rise during inflation, which means you’ll be paying even more on this debt. The national average APR is over 20% in 2023, up from around 16% APR in 2022. If you use a credit card, ensure you pay off the balance each month.

If you have credit card debt, the debt snowball method is the recommended method to pay off your cards quickly. Make the largest payment possible toward the smallest debt while making your minimum payments on all your other debts. Once you fully pay off the smallest balance, roll over the money spent on that payment to the debt with the next lowest balance. Discover different strategies to pay off debt in our article, “Popular Strategies to Get Out of Debt.”

2. Reduce Interest on Debt

If you have excellent credit history, you may benefit from a debt consolidation loan. Paying off several debts with one lower-rate loan may help you reduce your overall monthly debt expense, increase your cash flow, or allow you to pay off your debt quicker. A debt consolidation loan makes sense if it allows you to pay off your debt faster, lower your monthly payment, or is a lower interest rate.

A balance transfer to a lower, or no interest, credit card may also be a strategic move. A balance transfer involves moving debt from one credit card to a different credit card. Credit cards offering a 0% APR — or 0% interest rate — on balance transfers do not charge any interest for the promotional period’s term. Transferring high-interest debt to a lower interest rate card can save you hundreds of dollars in interest or allow you to pay the balance off faster. Learn more about how balance transfers work in our article, “How Credit Card Balance Transfers Work.”

3. Take a Staycation Instead

Everyone likes to get away, but there are ways to still have fun in your own backyard. Search for free events at local museums or libraries. The parks and rec departments or other community organizations may also have free, family-friendly events. For fun in your own home, you can camp in your own backyard, create a scavenger hunt, or have a movie marathon. Recreate the magic of a past vacation by preparing a favorite dish from that trip. It may not be as much fun as a vacation, but it’s worth keeping your budget in check.

4. Reduce Spending on Food

Groceries account for a large portion of your budget, and it’s a challenge to reduce this budget when prices are rising. Shop around and compare prices between stores to find coupons and other deals. Avoid name brands and shop for the store brand, which is usually less expensive.

Plan your meals ahead and stick to your list when shopping. If your budget allows, consider buying meat in bulk to freeze. Although it’s tempting to splurge on snacks like chips and cookies, these are unnecessary expenses. Sticking to the essentials needed for meals cuts your budget considerably. If you need a treat, buy store brand snacks, or make your own at a fraction of the cost.

5. Reduce Energy Use

A programmable smart thermostat saves a ton on your utility bill. If you are away for most of the day, schedule the thermostat to several degrees cooler so that’s it not running constantly while you’re gone. Use energy efficient light bulbs and appliances and wait until appliances are full to run. If your home isn’t well insulated, think about investing in better insulation or getting windows and doors with tighter seals to lower costs.

6. Shop Around for Insurance

Regardless of inflation, you need insurance coverage, but you can try to reduce the premium. Look for plans with a higher deductible that still has the coverage you need or ask about bundling options to cut costs.

Texell Insurance agents work with top providers like Nationwide, Liberty Mutual, Progressive, and Travelers. They’ll also shop your policy at the renewal period to make sure you’re still getting the best deal on the policy that meets your needs. Learn more at TexellInsurance.com or call 254.774.5181 for a free quote.

7. Cancel or Reduce Subscriptions

Although they’re entertaining, streaming services aren’t a necessity. Pick your favorite one or two, then cut the rest. You can always renew the account later when your budget allows. If you rarely use your gym membership, cut it from the budget and get creative with home workouts. If you have more subscriptions than you can count, use a mobile app like Truebill or Bobby to search for and cancel unused and unwanted subscriptions.

8. Evaluate Your Phone Plan

Shopping around for cell phone plans may be overwhelming, but it could save you a lot of money. Evaluate the coverage and data usage that you need, then compare plans from different carriers. Use a third-party review site like Reviews.org. Many cell phone carriers also offer deals to new customers, including a free phone or reduced price for a few months.

No matter how you decide to cut costs during inflation, make sure it’s outlined in your budget and that you’re following it closely. If your budget isn’t working and you need a fresh start, read our articles on “Building a Basic Budget Part 1” and “Part 2” to get started.

1 How the Fed affects credit cards from Bankrate.com.

If you wish to comment on this article or have an idea for a topic we should cover, we want to hear from you! Email us at editor@texell.org.

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