How to Stretch Your Budget During Inflation

When groceries, gas, and other essentials cost more, it’s challenging to keep a balanced budget. Learn tips to keep finances on track during inflation.

Annual inflation climbed to 4.2% in May 2026, its highest level since April 2023.¹ Although it dropped in June after energy prices decreased, many household expenses remain high, making it more important than ever to manage spending. To avoid new debt and keep finances on track, follow these steps for managing finances and budget during inflation.

1. Keep Paying Down Debt

It’s tempting to use credit cards when you’re feeling squeezed by rising costs. However, credit card interest rates remain near historic highs in 2026. The average APR across all accounts is about 21%, and rates for new card offers average closer to 24%.² If you use a credit card, pay off the balance in full each month to avoid costly interest rates. If you’re carrying a balance, call the card issuer and ask if they can lower your rate. Many lenders are willing to work with customers, and a June 2026 survey from LendingTree.com found that 84% of cardholders received a lower rate after requesting it.³

If you have credit card debt, the debt snowball method is recommended 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. Learn more about other strategies to pay off debt in our article, “Popular Strategies to Get Out of Debt.”

Transferring credit card debt to a debt consolidation loan is another option to pay off credit cards. Combining several debts into one lower-rate loan makes sense if it helps you pay off debt sooner, lowers your monthly payment, or comes with a lower interest rate than what you're currently paying. Learn more about your options in “What is Debt Consolidation”.

2. Shift to a Needs-Based Budget

Many people follow the recommended 50/30/20 budget, spending 50% on needs, 30% on wants, and 20% on savings. To control spending when prices are elevated, adjust your budget to 60/20/20, or 60% on needs, 20% on wants, and 20% on savings. For example, for a $5,000/month income, shifting from 30% on wants to 20% would allow $500 to be used for needs. You can avoid debt by reducing spending on unnecessary items, but it’s important to remain consistent with building your emergency savings fund. A high-yield savings account helps you earn money on interest while keeping funds accessible. Texell’s Save First Account is designed for creating your emergency fund so that you can keep better pace with inflation.

3. Examine Essential Expenses

After adjusting your spending, look for ways to cut costs on essential expenses. Small savings in each of these categories lessen the burden and free up funds for savings or debt. Let’s take a closer look at the largest monthly expenses.

• Food — create a meal plan, buy in bulk, compare prices, use coupons, and buy store brands. Groceries continue to take a bigger bite out of household expenses. Plan your meals for the week and stick to your list when shopping. If your budget allows, buy meat in bulk and freeze it to use as needed. Shop around and compare prices between stores. Use store loyalty apps or coupons to stack savings. Avoid brand names and shop store brands instead, which are usually less expensive without sacrificing much in quality.
• Transportation — compare gas prices, keep tires properly inflated, remove heavy items from your trunk, and pay attention to driving habits. Rising gas prices can drain your account, but you can use an app like GasBuddy to find the lowest-priced fuel in your area. Keep your tires inflated at the recommended level and remove any heavy items from your trunk. Certain driving habits also burn fuel faster. Avoid idling for more than a minute, use cruise control to avoid sudden speed changes, and drive at the speed limit, since your car uses more fuel at higher speeds. To calculate the cost of your commute and for other transportation solutions, visit commutesolutions.com. 
• Utilities or energy use — upgrade to a smart thermostat, lower your water heater temperature, change air filters frequently, use LED bulbs, and check weatherstripping around windows and doors. The main sources of energy use in your home are heating, cooling, and water heaters. Upgrading to a smart thermostat that automatically adjusts the temperature when you’re away from home can reduce energy use. Lowering the water heater temperature to 120°F instead of the standard 140°F lowers energy consumption while keeping the water hot enough to stay sanitary. Changing air filters frequently, using LED light bulbs, and sealing any cracks in weatherstripping also help with energy use.
• Insurance — Review your plan’s coverage and work with independent insurance agents to find a policy that’s best for you. Regardless of inflation, you need insurance coverage, but you can still try to lower the premium. Look for plans with a higher deductible that still provide the coverage you need or ask about bundling options to cut costs. Texell Insurance agents work with top providers to find a policy that fits your budget. They'll also shop your policy at renewal to make sure you're still getting the best deal for your needs.
• Cell phone and other recurring bills — review plans and comparison shop to find cheaper plans. Shopping around for cell phone and internet 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 a reduced price for a few months.

4. Pause Subscriptions and Nonessential Expenses

Although they're entertaining, streaming services aren't a necessity. Pick your favorite one or two, then cut the rest. You can always renew later when your finances allow. If you rarely use your gym membership, cut it and get creative with home workouts. A surprising number of people are still paying for subscriptions they no longer use, so take a few minutes to review your bank or credit card statements and stop payments. Fast food, eating at restaurants, and food delivery services might be fun treats, but this unnecessary spending easily disrupts your financial plan. Reserve these splurges and other forms of entertainment for special occasions and set savings goals for these celebrations.

Bottom Line: Small Adjustments Ease Financial Strain

Inflation makes every dollar work harder, but you can ease the stress by taking small steps. Strategize ways to pay down debt, prioritize covering the costs of necessities, and trim spending wherever possible to protect your finances. After you’ve decided which steps to take, write down your budget and revisit it often to adjust as prices change. For more tips, read “Building a Basic Budget Part 1” and “Part 2”.

¹ Consumer Price Index Summary from the Bureau of Labor Statistics.
² Average Credit Card Interest Rate in US Today from lendingtree.com.  
³ LendingTree Money Insights: Trusted Advice From Our Experts written by Matt Schulz, edited by Dan Shepard from lendingtree.com.

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