Inflation-Proof Your Budget: Strategies for Rising Costs

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Budgeting and managing personal finances are difficult enough without pandemic-induced inflation bearing down on you. In January, the Bureau of Labor Statistics (BLS) reported a ​7.5 percent​ increase in the Consumer Price Index (CPI) since last year. And economists predict the Federal Reserve (the Fed) might raise interest rates up to three times in 2022.

Higher prices, increased cost of living and reduced purchasing power call for budgeting tactics to help you save money while getting through the next year.

Create or Revamp Your Budget

If you don't have a budget yet, it's never too late to get something in place to track your expenditures and personal finances. The Consumer Finance Protection Bureau (CFPB) shares budgeting basics and free budgeting trackers for income and expenses.

You may want to check out some budgeting apps to align your bank accounts, credit cards, income and expenses in one place. Mint and Goodbudget are two no-cost apps available. You can also go lower-tech with a spreadsheet in Excel or Google Sheets.

Those who are revamping budgets don't need to recreate the wheel. But, as long as you are doing an update, consider your current money management tool and whether it has all you need.

Tidy Up Your Subscriptions

You'll be looking at your more significant expenses later. For now, start with paid apps and streaming services. These fall into the "wants" category of the 50/30/20 rule. Your total budget for all wants should be under 30 percent of your total budget.

You don't have to cut out everything fun – and you shouldn't. Doing an inventory of your small monthly expenses may turn up rarely used streaming channels or digital subscriptions you didn't realize you were still paying for. And some of the costs of these apps are also trending upward.

If you pay for apps through Apple's App Store or Google Play, you can track your subscriptions right from the settings on your cell phone.

When you review your monthly expenditures, there are bound to be areas where you can trim to counteract rising inflation and help with the 20 percent part of the 50/30/20 rule: paying off debt and setting aside savings.

Prioritize which of these and other nonessential items will stay in your budget. Anything you don't spend here can go into a savings account for a rainy day – or be tapped into for a small, budget-friendly splurge.

Go for Grocery Store Savings

During the pandemic, many people got used to spacing out grocery trips. When shortages arose due to supply chain issues, many shoppers dialed in on stocking up. With the rising costs in the price of goods at grocery stores and the inflation rate of food predicted to increase, it's time to take a closer look at your grocery habits.

Start by analyzing your grocery spending and finding where you can trim. Food shopping falls into the ​50 percent​ part of the 50/30/20 rule – and it is an area full of opportunities to save money:

• Use store apps to take advantage of coupons, rewards and special offers.
• Pair up with a friend and split the cost of bulk necessities at a warehouse store.
• Make a meal plan and create your list based on that. Stick to the list.
• If there is no extra fee, shop for groceries online and pick them up. This eliminates impulse buys and shelf-shopping in-store.

Along with this, consider those meals you eat outside the house. You don't have to give them up altogether, but consider them in your overall food budget and replace some nights out with a meal cooked at home.

Analyze, Adjust and Shop Around

Now for those expenses that require a little more research. For instance, with higher inflation and energy prices on the rise, you've probably encountered a steep increase in your power bills.

Consider your energy habits to find ways you can conserve in the short term to save money throughout the year. Use the home energy checklist from Energy.gov to help. Inquire about fixed-rate plans that offer a more consistent monthly bill.

Research cell phone plans for a lower monthly payment. Do the same with your credit cards. If you find a balance transfer offer that will save money, now may be the time to make a move. Call your insurance agent to find available discounts on home and car insurance or take a copy of your current coverage and shop around for a better rate.

When you review your monthly expenditures, there are bound to be areas where you can trim to counteract rising inflation and help with the 20 percent part of the 50/30/20 rule: paying off debt and setting aside savings.