It’s the end of another year with the holidays upon us. Prices are going up faster than Superman can leap off a tall building and that makes the topic of how to survive inflationary times especially relevant. Over the last twelve months, all items in the consumer price index (CPI) increased 8.2 percent. This number is an average, with some items doubling or even tripling in cost.
Increases in food, medical care and shelter costs were the largest increases in the CPI. These are basic items of expense that affect every person and family. You may not think people are suffering from the number of tables still full at your corner restaurant or people at the shopping mall. But the rising debt will be biting at your heel all too soon. I’ve noticed the cost of chicken has tripled. Most of us are looking to at least make smart choices as we face another year. Here, we give you some ideas that will hopefully help you as you plan how to survive inflation in your life and business.
- First: Determine your existing budget and ascertain the debt increment for each month. With this knowledge you can strategically curtail spending and reduce credit card debt, ultimately aligning spending with income.
- Second: Identify and curtail legacy spending, particularly focusing on long-term subscriptions and insurances. This especially applies to business SAS subscriptions, which can easily pile up.
- Third: Assess eating and drinking habits. Many are spending significantly on consumables like coffee and dining out. This not only impacts budgets but also health issues with obesity levels at an all-time high.
- Fourth: Honest communication is important. Living accurately and making mindful spending decisions cannot be overstated. Financial trouble often arises from excessive spending on houses, cars, and dining out. Evaluate carefully the borrowing for assets that appreciate versus those that depreciate in value.
- Fifth: For encouragement, disciplined spending over five years can significantly improve financial stability and lead to surplus income in the future.
Podcasts from 2024 and 2022:
One: Establish and Re-establish Your Budget
I talk about a default budget in my book Stuck is Not a Four Letter Word. In chapter 27, Watch the Cash, with a default budget, (download free: Default Budget) you define the basics of living expenses, car, personal, food, medical, insurance, etc… It also includes debt, which we’ll talk more about later. The important step is to identify everything you spend in a month, then over a full year so you know where the money is going.
This is something that Greg has done for our family through the years. There are certain costs that are basic necessities, but when you all the expenses laid out, it’s very revealing. It’s also what I do every year with business expenses and the same budget principles apply. One of the best things you can do to survive inflation is to actually see where the money is going. You may really need that morning coffee, but when adding up the trips to Starbucks, you may be shocked at the total. Creating a budget doesn’t mean you cut all the extras. Just be aware of them and make revisions as needed.
There are free programs you can do some of this online such as Nerdwallet that separates the necessities from the extras. Before cutting anything, establish what you’re spending now. And don’t rack up more expenses on your credit card! Those are expenses you are just delaying.
Two: Create a Mindfulness of Gratefulness
If you’ve followed Greg and my travels at all, you know we traveled to South Africa this year. We saw people and those who work in small villages happy with almost none of the comforts we enjoy. Most of them had laundry hung outdoors to dry. Their homes weren’t equipped with air conditioning and heating and who knows what appliances they owned.
But they had smiles on their faces and were thrilled to have visitors come who would spend a few dollars for their goods. Many of the resort workers worked 24-28 days in a row, then traveled hours to spend a few days with their families. They were thankful where most of us would probably complain of the schedule. We have so much here in this country. We may have to cut a meal out and do without a few comforts but should be so grateful for what we do have.
Three: Decide What to Cut
This step is most effective after determining your spending habits and setting up a full revised budget for moving forward. It helps to keep a healthy perspective of needs and wants. It doesn’t mean you don’t buy that new pair of shoes or outfit. But it does mean calculating your cost-per-wear and sometimes the practicality if you are trying to cut back. If you need those shoes to wear three times a week and a new outfit you will wear for multiple occasions, your cost-per-wear goes way down. It probably makes more sense in that situation. (Get free goal setting worksheets, including default budget!)
However, if you look in your closet right now, you probably have at least one pair of shoes you’ve only worn once. I do! Your cost-per-wear has skyrocketed for those shoes, even if they were on sale. Use your common sense in cutting. Remember, you don’t have to do without all the extras. Just evaluate them and save so you don’t go into debt.
Four: Lower Your Debt Ratio
If you have $5-6,000 in credit card debt, you are paying $500 a month in interest. At the time of this writing according to WalletHub, current credit card rates for existing accounts is 16.27% and for new accounts, 20.57%! Carrying any significant balance on a credit card will absolutely kill your budget. The balance of your credit card is the overflow of your monthly spending.
When charging expenses, you are merely delaying them and are adding a fee for that privilege. Credit card debt can be debilitating and you should shave it down as soon as possible. I don’t believe in drastically cutting up credit cards unless you have a backup plan for covering emergencies. But be careful. If you pay off your expenses every month, you have developed a great habit and definitely keep it up. That is a habit I developed years ago and I put prompts in my calendar to make sure I’m never late. I hate late fees!
Five: Evaluate Appreciating or Depreciating Assets
Your car is a depreciating asset. We knew someone who bought a Peugeot car, which you don’t see much in our country any more. They told us it was an investment. Their “investment” was soon broken down in the shop more often than on the road. It was very expensive to maintain. And it had depreciated faster than they could drive it off the lot.
Lest I sound like we’ve made all the wise decisions, we purchased a used Volvo station wagon in the same manner. We should have had a clue that all would go wrong when the engine started smoking when we drove it off the lot. But we were sure it was one of the safest cars around and a great “investment.” We had a hard time giving the car away after a couple years.
An appreciating asset is one that will most likely go up in value. Mostly this is the purchase of property and your home. Greg says you make the most money when you buy, so try to buy at the bottom of the market when prices are down if at all possible. We have known many who bought at the top of the market and foreclosure closed in when the market shifted.
Quick Tips
- An easy way to save money is try not to buy something as an investment that will go down in value.
- Save for extras like vacations and holidays in a separate account.
- Buy bulk meat on sale and freeze portions. (Label with date!)
- Whittle down any credit card debt as fast as you can.
- Be honest with yourself on expenses. Face the truth and then act.
- Realize inflationary times come in cycles. It may get worse before getting better, but it eventually will turn around. If you look at the US Consumer Price Index graph, you’ll be able to see the historical cycle.
Also see: How to Manage Finances During a Crisis
When charging expenses, you are merely delaying them and are adding a fee for that privilege.
deborah johnson
Thought Leader, Keynote Speaker, Author
If you are interested in growing and learning, check out our online courses here: Online Learning
1,238 words
