You’ve probably noticed that lately, things are getting more expensive. Prices for gas, groceries, food, or just about anything else are shooting up quickly. In May 2022, inflation continued to move upward as it reached 5.4%. In such a high inflation environment, many of us are struggling to cope; and saving money may not be possible. Here are the things you can consider to properly budget expenses during this time:
1. Rethink your budget
It is time to revise and revisit your family or personal budget. Rising prices mean that your budget used from the previous year will likely no longer work. You may opt to consider cheaper alternatives to the brand that you’re used to, in order for expenses to fit your grocery budget. Another thing you can do is review your subscriptions and cancel those that you don’t really need. Many would refer to online price comparison sites for purchases in order to catch the best deal.
2. Prioritize paying your variable debt
Paying down debt—especially variable debt, like credit cards, lines of credit, personal loans, and variable rate mortgages—should now come as a high priority, only second to living expenses. Remember, rising interest rates are making everyone’s debt load more expensive to carry.
3. Set your “rainy day fund”
When doing your budget, add a line item for your “rainy day fund”. Keep at least three to six months of living expenses in case of unexpected financial challenges. This fund should be relatively liquid, for you to access quickly if you need to.
4. Explore safe investment opportunities
Double your effort in studying and researching the bond market, and go with certain types of bonds that can hold up relatively well in this type of inflationary environment. Explore investment opportunities that are both safe and guaranteed to keep pace with inflation.
With sudden increases in cost of living expenses, it may cause financial stress. If your paycheck suddenly doesn’t stretch as far, it’s a good time for you to be smarter in looking at your personal finances. There are many ways to make room for increased expenses. The best approach is to review your financial priorities and cover essential needs first.