Managing Your Household Budget During Inflation

  • September 28, 2022
  • By: GreenPath Financial Wellness

Whether you are going to the grocery store or the gas station, it seems like everything is costing more. It’s not your imagination.

The question is, how do you manage your money when it takes more of it just to make ends meet?

We hear terms in the news about the economy we may not fully understand. Although it can be overwhelming, understanding the basics is fairly straightforward. One term you may hear is inflation. It can sound scary, especially if you don’t have a finance degree. In a financial chat GreenPath’s Chris Dlugozima explained inflation this way in a recent video chat, “Inflation is the cost of things (necessities like gas, food, and everyday basics) getting more expensive.”

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“The typical American household now needs to spend $493 more per month to buy the same goods and services as it did last year.” – Moody’s Analytics, July 2022

Coping with inflation means managing budgets, creating a spending plan, and keeping a close eye on what money is coming in and going out related to your personal finances. Here are some tips to help manage your debt and household expenses at a time when we are all paying even closer attention to every dollar. If you are concerned about what is going on with inflation, interest rates, and the costs of everyday items, you are not alone.

How is Inflation Impacting Household Budgets?

When it happens, inflation does affect everyone, but it can touch people differently, depending on what is going on in your particular area and household.

Many families across the country are facing rising gas prices, more money spent at the grocery store, as well as housing and rent costs that are higher now than they have been for decades. A good example is rent costs that are up as much as 17-percent at the same time last year, according to national data.

One way to offset the effects of inflation is to bring in more money to your household. Do you have a hobby that could generate additional income? Do you have a small business that could produce more income? Although it may be an uncomfortable conversation, you may want to consider asking your employer for a raise. There are a number of ways to generate more income for the household and reduce the burden of rising prices. Increasing the amount of money coming in can help pay bills and make ends meet.

We know what we read in the news, but is there anything we can do to make inflation’s impact a little easier to deal with? As much as possible, even during these challenging times, you want to have a plan and then stick to it. That means being a smart shopper, not over spending, looking for deals where you can find them, being careful about credit spending, creating a debt payoff plan. Things are challenging right now, but you can also consider a future, after things return to some semblance of “normal.”

What Can I do to Navigate Rising Prices?

From the time you were old enough to work, did you ever look at your paycheck and wonder where all the money went? As inflation has hit a 40-year high, it is even more important to figure out your finances to make sure you aren’t over extended financially.

Some of the best ways to navigate rising prices is through budgeting, consolidating debt, and saving. All three can ease the burden of rising inflation. As prices of goods and services continue to go up and families search for solutions to meeting their basic needs, all three can be a challenge, but are no less important.

Your household budget can get away from you if you’re not careful. Those seemingly small monthly bills can add up and eventually have an impact on your overall budget. To stay on track with your household budget, look realistically at everything you spend on a monthly basis. While you should be mindful of costs and income, it doesn’t mean you have to go to extremes. Understand where you are right now, and spend appropriately.

Take Inventory

As prices continue to fluctuate, this is a great time to take a close look at your budget frequently. An item for the family may have been one price last month and it could cost even more the next month.

Has your household income changed? Have you made adjustments for rising grocery, transportation or other expenses? A good place to start is to use a budgeting worksheet to track your monthly income against current expenses.

Along with tracking your income and expenses, you also want to monitor your debt. To keep up with rising prices, some Americans are using their credit cards more than they normally would. This can quickly become an issue, especially if they aren’t able to keep up with payments or fall behind. Late or missed payments can affect your credit report, making it more challenging to get favorable interest rates or make larger purchases. Having a debt payoff plan is essential to your financial success and sets you up for more savings, better credit, and can ease your mind if or when interest rates or inflation rise in the future.

Regular budget reviews give you a chance to consider what expenses are must haves, wants, or items you could consider cutting out altogether.

If things are tight, consider cutting out things you don’t need, like streaming subscription services. You can also contact service providers like cable or mobile phone bills to negotiate a lower rate.

It is also smart to look for ways to reduce common household expenses like energy and even gasoline. You can work with your energy provider to put yourself on a consistent monthly payment plan. This will help reduce the surprise of higher bills during high usage months when temperatures are very high or unseasonably low. Energy savings can impact what you pay by as much as 5 – 10% per month on a residential bill, according to the Department of Energy.

GreenPath is a national nonprofit, our counselor are NFCC certified, and our counseling service is free.

Set a Simple Spending Plan

To get a better handle on where your hard-earned cash is going, especially during rising inflation, it helps to create a spending plan. This plan can be your roadmap to success now and into the future as the overall financial picture improves.

Creating a spending plan helps you take control of your finances, and puts a good habit in place for now and into the future; it can even help you reach your short and long term goals.

Managing budgets for your family takes planning and dedication to follow through on what you create. Your spending plan doesn’t have to be complicated, but it does have to include a realistic look at your finances.

Your spending plan should include all of your income and expenses. What money is coming in, what is going out, and what you are saving? In addition to your regular monthly costs, it should also include financial goals you hope to meet, like a family trip or larger expenses.

Shop Smart

Sometimes it can seem like it is a delicate balance to stay on top of your finances. Recent research shows 64% of consumers were living paycheck to paycheck at the beginning of 2022. With that in mind it’s even more important to be smart about how you shop and spend your money.

Here are some tips on how to be a smart shopper in the face of inflation:

  • Create shopping lists and then, stick to them – Before making the trip to a store, make a list and decide no matter what, you are going to stick to it. Impulse spending can be a challenge as you are managing budgets for the family.
  • Look for bargains – Being patient and looking for deals can save you big money in the long run. Five dollars here or there may not seem like a lot, but those small savings can add up. The same way small impulse purchases can affect your budget negatively, savings from coupons and discounts can put money back into your pocket.
  • Buy essential household items in bulk – Utilize big box stores to stock up on common household items like deodorant, toilet paper, and some non-perishable food items.

Consider a Debt Management Plan

Monitor debt, especially as interest rates rise. Paying off high-interest credit card debt can save money in interest, improves your credit score, improves your credit report and makes more room in your budget for other expenses or for a debt payoff plan.

Look at your particular financial situation and choose a debt payoff strategy that works for you. Consider GreenPath’s Debt Management Plan. It can help you pay off

unsecured debt in three to five years. GreenPath certified counselors can work with your creditors to bring your accounts current, lower interest rates, and eliminate fees.

Keep an eye on your credit history. Your credit report doesn’t have to be a source of frustration. Learn why your credit history is important here. Your credit history is used to calculate your credit scores from the three major credit bureaus – Experian, Equifax, and TransUnion. Those three-digit numbers help lenders decide whether to approve you for new credit and what interest rates you may pay. Annualcreditreport.com is the place to go to check your reports.

Tap into Trusted Resource

You can get independent guidance on your finances from nonprofit financial counseling agency GreenPath for trusted debt advice.

By working with a certified financial counselor, you get caring and knowledgeable help to increase your credit scores; increase savings, reduce your total debt; and give you more confidence in reaching your overall financial goals.

Anyone who contacts GreenPath receives a free initial financial counseling session with certified counselors who lend an emphatic ear, look at the entire financial picture, help you ease financial stress and uncertainty through access to clear information and develop a personalized plan.

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