“How to Save Money and Manage Your Budget Amid Rising Inflation”

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Combatting Inflation: Practical Tips to Save Money

Inflation is exerting financial pressure on U.S. households, with consumers now paying 6% more for goods and services compared to March 2022, according to the U.S. Bureau of Labor Statistics. Although this is a decrease from last year’s peak rates, inflation remains high, making it challenging for people to cover basic expenses and diminishing the purchasing power of savings.

Housing Costs on the Rise

The cost of housing has surged by 8.1% over the past year, significantly impacting low-income households who spend a larger portion of their income on housing, groceries, energy, and transportation. Adjusting your budget to cut expenses wherever possible can help you manage these higher costs. Here are some strategies to save money and combat inflation.

1. Cut Costs at the Grocery Store

Grocery prices have increased by 10.2% for the 12-month period ending in February 2023, according to the U.S. Department of Agriculture. Some food categories are expected to be hit harder this year, with sugar and sweets predicted to rise by 11.1%, cereals and baked goods by 11.7%, processed fruits and vegetables by 11.4%, and non-alcoholic beverages by 10.7%.

Here are some tips to save money on groceries:

• Come up with a food spending plan: Compare your budget with the USDA’s food spending plans to assess how your spending measures up against suggested averages.
• Opt for cost-effective foods: Build meals around low-cost staples such as pasta, rice, dried or canned beans, and potatoes. Canned and frozen fruits and vegetables tend to cost less than fresh, and swapping name-brand products for generic versions can help you save money.
• Meal plan: Create a meal plan each week to avoid impulse shopping or relying on takeout. Search for recipes that use ingredients you already have or plan meals using your grocery store’s weekly sales flyer.
• Comparison shop: Compare the price of grocery products by weight to determine the best value. Buying staples in bulk from stores like Costco and Sam’s Club can also save you money.

2. Save Money on Transportation

If rising gas prices are straining your budget, consider limiting your driving as much as possible. If your work allows, ask to work from home more often. Running errands in batches, carpooling, or using public transportation, biking, or walking can also save you money.

Take advantage of fuel savings programs at your local gas station, and consider using a gas rewards credit card to earn points or cash back on gasoline. Additionally, you may qualify for a lower auto insurance rate based on factors such as your credit score and driving history. Comparison shop for auto insurance to see if you could save.

3. Plan Ahead for Cheaper Vacations

While some economists predict that summer 2023 airfare prices will be lower than last summer’s highs, year-over-year increases in jet fuel prices remain elevated. Dining and hotel costs are also up, making vacations more expensive.

Consider taking a staycation, where you stay close to home and visit local attractions, take day trips, eat at local restaurants, and relax at home. This can save you a lot of money now, making it easier to take your dream vacation without accruing debt in the future.

If you plan to travel this year, book your flights at least six months in advance and use online savings tools like Hopper and Skyscanner to compare airfare rates. Flexible travel dates can help you select the cheapest flights. A travel rewards credit card can also save you money on travel by providing points or miles for qualified purchases.

4. Check Your Budget

Regularly auditing your budget is essential, especially when prices are rising. Evaluate your spending and build savings into your budget. If you’re already tracking your spending, compare it against your goals and adjust your spending limits as needed.

Look for areas to cut back, such as unused gym memberships, multiple subscription services, or excessive retail spending. Reducing discretionary spending can give you an instant cash flow boost. You can also try negotiating your utility bills, subscriptions, memberships, cable, phone, and internet bills to lower your regular expenses.

5. Pay Down Credit Card Debt

As prices increase, it can be tempting to rely on credit cards to cover expenses. However, taking on debt can stretch your budget, and rising interest rates can make credit card debt more expensive and difficult to pay down.

Making more than the minimum payment on your credit cards is crucial to paying them off. Consider using a debt repayment strategy, such as the debt snowball or debt avalanche method, to make aggressive payments on one card at a time. A balance transfer credit card with a 0% introductory APR period or a debt consolidation loan can also help you manage your debt more effectively.

6. Earn Money on Your Savings

While most saving methods can’t outpace inflation, putting your money in a high-interest account can reduce its eroding effects. Treasury I bonds are a safe, government-backed option designed to match or beat the rate of inflation, offering a 6.89% yield as of April 2023. However, I bonds require a five-year commitment to avoid forfeiting some interest.

For short-term savings, a high-yield savings account can help you earn more interest than a traditional savings account. Consider exploring options like American Express National Bank, Discover, CIT, Barclays, UFB Direct, Valley Direct, Laurel Road High Yield Savings, and Bask Bank for competitive rates.

The Bottom Line

Inflation makes basic housing, energy, food, and transportation costs more expensive. If your budget is under pressure, create a strategy to cut costs wherever you can. Economic stress can make credit management more difficult. Experian’s free credit monitoring allows you to track your credit report and see how factors such as your credit utilization ratio and payment history are impacting your score.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you navigate these challenging times and provide the best solutions for your financial well-being.

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