Inflation is an economic term that refers to changes in the cost of goods and services. The inflation rate is the rate at which these costs grow over time. Inflation reduces the absolute value of money over time, so that $100 today is worth less than $100 ten years ago. You can buy less now with the same amount of money than you could in the past. Currently, the Consumer Price Index, an indication of the inflation rate in the U.S., shows that prices are up 3.1% compared to one year ago, but these changes are distributed irregularly. Food purchased for consumption at home, for example, has increased only 1.7% in the past year, but food purchased at restaurants has increased over 5%. Transportation services are up 10%, and housing is up over 6%. These increases hit the wallets of US consumers particularly hard.

When consumers feel pressure in their wallets, it can be hard to know what habits to change that will have a real impact on their finances. Consider the following ways to combat inflation at home.

Review your spending plan. Any time that your paycheck feels like it has less buying power than usual, it’s time to review your spending plan. Think about what you can cut from your monthly expenses, what you need to keep, and what, if anything, needs to increase. This may be a good time to call up your homeowner’s and vehicle insurance companies and try to negotiate lower rates or to evaluate your cell phone, internet, and streaming service providers and make adjustments to your plans to save money each month. This may not be the time to reevaluate your living arrangements or make any large changes, but small changes do add up over time. It may also be wise to avoid discretionary purchases. If you don’t need new shoes, don’t buy them.

Pay special attention to meal planning. Cooking at home is almost always cheaper than eating out at a restaurant or grabbing takeout on the way home – and grocery prices are increasing more slowly than restaurant and fast food prices. Typically, you can cook larger portions at home, making enough to feed the whole family and have some extra for lunch the next day. With a plethora of free meal planning sites and recipes available online and on social media, getting ideas for quick lunches and dinners isn’t too much of an added chore. Cut costs on food by eating out less frequently, planning your grocery list in advance, and buying nonperishables in bulk. The best tip? Don’t go to the grocery store hungry. Multiple studies have shown that people who shop while hungry spend significantly more money than those who shop while full.

Tackle debt. Debt eats up more than its fair share of your money for one reason: interest accrues on the debt, increasing your loan balance and raising your total obligation, along with your minimum payment each month. Note that interest does not accrue on credit card bills that are paid off in full each month, but it does accrue on credit card bills that are not paid in full each month, mortgages, vehicle loans, and loans taken for educational purposes. It seems counterintuitive to put more of your limited income toward debt each month, but if you want to combat inflation and gain spending power, you have to limit how much of your money goes toward paying off purchases that you’ve already made.

Learn more about debt repayment strategies.

Revisit your savings accounts. If your emergency fund and savings are not stored in high-yield savings accounts, you are leaving money on the table and likely losing spending power. High-yield savings accounts work for you with interest rates that rival or outpace inflation. This means that money that you do not touch (or at least try not to touch very often) will maintain its spending power into the future instead of losing value through inflation. Check the interest rates of your current accounts – if you’re earning less than the current rate of inflation, you may want to consider moving your money to a bank or other financial institution that can offer you a better deal.

Don’t stop putting money away in long-term savings vehicles. This can include stocks, bonds, retirement accounts, CDs, annuities – anything that grows money over the long run can help you fight inflation. If you get a raise each year, consider adding an additional percentage of your salary to your 401(k) or TSP account and living off your previous salary; some retirement accounts will automatically increase your savings percentage (up to a point) at the beginning of each year. Saving for the future and your retirement is important given that inflation and costs of living aren’t likely to decrease over time. You’ll need money and growth in the future more than you need it today. Treasury I bonds are an option for individuals who want to save for the future but may have a low risk tolerance – they’re considered quite stable and are currently offering 5.27% through April 30, 2024.

Consider small adjustments. Heating and cooling costs can make up a good chunk of your monthly bills. If you can stand to bundle up and keep your house a little cooler in the winter and dress down and keep your house a little warmer in the summer, you’ll save on utilities (and then can apply your savings toward paying down debt). Think, too, about tasks that you normally outsource. Can you cut your lawn services or maid services and take over exterior maintenance and cleaning yourself? Could jogging through your neighborhood and lifting weights at home allow you to skip your gym membership? What other discretionary purchases can you cut or reduce?

When it comes to your money, every penny counts – especially when inflation is high. Making some simple changes in your personal finances can help lessen the squeeze and stretch each paycheck. If you have questions about crafting a spending plan, our Education Team is available for one-on-one consultations and can help you stay on track. They can be reached at education@navymutual.org or 888-298-4442.