Though you may not realize it, inflation is one of the biggest budget destroyers that affects nearly everyone.
Typically inflation hovers at around 2% – 3%, meaning that goods and services are a little bit more expensive every year and your money is effectively worth less. Nowadays, inflation is closer to 9%. That means it’s more important than ever to figure out how to deal with inflation.
Regardless of where you are in life, it’s never a good idea to sit by and watch idly as your bills slowly grow. There are a few practical tips you can implement today that could help you combat inflation and protect your savings. This post will cover them all.
7 Tips on How to Deal with Inflation
The best personal finance tip regardless of economic condition is always to spend less than you make, and to increase your earnings so that you can save more over time.
This is true when costs stay relatively steady and when inflation is running hot. Of course, there are a few tips that can help you stay true to the course.
Cut Your Expenses
Needless to say, when costs are going up, one of the best ways to manage your budget is to pull back your spending. The first thing you’ll want to do is clearly identify everything you’re spending money on in a typical month.
Visit your bank and credit card statements to identify exactly what your expenses are each month and how much money goes to each category. Once you have your expenses clearly laid out, it becomes much easier to choose which items you can pull back your spending on.
Some common bills that you can consider reducing are:
- Monthly subscriptions you don’t use anymore
- Phone plans that give you data you don’t need
- Car and home insurance
When it comes to monthly subscriptions, many people are still paying tens or even hundreds of dollars every month to services they don’t use anymore. Comb through your bank statements and see if there are any recurring charges that correspond to a service you no longer use.
Phone plans are another area where you can potentially save some money every month. Nowadays with free internet everywhere, it really doesn’t make sense to have unlimited data unless you really need it. Changing from an unlimited data plan to an 8GB prepaid plan can save you a significant amount of money every month.
The same idea applies to car and home insurance. If you bought your insurance a while ago, you may be paying more than you need to. Shopping around for new insurance could yield you better coverage at a lower cost.
Of course, there are certain purchases that must be made, like food, gas, and rent. However, even these can be minimized if you really scrutinize your spending. Finding ways to save money on food, to cut down on gas, and to potentially lower your rent is possible if you put in some time to look.
Start a Side Hustle
Oftentimes it’s not enough to just live within your means. After all, there are only so many expenses you can cut down on. For that reason, another way you can combat inflation is to expand your means. One way to do so is to start a side hustle.
Though it may sound scary to start a side business out of the blue, your current profession can actually be a great launching pad for secondary income in the form of consulting. If you have a decent amount of knowledge and expertise in your field, there are bound to be people willing to pay you for your help.
For example, if you’re a software engineer, instead of just working on massive projects for your current company, see if you can prospect and gain a couple smaller clients who are willing to hire you for website design or simple software projects.
Even if you don’t have a leverageable skillset, there are still simple ways you can start a side hustle:
- Freelance writing for small blogs and publications
- Tutoring for students
- Driving or doing delivery for companies like Uber
- Becoming a dog walker for your neighbors
- Managing social media accounts for small influencers
Regardless of where you start, even a couple extra dollars a month can go a long way towards helping you deal with inflation.
Invest for the Future
At the end of the day, you can only increase your income so much. After all, there’s only 24 hours in a day and there’s only one you. That’s why if you want to truly escape from the shackles of inflation, you need to invest for your future and get your money working for you.
If you haven’t started investing yet, try to set aside a little bit of your paycheck for savings/investments before you use any of it for your expenses. This can help you prioritize your future and slowly build up a nest egg that can eventually beat out inflation.
If you’ve already begun investing and are discouraged by rising interest rates and a falling stock market, remember that portfolios aren’t grown in a day. Take advantage of the low stock prices and stay consistent with your investments.
Ask For a Raise
If you’re like most people, your salary makes up the majority if your income. For that reason, asking for a raise is also usually the most accessible way to increase your earnings every month.
If you’re making $60,000 a year, even a 5% raise translates to an extra $250 every month. Here’s a great framework to consider if you’re thinking about asking for a raise:
- Add value to every single task you do at work and try to go above
- Track down the work that you do and what projects you’re working on
- Quantify how much value you are adding above your current salary (time saved for other employees, efficiency added, etc.)
- After tracking down your work for a couple weeks go chat with your employer
- Present them with your tracked work and value add and ask for a raise
If you’re adding value to your workspace, ask for a raise, and still get denied, it may be time to consider switching companies…
Update Your Resume and Consider a Job Switch
If you’re looking for a way to increase your income within your current career trajectory, one of the most promising methods is to update your resume and start recruiting for a different company.
Though you might feel like it’s a hassle to brush up your resume and re-prepare for interviews, many studies show that it actually pays to switch jobs. According to Forbes, people who switch jobs can consistently earn gains in salary of 8% or higher.
By freshening up your resume and re-entering the market for a job switch, you are also opening yourself up to more opportunities. You may inadvertently end up in a job you’d never consider doing work that is much more satisfying to you.
The process for changing you job will be very similar to the one needed to ask for a raise. The only difference is that instead of presenting your quantified accomplishments to your current employer, you’ll want to present them to your interviewers at places you’re hoping to break into.
Pay Attention to Lifestyle Creep
Lifestyle creep is the phenomenon of spending more money as you make more money. You could be getting paid more and more each year, but if you’re expenses rise in proportion with your income, you’ll never be able to truly escape the effects of inflation.
One way to prevent lifestyle creep is to mark down how much you spend every month and try to keep your expenses flat even if your income is going up. For example, if your expenses for the month of June last year was $6000, try to keep this June’s expenses limited to $6000.
With inflation eating away at costs, this will mean that you’ll need to cut something out of your budget. However, if you really analyze your spending, you might find that you’re slowly succumbing to lifestyle inflation without even noticing it. Some things take note of are:
- Ordering in or eating out every night when you used to meal prep and batch cook
- Subscribing to services that you only use a couple times a month (or don’t even use at all)
- Shopping online more often now when you used to hunt for bargains
Little things that contribute to your lifestyle inflation can build up until one day they shift in your mind from being a “nice to have” to being a “must have.” Dealing with lifestyle inflation and making sure that your expenses stay relatively flat is a great way to also deal with the inflation in the economy.
Optimize Your Lifestyle for Happiness
Too many people live paycheck to paycheck and consistently give their money to certain expenses without stopping to analyze whether what they’re spending on really brings them happiness.
When prices start rising, it’s a good idea to sit down and think about what you’re spending money on and why. You might instinctively jump to the conclusion that every purchase you make is necessary but really try to stop and think about whether a certain purchase brings you any joy.
Then, make an attempt to cut out the things in your budget that don’t make you happy. By doing so, you are essentially increasing your return on happiness for every dollar spent and simultaneously saving more money.
You might be surprised at what a couple of hours a month can do for both your happiness and your financial future.
How Will You Deal with Rising Inflation?
As inflation rises and the cost of living slowly creeps up, it becomes increasingly important to optimize your finances and find ways to deal with inflation.
At the end of the day, the best strategy for you is the one that you can stick with in the long-term. If you’re committed to a certain method of managing inflation and can seamlessly integrate it into your lifestyle, then that is the right method for you.
Jeff is a Harvard 2025 student passionate about making smart financial decisions both in school and in the workplace so that he can spend more time doing what he loves (like playing golf, spending time with family, and travelling). He has experience working in the financial industry and enjoys sharing all things personal finance, academic, and golf-related. Outside of blogging, he loves to cook, read, and golf in his spare time.