Financially Preparing for Inflation

My vote for the 2022 buzz word of the year is already cast: Inflation! Before this year, that word may have spurred some high school or college economics class memories; however, in 2022, we’re experiencing the definition of this word in action. With inflation levels at 40-year highs, gas, food, and entertainment prices are all deducting a larger chunk from our income. How do we all cope with a decline in the purchasing value of money?

As a disclaimer, I’m not a Certified Financial Planner; however, I do have a strong desire to read, research, and execute personal finance methodologies and tips. In my view, the key to navigating a successful personal finance journey is by budgeting. Ugh, yes – I know that “B” word is the worst. However, during economic times that strain your wallet, your personal finance budget is more important than ever. While creating a budget can be a headache, the most difficult part is executing, tracking, and adjusting your budget frequently.

The key to the personal budget process is to evaluate your financial goals and possess the ability to carefully evaluate needs vs. wants. I’d really love (want) to have a personal chef cook all my meals, but that would certainly take a significant chunk out of my monthly budget. In my opinion, one area that shouldn’t be adjusted downward during inflationary times is your savings/investing dollars. Continuing to contribute to a 401K, money market account, or a certificate of deposit (Hey! Check out Clearview’s competitive certificate rates – especially as rates are on the rise) is crucial to building wealth for your future. So, if those savings/investing dollars don’t budge, then what gives? Here are a few thoughts on how you can start preparing for inflation, based on research and personal experience:

Weekly meal planning

Yes, I know this may be more painstaking than creating and tracking a budget, but it can prove very helpful in preparing for inflation. If I had a penny for each time my wife and I asked each other on Sunday morning, “What are we eating this week?”, well, we’d have many pennies! However, once we do decide and execute – it ensures a smooth meal planning week and drastically reduces our temptation to order from DoorDash multiple times per week. We’ll plan for one take-out/“go-out-to” dinner each week.

Recurring subscriptions

We “cut the cord” a few years ago. There are too many channels and we barely watch cable anyway. The alternative? Streaming services! What started as a few streaming services has now grown to more than a handful. Netflix, HBO Max, Hulu/Disney+/ESPN+ combo, and the occasional Sling TV stint. There might be one more. I should probably know all of them, but that’s the point. Sign up, set up a recurring payment, and forget. $15 here, $20 there, it all adds up each month. Is this really cheaper than cable? There may be other recurring items hitting your accounts that can be re-evaluated during inflationary times – some of which may not be missed much at all.
 

Daily Starbucks

I know this may be a non-negotiable for some, but the daily purchase of a “cup of joe” can add up quickly. Finding a way to cut back slightly will help as a cushion for other areas of your personal budget.

Invest in yourself when preparing for inflation

This focuses on the income side of the equation. Inflationary times may provide some added motivation to advance your education and skillset by way of a degree or certification. Although these efforts will temporarily reduce your personal time, a degree or certification can set you up well for promotions/advancement within your workplace. Many companies assist with funding your education as well.

So how long will this personal budget crunch (driven by inflation) continue? Predictions change frequently, but I’d expect the continued pain to last through the remainder of the year (at least to some extent), with some relief occurring throughout 2023. As with anything in life, the good and bad times don’t last forever. The Federal Reserve’s goal is to reach an inflation level of 2%, compared to the current figure of 9%. So, we still have some progress to make on this front.

Hopefully, this article provided some useful (and relatable) personal finance information to help you start better preparing for inflation while navigating challenging economic circumstances. At Clearview, we provide the expertise to assist with all of your personal finance needs.

Take care and remain diligent on your financial journey!