Saving means the portion of income which you don’t spend on current expenditures and set aside for future use. Not to mention, saving is essential to accomplish objectives in the short term or in the longer run. But saving money during inflation is not so easy. Inflation acts like a silent budget killer that leads to higher prices for goods and services. Stay with us to know some proven tips to save money during inflation.
What Happens during Inflation?
Inflation is typically measured by the annual percentage change in the cost of living for consumers, or by changes in a country's GDP deflator. The inflation rate can also be calculated on a monthly basis, which is known as the inflation rate.
A high inflation rate means that prices are rising quickly and will continue to rise at that same pace over time. This leads to an increase in the prices of all goods and services, which can make it difficult for people to afford these items.
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How Does Inflation Affect Yor Lifestyle
Income is the most important aspect of our lives. It allows us to live comfortably and have a good quality of life although rising prices are making that difficult.
The inflation rate in Bangladesh was 7.48 percent in July 2022. It means if you had carried out all of your monthly expenses with a budget of 50000 TK in July of 2021. In 2022, you have to spend 53,740 TK to purchase the same amount of goods and services.
During the period of inflation, the soaring prices of commodities and services put overbearing pressure on regular monthly expenditure and budget limits. When low to middle class people struggle to fulfil their basic needs, they usually can’t save money or save as little as possible.
Still many people try to save money during inflation periods thinking about the emergency situations as well as the future of family members. Unfortunately, for many low to middle income families saving money during inflation may lead to tough lifestyles with little entertainment or socialising.
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10 Ways to Save Money during Inflation
Saving money during an inflation period might be challenging for many low and middle income generating people. It requires a lot of routines and hard work. Check below 15 ways to Save Money during Inflation:
Budget
When you have spent all your income and then run out of money for savings before, you cannot realise it. That’s why it’s wise to plan ahead and figure out how much you can save with ease from each paycheck — then put that amount into savings from the outset.
If you put your savings first, you will find a way to live within the bounds you set for yourself.
The amount you should save depends on your total income and what savings goals you have. You can follow a common budgeting strategy- the 50/30/20 rule which means 50% of your income goes to needs, 30% to wants and 20% to savings.
However, it may not be realistic for you. The important thing is to try to cut down on expenses and outline a plan to contribute some money at the beginning of the month to a savings account.
Various budgeting apps are available to help you stay on track with a savings strategy and help save on time, too. Use some of these apps to analyse your income and spending to help you determine how much you’re able to save each month.
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Spending priorities
Once your budget is done to build a decent savings cushion, then think about how to allocate spending — looking out for where spending could be cut. You can eliminate impulse purchases by being more aware of your spending.
Be intentional about the amounts within your spending categories and try to find out what is the best use of your limited resources.
Put emphasis on paying down credit card debt or other types of consumer debt first. Once you get out of debt, you can save more in the long run by limiting the amount of interest accumulated.
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Continue Investing
Samuel Deane, founder of Deane Wealth Management (a financial planning firm), says that if you invest the cash flow you have outside of your emergency fund, it is one way to keep up with or even outpace inflation.
You can set up from the start to deal with ups and downs. You shouldn’t let these things distract you. Investing, in the long run, will be key for you While you want to pay attention to what’s going on.
When you’re investing for retirement or other goals, you need to sustain regular contributions. After all, to invest in the first place is to beat inflation by maintaining and growing the purchasing power of your savings over the long term.
However, if your budget is under pressure, consider reducing your contributions in the short term. But make sure you restore and feasibly grow contributions once the pressure is finished.
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Buying Bonds
Keep short-term cash-an emergency fund in your savings account. However, if you have savings that you don't need for a year or more, you may invest those funds or buy a treasury bond.
Investing could help you not lose money. You can take more risks if you want a higher rate of return.
Treasury bonds are basically like a certificate of deposit. You put your money in one or two years, and by the end of the year or years you will get a guaranteed rate of return that stays higher than the current rate of inflation — so your money won't lose value. Keep an eye on ways to save money during inflation.
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Increase Your Income
The main problem with inflation and higher prices is that incomes don’t rise consequently. So, you must make extra money outside of your job.
There are lots of side jobs with a flexible schedule. You can do that by staying and spending quality family time at home. Some of these jobs include pet sitting, online tutoring, or driving for a rideshare service. You could do any of these outsides of your 9-to-5 job.
Besides, you may find freelance work at places like Upwork, Fiverr, other different market places or Flexjobs.
Although it isn’t always a quick or easy way to increase your income, there are options for earning extra cash to cover more immediate expenses.
Moreover, some other possibilities to increase income are as follows:
-Selling things you don’t need
-Negotiating a pay raise with your current employer
-Changing jobs for better pay
-Taking on a part-time or second job
-Starting a side hustle or side business
Each option has its pros and cons and risks and rewards as well. But growing your income is the best way to protect yourself and your budget against the impacts of inflation over time.
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Cut back on energy bills
Food and energy are the important areas that face the highest rates of inflation. The high costs of utilities can result in potential savings. You can save on energy by taking a few simple lifestyle changes, especially in the hotter months.
-Save up to 10 % on heating and cooling by turning the thermostat down seven to 10 degrees Fahrenheit.
-Cover and wrap foods in the refrigerator to reduce the energy needed by the refrigerator’s compressor.
-Use warm water in the laundry to cut the amount of energy used for the load in half.
-Unplug electronics items when you don't use them
-Use energy-saving LED light bulbs to save up to 80% in electricity.
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Shop for cheaper alternatives
Feeding your family isn’t something that you can forego, so you need to find ways to buy groceries when prices are rising. Follow these money-saving tips to manage your grocery budget:
-Exchange brand-name items for generic products as much as possible.
-Buy in large quantities to get a lower unit price.
-Minimise expensive meals as much as possible from your family’s diet.
-Plan budget-friendly meals and go to the grocery store weekly
-Shop from local markets
-Incorporate low-cost items into your meals.
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Saving for travel
When prices are high, avoid unnecessary travelling. If you are bound to go on a family trip, choose off-season so that you can find a better rate. Make sure you book ahead of time to find discounts and deals.
Search affordable hotels and housing and try to advance to cut costs. Try to stay close to the tourist destinations to avoid the price of a rental car.
Trim mortgage costs
If you own your home, your mortgage is the biggest budgeting cost. Therefore, you may take the opportunity of refinancing.
When you are planning to stay in the home to reach the break-even point—it is wise you redeem what you pay for closing costs in interest savings. Then your refinancing would be worthwhile.
However, if you’re unable to refinance your mortgage, you can shop around for a better deal on homeowners insurance. When you find a less expensive policy, you could shorten your budget and save money.
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Save on Car Insurance
Changing homeowners insurance is one way to save money and you need to rethink your other insurance coverage like car insurance. The following ways help you save money on car insurance:
-Raising your co-payment to lower your monthly premium
-Talk for a safe driving discount
-Decrease coverage
Bottom Line
Inflation is like a double way sword. Due to the highly inflated prices on everyday items, it’s normal to feel defeated. To survive in today’s economy try to develop financial literacy and look for what opportunities might come about. You need to be more strategic with your income and expenditure to adapt with the inflation. In the above sections, we have mentioned some effective strategies to save money during inflation. Hope it helps!
Read Tackling inflation to protect people’s purchasing power key challenge: DCCI
