How to Be a Smarter Consumer in an Inflationary Environment


You might have noticed that prices on just about everything — from gasoline, to food, to clothing and more — seem to be on the rise. It’s not your imagination — according to the Department of Labor’s Consumer Price Index, which measures energy, groceries, housing costs and other goods — consumer prices are up 5% in the last year. That’s the biggest one-year jump since August 2008. 

First, some statistics.

That May report was a big one. In addition to the rise in prices, the agency reported a 3.8% rise in the core inflation rate, which excludes food and energy prices. That was the sharpest jump in nearly 30 years. A wide range of factors were responsible, from surging prices on used cars, to healthcare spending to the return of many to the workforce this year.

Quote: “The strength in the top line indices was driven largely by categories that have been heavily disrupted by COVID and remain under pressure from supply chain disruptions. The more persistent categories of inflation — the ones that do a better job of capturing the sustainable trend—are significantly more subdued. That means that the details of today’s print continue to support the idea that the spike in inflation is transitory, even if it is more intense than most forecasters (myself included) would originally have anticipated.” — Eric Wingorad, senior economist at Alliance Bernstein

How should the rest of us react?

All of this is to say that prices on just about everything are rising and are expected to continue doing so, at least for a while. So what can shoppers do to keep their budgets in line during these inflationary times?

Set a Budget: I know, we all talk about it but it’s all too common for Americans to live budget-free. Those days are over. As prices rise it’s important to have a full picture of your overall finances so you can determine where the holes are and what needs the most attention. Bring it all together in one place, like a personal finance accounting platform, if possible so that you can see your checking, savings, retirement, investments and other assets together at the same time and use that to make informed decisions about your spending. 

Reassess Your Spending: The pandemic upended a lot of part of our daily lives, and spending should be one of them. Are your priorities the same today as they were in 2019? If not, why not? Take those changes into account when deciding where to focus your attention in the years ahead.

Take a Step Back: It’s also going to be very easy to go crazy with spending this year. We all took it easy in 2020 and many people have a little extra in their savings accounts as a result. Don’t blow it on fleeting fun this year as things get back to normal. Yes, get out and enjoy life again. But don’t lose sight of your long-term goals and let your finances slip just to have a little fun today that you’ll regret tomorrow.


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