While we can’t fully immunize ourselves against inflation, there are small ways to change how we spend, helping us to avoid being hit by the worst of it.
We’ve seen dozens of articles detailing how investors and the wealthy can protect themselves from record-setting inflation. When we researched ways for working families, side hustlers, and the rest of us, we found very little useful information. So we collected the most practical (and actually useful) tips and tricks to blunt the impacts of an inflationary environment that seems likely to stick around. Also, none of these tips involve cutting your “weekly Starbucks” or avoiding avocado toast.
Inflation Hurts More
Inflation bites into everyone’s budget, but it hits some harder. How does that work? Essentially, the less money you make, the more of your expenses are seen as “fixed costs” or “basic needs.” Things like food, rent, utilities, car payments, or other non-negotiable bills eat up a larger percentage of your income.
For example, if you make $2000 a month, rent is $700, food is $250, utilities are $50, and car payment is $100, you have $900 in cash for things other than what you need to survive. That’s 45% of what you earn, as cash for clothes, trips, Netflix, whatever. If inflation pushes everything up 5%, you’re looking at rent being $735, food at $262.50, utilities at $52.50 and car payment at $105, you’ve spent almost $60 more on essentials. That chipping away over time adds up for those with low salaries. If you’re clearing $5000 a month with the same essential costs, you won’t even notice the extra $60 going out of your pocket.
And that’s just 5% inflation on essentials. Inflation has shot up on everything except alcoholic beverages and airfare. So, when prices are up almost everywhere, what can you do to stretch the dollars you do have?
Variable to Fixed
During periods of inflation, bills that stay the same “feel cheaper” because you need more cash to buy, rent, or lease things than you did before. This is why turning a car or student loan payment from a variable rate to a fixed rate could save you surprising amounts of money. If you’re already in a fixed rate situation, extending that term for another year or two could keep your costs down while everyone else sees 10% jumps due to inflation.
Also, seriously reconsider any purchases you’d put on a credit card or need a payment plan for. After the first year, credit card interest rates are subject to change, and that spells disaster during a high inflation period. If you can purchase durable goods that last, with cash or a debit card, that’s the best possible option. If that’s not possible, refinancing variable rate debt into fixed rate or even introductory rate credit cards could save thousands if/when inflation remains next year.
It’s not just affecting people of varied incomes differently, inflation is affecting the price of consumer goods in very different ways. For example steak, pork and chicken prices are up 10-24% depending on where you are in the country. This has led some carnivorous Americans to purchase meat freezers and stock up during holiday sales. While getting another refrigerator-sized appliance isn’t a solution for many, purchasing in bulk can be.
Dry goods, detergent, canned goods, and even some pantry staples have a shelf life measured in years. When they’re available at a steep discount from your local grocery, online, or when a friend with a wholesale club card offers to take you, buying 10 instead of 2 is one of the easiest and sometimes cheapest ways to keep your staple costs down over time.
Even if you’re in an apartment, is it filled with clothes you haven’t worn since before COVID, or junk you haven’t used in years? Looks like you just found some storage space to fill with underwear, socks, tuna fish, detergent, and bottled water. If you know your butcher, baker, or candle-stick maker has sales in certain months of the year, you can wait for those and stock up.
Hard times come and go, but good subscription discipline benefits in the best of times, and the worst of times. If forgotten, streaming services, patreons, or other subscriptions can cost hundreds annually. Have you finished Stranger Things, but both you & your spouse each have a Netflix account? That’s an extra $120-$180 right there.
Also look for duplication of services across subscriptions. For example, if you have Amazon Prime or YouTube premium, you might not need a subscription to Spotify, depending on your listening habits. Your internet or TV provider might have a similar set of on-demand movies than what you’re paying for now. It never hurts to look and see what you’re paying for.
Calling to renegotiate monthly bills and plan pricing is something else that never hurts to try, but most people never do. If you call to cancel your cell phone, cable, or insurance plan, you’d be surprised how often customer service offers you a better rate or more for less. Even if you’ve missed a few payments, calling to ask what can be done, sometimes results in quite a lot being done. If you don’t mind sitting on hold for a bit, methodically calling and renegotiating each subscription will pay big dividends.
Rework Your Rewards
Fancy gold, platinum, and travel rewards cards come with high fees, so if you’re not vacationing any time soon, seriously consider switching to cards that offer cash back. Switching from a travel rewards card issued by a legacy bank to a cash back card issued by a fintech app or challenger bank will most likely reduce the fees you pay, and has the potential to add hundreds back into your account over a few years of regular spending.
Some cards make more sense depending on your situation. If you don’t like eating out and you don’t have a car, cash back programs that offer the best rewards for fuel and restaurants won’t be for you. But if you’re at the grocery store three times a week with a card that gives you maximal cash back at grocery stores, you’ll see the cash add up before your eyes.
Major Purchase? Major Savings
When it comes to big purchases, like new appliances, technology, mattresses, or even bicycles, they go on sale & clearance in certain months of the year. Timing out a purchase to one of these “clearance months” could save 20-50% of the purchase price. If you’re skeptical, go check how expensive patio furniture and swim trunks are in September, and scoop up discounted boots and winter clothing in March.
If you’re looking to purchase a used car, be very careful and don’t rush into anything right now. As of Fall 2022, the used car market is in flux with repossession rates doubling year-over-year. As used car dealerships begin to receive more and more inventory, that car you’ve got your eye on might go down in price, especially compared to the highs of 2021 pricing.
Looking for even more savings and don’t mind sifting through “what’s there?” Secondary marketplaces are everywhere these days, from Facebook Marketplace and BackMarket, to Carvana, Poshmark, and even Federal & State government auctions! Getting a better quality version of a major purchase on these marketplaces, you’ll not only save money buying it, but it’ll last you so much longer, while something cheap from a retail outlet might need to be replaced.
Storage for the Storm
If you’re lucky enough to have some spare cash at the end of every month, it’s easy to feel like it can’t do anything for you. High Yield Savings Accounts have started to offer interest rates not seen in over a decade, and most don’t have fees or minimums to open accounts these days. If you’re not getting at least something for your savings, shop around.
If you know for certain you don’t need the money for at least a year, take a look at I-Bonds. Series I Savings bonds are interest earning bonds issued by the US Treasury, where the interest rate is pegged to inflation and adjusted every 6 months. They are currently earning a whopping 9.62% interest and will earn interest for 30 years! There are no taxes or fees to purchase them, and the redemption value on them can never decline. The only downside is that you can’t cash them for 12 months, and if you cash them in earlier than 5 years, you lose the last 3 months of interest.