Inflation protection through a budget


There is a never-ending struggle amongst us; it can tear a family apart, ruin a friendship, or even end a business. Balancing spending, saving, and investing is extremely difficult when we see the costs of everyday necessities skyrocket, from eggs to gas. There are certainly signs of inflation regardless of where we look. However, there is a way to minimize inflation's impact on our everyday lives. We can achieve this by creating a budget and tracking our spending weekly or monthly. In this post, I will discuss the power of budgeting while touching upon some of the CPI (Customer Price Index) data to paint a picture of the impact we can have. The data I will cover can be found at https://www.bls.gov/news.release/cpi.nr0.htm and will be un-adjusted 12-mos. Ended July 2022.



What is the Consumer Price Index:

“The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all-urban consumer group represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers.


First up is food:

Food at home – 13.1%

“The food index increased 1.1 percent in July; this was the seventh consecutive monthly increase of 0.9 percent or more. The food at home index rose 1.3 percent in July as all six major grocery store food group indexes increased” 

I think we can all agree that our spending on food is most likely the easiest way to reduce our expenses. There are many ways to do this and during inflationary times planning meals to maximize the longevity of food and purchases is critical to protecting against inflation. Firstly, understanding how much is spent in the grocery store can allow you to plan your meals accordingly. I’m not saying avoid nicer cuts of steak or your favorite ice-cream snack. I mean, I can always enjoy a bowl of Oreo ice cream. I am suggesting understanding the value of the products you put in your basket. Ask yourself what you can make with these products, how many meals, or if you will eat the leftovers. Having a strategy is a foundational aspect of the blog in general but is especially useful when applied to your food choices as you can truly stretch your dollar.



Food away from home – 7.6%

“The index for food away from home rose 7.6 percent over the last year. The index for full-service meals rose 8.9 percent over the last 12 months, and the index for limited-service meals rose 7.2 percent over the last year.

I’m here to say I still struggle with this topic as we come off a two-year slump in our social life; we are desperate to spend time with friends and loved ones at our favorite restaurants and bars. This category is most impacted by awareness and balance. After a long week of work, the first stop is most likely a bar or restaurant with friends. The balance comes into play here when we consider the types of restaurants and bars and the frequency. Remember that balance is unique to the individual; some people can budget more for eating out than others. There may even be some people that conduct business over food and drinks. The goal is to ensure stability by planning the days and locations of your social outings with more relaxed days eating at home or getting together at a friend’s place for a Friday night drink.


Transportation:

New Vehicles – 10.4%

Used Car and Trucks – 6.6%

Fuel Oil – 75.6%

Electricity – 18.8%


This one is not as straightforward as food because we are getting into nuanced decisions, but I will do my best to keep things simple for this shorter post. We can take from this data two main points, the first being the disadvantage of having a new car that runs on gas. This is very clear; however, we are aware these electric cars are still costly, and location aside, most people aren’t able to make that purchase. I would say for those in the market for a vehicle and considering the statistics above; a used gas-powered car is the most understandable path. However, for those who can purchase an electric vehicle, there is certainly a strong case for doing so.


Another way to combat the effects of inflation in these categories is to position yourself close to where you work, if possible, to cut down on transportation and time (which can be viewed as an intangible cost). We may have to sacrifice in this aspect depending on the landscape of our work, but if done correctly, this can propel you in a direction financially that your future self certainly won’t regret.


Clothing:

Apparel – 5.1%


Clothing is similar to food because we can massively impact this category with a bit of planning. We have heard this countless times, but ill touch on a few things to focus on when shopping to help protect your hard-earned money. Firstly, shopping at home is a powerful thing. There are several reasons for this but most importantly, shopping from home forces you to buy what you need more so than what you see. These stores have customer behavior down to a science, so leaving your local Target with ten items that weren't on your grocery list is not surprising because you got so distracted with the shiny new candles that you forgot the pickles.


Conclusion:


The main point of all of this is to have an objective; the last thing you want to do during these times is place yourself in a compromising position, whether that be not having an idea of what groceries to buy. Pulling the trigger on a new car without understanding how that purchase will trickle down into other areas of your budget unexpectedly. Having a budget and understanding the flow of money will allow you to make what I like to call educated purchases, knowing where the money is going, why it is going there, and planning for it to be used a certain way.

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