How to Save Money … Even with High Inflation

Like it or not, everything costs more than it used to. As of July 2022, the U.S. Bureau of Labor and Statistics reported that inflation had risen 9.1 percent (as measured by the 12-month change in the Consumer Price Index or CPI).

Even though the Federal Reserve is taking steps to curb inflation by raising the central interest rate, progress won’t happen overnight. And in the meantime, your money just won’t have the same purchasing power it did a year ago.

So, what does this mean for our savings? Is putting money aside for retirement or long-term goals just a futile effort? Is there even any money available to be saved?

The answer to these questions is yes. In this post, we’ll explore five ways you can still continue to save and even earn money despite the fact that inflation has made everything cost more.

1. Get Serious About Budgeting 

The first thing anything someone should do in times of economic trouble is to influence those things which are under their direct control. For most people, that means their household spending.

Nearly everyone has fat in their daily routine that can be trimmed back. This may include unnecessary purchases like expensive coffee drinks, unused subscriptions, or clothing that never gets worn. 

The best way to tame your spending is through budgeting. A good budget is just a plan for how you’ll spend all the money you’ll earn this year. It could be for the direct purchase of items, or it might also be used to pay down debt or fund long-term initiatives like saving for retirement.

To make a budget, you don’t have to create some elaborate spreadsheet that needs to be updated with every transaction. You can use a helpful app like Buxfer to keep track of your spending as it automatically connects with your credit cards and bank accounts. This provides you with a real-time report of how you’re doing and if you need to make any changes.

Remember: You can’t change how much things cost. But you can control what you spend your money on. Therefore, plan your budget and let it serve as the guardrails for financial stability.

2. Delay Major Purchases if Possible

It may not be ideal, but another option you can always exercise is to try to wait on making any major purchases if possible. For instance, if you were planning to get a newer vehicle, try driving your current one for one more year. Or if you were hoping to make a major renovation to the house, wait it out just a little longer.

Obviously not spending money if you don’t have to will be helpful. But the more important thing to keep in perspective is that everything is expensive right now. Go back to the vehicle example – used car prices are up by a staggering 50 percent since the COVID pandemic began in 2020. And this is true for a lot of other things as well.

For that reason, it may be better to wait and see if the Fed is able to tame inflation and bring the cost of the things we need back down. If they can, then a year from now there’s a much better chance that you’ll be able to buy what you need at a more reasonable price.

3. Take Up a Side Hustle

Even though there’s a lot of debate about whether or not inflation has caused a recession, one thing that’s unique about 2022 is that we still have unusually low unemployment. This means that businesses are still keeping people employed and paying competitive wages to make sure they stay staffed.

The good news here is that this means there are opportunities to side hustle. For example:

  • If you’re a freelancer, then you might find small businesses that need help writing sales copy, designing marketing materials, or even launching a social media campaign. 
  • If you work for one of the food delivery services, then you may be able to serve employees and managers need lunch or drinks brought in.

As an added bonus, inflation may even help you because everyone will be charging more than they did a year ago for this help. That will enable to you work a few extra hours per work according to your schedule and preferences, possibly pocketing a few extra hundred or thousand dollars per month.

4. Leverage Your Assets

While most people think of saving money as holding onto money that they earn, it can also come in other ways. For example:

  • Paying off high-interest debt
  • Updating your home to increase the property value
  • Buying an income-producing asset (like a rental property)

But where would the money for such things come from? The answer might be from your own home through a home equity loan. 

With home values up an average of 17 percent when compared to a year ago, many people are finding that they’ve accumulated tens of thousands of dollars in equity that’s literally just sitting idle within their four walls. Instead, you could tap those resources through a second mortgage at a reasonable interest rate and then use the funds to strategically improve your financial position.

5. Invest for Growth

Speaking of investing, the markets usually don’t favor inflation. Not only do businesses struggle to make a profit, but high inflation gets attention from the Fed. And every time they make one of their big announcements about raising the federal interest rate, the stock market buckles up for a wild ride! 

Again, you and I can’t control the Fed. But what we can do is recognize that there are lots of buying opportunities for investments. Take a look at any major, well-known corporation and you’ll notice that its share price is most likely down. However, this isn’t because the company is doing poorly. The more probable reason is that collectively investors are nervous about inflation and a recession, and this is causing the market as a whole to decline in value. 

When this happens, it’s important to not let fear get the best of you and to think about where these companies will be in the next 5 to 10 years. If you believe they will be doing well, then buying their stocks now while they’re at a discount might be one of the smartest moves you could be making. For the patient investor, it will help to increase your net worth and accelerate your progress towards reaching financial freedom.

Image source: Unsplash

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