Understanding Inflation: Five Ways to Protect Your Wallet from Deflating
Suppose you have spent any time buying gas, shopping for groceries, or even indulging in a drive-thru. In that case, everything costs more everywhere, and Americans everywhere are now interested in understanding inflation.
Everything else is costing more, but you’re not making more money. Where’s the fun in that? When inflation happens, most people “feel” it without understanding it. That is another factor that can lead to insurmountable debt–often leading to talking to us for help.
If this confuses you or gives you a “tired head,” Beyond Finance is here to help and answer your questions. But first, a definition helps:
Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year
International Monetary Fund
If that definition doesn’t help you much, the Bureau of Labor Statistics has another explanation:
Inflation is the overall decline in the value of money since the more prices go up, the less each dollar is worth. Every business is going to try to make money.
When people buy less, prices may go up so they can still earn without losing profit. It’s the way of the world, but don’t lose hope because you can make it.
The economy is something few people really can explain. Again, as hard-working Americans, all we know is when things get tight, how it hurts. However, we can do a few things to continue understanding inflation. You may be doing some things now, but are they working? If not, maybe these will help.
Here are five easy tips to help you with battling and understanding inflation:
It doesn’t hurt to ask about inflation.
The art of negotiating can look like a hustle, but when it benefits all parties involved, that’s when it works.
First, try the easy stuff. Call your insurance provider, streaming services, and cell phone carriers. Ask them where you can save money. Note you have to start looking elsewhere and see if that helps. Then, once you have some confidence, call your credit card company and ask about your APR. If they say “No,” you tried. So, wait a few months and try again.
Please write it down
This will always be an answer when personal debt is concerned because when you can see what you’re doing and spending, it’s remarkable how fast you can understand where to make changes. In the business world, that’s called a “Debt Management Plan.” You can call it a “Budget.”
Either way, it’s necessary to do this since it’s not a math thing–it’s an accountability thing. Understanding inflation is about realizing your spending patterns and where to reel them in. Your budget should consist of your needs first, then consider your wants. Do that, and you are halfway there.
Consider buying over renting
Generally, understanding inflations mean grasping the reality of how to control your highest–and often, most important–costs. If you are renting, your landlord can hike what you pay. Unless you have a binding agreement that locks you in, plan on the price going up.
With owned property, you’ve already signed a 15- or 30-year loan agreement that shores up your monthly payments to something you can afford. Not to mention, inflation helps increase your property value, so think about that seriously.
Reduce your eco-prints
Improving your energy efficiency is suitable for many reasons, including how to go about understanding inflation better. Have you seen your light bill lately? Even the mysterious “grid” is charging you more. Change your light bulbs to LED if you haven’t already. All of them.
If you have anything that could be powered with solar panels, like the accent lights in your front yard, do that. Not all solar panels have to go into “OMG” pricing for you to have them. Another way to save energy is to have your doors and windows sealed. The less heat or cold air that leaves your home, the less you need to depend on central heat and air to do its job.
Do you really need that?
That question is the number one thing you should ask yourself daily. It’s something that Warren Buffett even does. His BFF, business partner, and vice-chair of Berkshire Hathaway, Charlie Munger, said this at an annual shareholder meeting about understanding inflation in 2004.
“One of the great defenses to being worried about inflation is not having a lot of silly needs in your life.” Don’t believe the billionaire there? How many times do you go to that fancy coffee place each week? What about eating fast food? Shopping is fun, but don’t you already have a closet full of “nothing to wear”? Just think about it.