February 17, 2022


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Inflation is a word that fills many with dread. A recent Harris Poll found that 55% of Americans are worried about inflation and what it will do to their cost of living. It's not a surprise people are afraid. The most recent inflation reading from the Consumer Price Index came in at 6.8%, recording the highest year-over-year increase since 1982. 

But the truth is, there are things you can do to keep your costs manageable to avoid any significant shocks when prices are rising. 

  1. Ask for an Inflation Raise

2021 was the year that many referred to as ''the great resignation crisis''. This year, data suggests companies don't want a repeat. According to the Mercer Compensation Planning Survey, pay budgets are expected to increase by 3.2% in 2022. 

Experts agree that positioning a pay rise as an inflation raise is an excellent way to go. Evan Tarver, CEO of Selling Signals, says, "An inflation raise is a raise that adjusts your current salary for recent inflation. For example, if inflation is 5% and it's expected to remain that way, you can ask for a 5% raise to adjust your salary for the rise in the costs of goods and services."

Evan recommends aiming to take the conversation annually. "You would also need to prove that inflation is long-term and not "transitory". Still, it's important to plan and begin these conversations now."

  1. Consolidate Your Debt to Beat Interest Hikes

According to a 2020 Bankrate study, debt consolidation was the most common reason applicants took out a loan. With some experts claiming that interest rates will increase, this could be an option you may want to consider if you have debt. 

"Eventually, interest rates will increase on borrowing as the Federal Reserve begins to bump the prime rate." Says Tom Thunstrom, a Financial Educator.

"This will increase the cost of borrowing money. If you have credit cards, consider consolidating any owed balances onto your lowest rate card. If you have a credit card with 13% APR now, it may increase by one or more percent in the coming weeks. If you have another card at 18, that's an extra 5 percent (or $5 per every $100 you borrow) in interest that you're paying. You can also look for credit cards with zero percent interest offers on balance transfers. If you can find them but make sure you read the fine print in case there are any fees or charges that may apply."

  1. Get a Budget

Budgeting is an effective way to keep your expenses in order, whatever the situation. When prices start to go up, a budget can help you ensure that you're not overspending in areas where you don't need to.

Doug Carey, the owner of WealthTrace, has over 25 years of experience in financial planning, agrees, "If you don't have a budget, it's time to start one."

He says, "Not only will having a budget in place help you stick to a spending plan, but you can also see which prices are going up the fastest. This can help with decisions on where to spend money and where to cut back spending. Having a budget also shows each month where your money is being spent and can be a red flag for items that you have to cut back on if you're going to live within your means."

The good news for those new to budgeting is that many options are available nowadays, including easy to use budgeting apps

Andrew Lokenauth, a personal finance expert at BeFluentinFinance, agrees, "Budgeting with software, websites or apps can also make budgeting easy to stick with. Many may feel intimidated about where to start, overwhelmed by the amount of data to go through, or can't afford an accountant. Using an app, website or software can help reduce stress and make things easier. There are many free apps, websites and software to choose from. Creating a budget will help you visualize where you can cut back spending and where you can save money."

  1. Invest

Although investing should always be taken with caution, some experts suggest a time of inflation could be an excellent time to enter the market. Stock picking service Motley Fool data backs this up, it’s stock advisor service has reported consistent returns since 2002.

Imani Francies, a personal finance expert with USInsuranceAgents.com, agrees some stocks thrive in an inflationary economy. "Stocks in the following sectors have done well: agriculture, health care, energy, and construction materials. Of course, broad-based indexes make this technique simpler, less costly, and more controllable." 

Noah Rubin, Managing Director of Investments at Wells Fargo, agrees investing is better than keeping your money in cash. "There is an important concept you should know about keeping your money in cash. Inflation is the "silent robber". By just having cash, it will become worth less than before. For example, I am holding a $100 bill in my hand. If I wanted to, I could buy a ticket to see a professional football game with this $100. If I sit here for two years holding this $100 bill, I'll still have $100. But I likely won't be able to purchase those same tickets. This $100 is not worth as much anymore."

  1. Plan Before Shopping

The Consumer Expenditure Survey stated that the third-largest household budget was the food budget, occupying 10% of a household budget. 

With food prices due to rise, experts suggest that most people would benefit from planning before shopping.  

Alissa Krasner Maizes, a financial planner, agrees, "Before shopping online or in-person, making a shopping list can help you save money and avoid impulsive shopping. When creating a list, it is essential to make sure that it aligns with your budget and ideally focuses on needs rather than wants. For wants, create a wish list for when a splurge is within your budget."

"For example, before shopping for food, plan your meals for the week and create a list of your needs. See if you already have some items in your pantry and remove those from your list. Determine if any retailers may have some of the items on sale. If you use some nonperishable things regularly, find the lowest cost and purchase those items in greater quantity to have on hand as needed."

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About the author 

Mary Elizabeth

Mary Elizabeth is a passionate advocate for financial freedom. She is the founder of MeMoreMoney, and a featured Personal Finance expert in GO Banking Rates and Yahoo! Finance. Mary loves to make money simple and understandable for everyone. Her goal is to help people make simple changes so that they have more money to live the way they want.

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