Most would agree, 2022 has been a shocker. We have endured a year of price hikes, flat wages, and gas prices that hit all-time highs. In fact, the overall impact of inflation between November of 2021 and November of 2022 was 7.1%, and the impact of that kind of inflation on goods and services alone was even more dramatic. Consumers are now paying 8.5% more for goods and services than they were in March of 2021, according to the Bureau of Labor Statistics, U.S. Department of Labor (BLS)—that’s the highest rate of inflation over a 12-month period since 1981. When the cost of food, gas, housing, and all of life’s necessities increases, paying bills and buying what you need becomes more and more difficult.
Bloomberg economists estimate that U.S. households are paying an extra $433 per month, or $5,200 per year, on expenses due to inflation. And the burden is especially high for low-income households, for whom spending on housing, groceries, energy, and transportation makes up a higher portion of income.
As we ring in the new year, assume inflation is here to stay and make some new year’s resolutions to help you fight inflation. As you will see, the theme connecting each of the following inflation fighting goals is for taking charge of your purchasing power. If you do not buy an expensive item, or one which has a cost that is outpacing a reasonable increase in price – you beat inflation.
Resolution #1 – Only Buy What You Need
Before you buy anything—anything at all—ask yourself three times if you need it. Impulse shopping has become a way of life for many Americans and usually results in nothing more than short-term gratification.
Resolution #2 – Only Buy If You Can Pay
Before you buy anything—anything at all—ask yourself if you can pay cash for the item. If it is not a necessity, do not buy the item, purchase the service, or take on the debt unless you are able to pay for it with cash or a cash equivalent, such as through a debit card, Venmo, or other similar cash app.
Resolution #3 – Resist Credit Cards
Take the credit cards out of your wallet or purse and tuck them away in a very safe place. Resolve to shop without credit cards and resist using credit cards and store credit cards to shop online.
Resolution #4 – Consider Cash Only
Consider moving to a cash only or debit account only lifestyle. Unfortunately, this resolution is discouraged by the stores, restaurants, and shops we frequent. Many of them refuse to accept cash. When this happens, pull out your debit card.
Resolution #5 – Calculate Purchase Value
Prices for consumer goods and services are always changing. Even without rampant inflation, prices do increase over time. This kind of price increase that happens over many, many years is reasonable and largely due to economic growth. To determine how prices are changing, the BLS offers consumers an inflation calculator tool they may use to see if a product or service they want to purchase is grossly overvalued.
The BLS inflation calculator can help you easily determine changes in the purchasing power of a dollar. Use the inflation calculator to determine the value of goods in years past and convert prices from years ago into today’s prices. So, when your 75-year-old grandmother says to your 5-year-old son, “When I was your age, hot dogs cost a nickel” using BLS’s inflation calculator, you learn that the hot dog would cost less than $0.60. That’s cheaper than the dollar menu, and therefore, a great inflation fighter purchase!
Make sure to check out the four other tips in the Countdown to the New Year series to help you manage inflation going into 2023. Paying yourself first; paying your debts second; avoiding buy now, pay later; and making a budget can help you reach your financial goals.