It is common to see headlines like “Inflation hits multi-decade high” or “Unless your salary goes up 8.5%, you are losing money”. While these headlines grab attention, they may not be relevant to you.
Everyone’s inflation rate is different. The overall inflation rate is 8.5%, which is the average for everyone. Your rate could be 5% or 15%.
The trick is to reduce your personal inflation rate and not worry too much about the 8.5% number.
Different categories have different rates of inflation. If you drive to the office daily, the higher gasoline costs will impact you more than your neighbor who works from home. However, if your child is going to college, you will be happy to see that college costs are not increasing as much.
Take a look at your monthly expenditure and see which areas have the highest inflation. If you do not know your monthly expense, here is a simple way to track them.
We have adjusted our spending, and our personal inflation rate is 4.8%.
Reducing our personal inflation rate
We have reduced our expenses in the areas that have the highest inflation. Thankfully we don’t need to buy a car or furniture, so inflation in those areas does not impact us.
But we do like to travel. Looking at the inflation in hotels, rental cars, airfare, etc., we are cutting back on our travel for next year.
Given how much food delivery costs have gone up, we have decided to reduce our Uber Eats orders to once a month. With the house heating costs going up, we follow the standard practice of keeping the thermostat setting a degree or two lower – good for health and good for energy bills also.
There are some areas where inflation has been low or nonexistent. For example, technology. So we are going ahead with our phone upgrades this year.
When will inflation come down?
I was hoping inflation would come down this year, but I have been wrong so far. Inflation remains stubbornly high. So, for now, the Finer household is doubling down on our simple saving strategy that has helped us keep our expenses in check.
Going through a period of high inflation can be a scary experience. But it can also be the best time to develop frugal habits. Eventually, the inflation will end, but the frugal habits will serve you all your life!
Found this article helpful? Enter your email below to subscribe and get new articles in your inbox. This blog is free and does not have annoying ads or spam. Plus, you will be helping an aspiring writer!!