After more than a year of historic price increases, American consumers are feeling the impact of inflation. By the end of June, the Consumer Price Index had risen to 9.1%, the highest since November of 1994.
The pain at the gas pump and the local supermarket might leave you wondering how to survive inflation. Here are some strategies for dealing with rising consumer costs.
Inflation Rates in 2022
Just how high is inflation going to go? It’s not likely to change anytime soon. Meanwhile, high inflation rates are driving up consumer costs nationwide. According to the latest reports, there’s been a spike in the price of America’s three biggest costs:
- Food: 10.1% increase
- Housing: 14.1%
- Energy: 50% increase
In short, inflation has made it harder for families and individuals of every income level to stick to their budgets, raising questions about what to do during hyperinflation.
How to Survive Inflation
Wondering how to survive high inflation? Chances are that every American is going to feel the effects of inflation to one degree or another. But with the right strategies, you can minimize the damage that inflation plays on your budget. Here’s how to survive inflation.
Cut Back on Non-Essentials
Organize your budget around your most essential costs, which will likely include food, housing, gas, and utilities. Make sure your budget covers these costs each month before spending money on non-essential purchases.
If you’re struggling to stay within your budget, you may need to reassess your non-essential expenses. These might include things like:
- Subscription services (Netflix, Spotify, etc.)
- Gym memberships
- Dining out
For instance, you might limit yourself to one or two meals per month in a restaurant or rely on only one TV streaming service. Pressing pause on these non-essentials can ensure that your budget is directed toward what really matters: food, fuel, and housing.
Become a Bargain-Hunter
When you go shopping, pay attention to the prices, particularly at the grocery store. Food prices are increasing, so it might pay to chase down bargains and sale items to cut back on your costs.
One way to do this is to switch from name-brand products to a store brand. You’ll adjust to the taste sooner than you might realize, which makes this a great way to learn how to survive inflation as a consumer.
You may also find better deals when buying items in bulk; investing in a Costco or Sam’s Club membership may pay off, especially if you have a family.
A word of caution: pay attention to the quantity of the items you’re purchasing. Many food producers are deliberately reducing the quantity per bag or container as a sneaky way to keep costs down. For instance, paying $5.00 for an 18-ounce jar of peanut butter is a better deal than paying $4.00 for a 16-ounce jar.
Think Before You Swipe
Your credit card may seem like a faithful shopping companion, but now that the Federal Reserve is increasing interest rates, you may be paying more than you bargained for.
Generally speaking, if you pay off your credit card balance each month, the rise in interest rates won’t have much of an impact at all. In fact, some reward cards can help you earn cash to offset the rising cost of consumer goods.
But if you start to rack up credit card debt, you could be digging a hole that’s hard to get out of. Avoid using your credit card unless you’re making small purchases that you can pay off within the same billing cycle.
Delay Those Major Purchases
Maybe you’ve been itching for a home renovation project or looking to buy a new car. You might want to wait on that. Unfortunately, the chip shortage has made it challenging to find new cars without paying as much as 20% over MSRP. The shortage of new cars has similarly driven up prices in the used car market.
Instead, focus on maintenance. Perform only necessary home repairs, and keep your car in good operating condition. Inflation can’t last forever, and within a year or so you may see consumer prices drop, allowing you to complete the projects you’ve been dreaming of.
Save Your Money Strategically
One of the good things about the climbing interest rate is that you may have an easier time finding high-yield savings accounts. If you have cash you plan to use in the next few years (though not necessarily immediately), you might benefit from sinking it into a high-yield savings bond, or even a certificate of deposit (CD).
Just be careful to leave yourself around six months to cover emergency expenses, as some of these programs penalize users who withdraw their money prior to the maturity date.
Grow Your Own Food
You don’t have to have a green thumb to grow a few basic vegetables. If you have access to land, you might try to grow things like tomatoes, squash, zucchini, or some other herbs. Even urban neighborhoods offer a community garden that you can use to grow some food.
Your goal isn’t to replace your need for groceries, of course. But a small garden can supplement your grocery expenses and help you prepare fresh, delicious meals without having to spend a fortune at your local supermarket. If you have a family, you might make this a project to share with your kids.
Add a Side Hustle
Many American workers are changing jobs in order to find higher pay and better benefits. But you might also consider adding a “side hustle” if you’re still struggling to make ends meet.
For instance, working one of the following jobs can supplement your income:
- Ridesharing or delivery
- Online tutoring
- Photography
- Event planning
- Landscaping
- Pet sitting/dog walking
- Freelance writing
- Freelance web design
Each of these professions can augment your regular salary and help you develop a financial plan for how to survive high inflation.
What to Do During Hyperinflation as an Investor
It’s not just consumers that struggle to know how to survive inflation. Investors also face some tough choices about where to put their money.
Inflation, after all, impacts the stock market in much the same way as consumer prices. When inflation rates rise, stocks tend to underperform, making it harder to generate a strong return on your investment.
Here are some tips on how to survive high inflation as an investor.
Invest in Large, Stable Corporations
When inflation rises, think big. Large-cap stocks represent large, relatively stable companies that have the ability to weather an economic downturn.
Avoid Risky Startups
Ordinarily, startups and “growth stocks” offer the possibility of rapid expansion. But if you want to learn how to survive inflation, you might want to hold off on these sorts of investments until the economy improves and these companies offer a greater promise of return.
Diversify
Hyperinflation can hit different market sectors in different ways. That’s why it pays to have a diverse portfolio — if one industry gets hit hard, your losses are mitigated by shares of companies from other industries.
Think About Dividends
Investors aren’t always guaranteed to receive stock dividends, but many companies are prone to offer payments to shareholders to reward their continued loyalty. This money isn’t much, but it can be a great way to relieve the pain at the gas pump or the checkout counter.
Research Like a Pro
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