For the better part of the last 12 years, inflation has been a relatively minor issue in our daily lives with prices increasing roughly 1.7%. When the Covid pandemic hit in 2020, inflation actually went down. This all changed drastically in late 2021 when inflation spiked to over 7.0%. In 2022, the economy continued to overheat with inflation rising to 9.1% in June.
Inflation is a naturally occurring phenomenon in a healthy economy as demand for goods & services grow at a faster rate than the supply. However, the sudden rise in inflation today is driven both by unusually high demand and a dramatic decrease in the supply. With the easing of Covid restrictions, people were suddenly going out and living life again. Unfortunately, there were not enough workers, products, and fuel to meet this surge in demand. Russia’s invasion of Ukraine in February added further disruption to oil and natural gas prices. The result is the extreme surge in the price of goods and services that we are experiencing today. We all have seen the impact of inflation on everything from coffee, gasoline, groceries, restaurants, hotels, and new & used cars.
Thankfully inflation has shown signs of slowing down as the inflation rate dropped to 8.5% in July. Economic experts are cautiously optimistic that higher interest rates enacted by the Federal Reserve, easing of supply chain pressures, and reduction in fuel prices will result in further inflation reduction in the months ahead. However, uncertainties in the oil market, high cost of housing, and wage growth pressures could mean that we will continue to experience higher than normal prices in the months ahead.
The sharp increase in prices has caused me and my family to adjust our spending habits. Here are a few things we are doing in our household to reduce costs:
We are Eating In not Out
Money spent on food is one of the biggest spending line items on our budget. In our household, we are eating out (more like ordering to go) at restaurants less often to save money. We used to eat out quite a bit during weekends but now we are making more of an effort to make breakfast and dinner at home. In addition, we try not to purchase coffee or other beverages at coffee shops. Instead, we make coffee at home, fill up our coffee mugs and drink it on the go. We will also fill up our water bottles and bring them with us.
We are shopping smartly
We tend to do most of our grocery shopping at Whole Foods or Trader Joe’s. When we shop for groceries, we are always on the look out for weekly deals and specials. This has helped reduced our grocery budget especially with meat and fish as these prices have increased significantly this year. We also try to buy in bulk at Costco when it makes sense.
When shopping for clothes or shoes, our goal is to never pay full price. We will shop at an outlet mall or on Amazon versus shopping at a retail mall.
We are reducing our utility bills
We are mindful of peak electricity usage hours. Summer has gotten hotter and hotter each year and with that comes the need to run our air conditioner longer and more frequently. To reduce the cost of electricity, we turn on our air conditioner in the early afternoon to cool the house than leave it off during peak hours. During peak hours we will use portable electric fans to keep the house cool. We also will run other appliances like washers, dryers, and dishwashers during non-peak hours.
We have installed solar panels and power walls in our home. By storing solar power during non-peak electricity usage hours and utilizing solar power during peak electricity hours we have reduced our energy costs pretty significantly.
We are using less water. In our house, it takes a while for the cold water to turn hot in the kitchen sink and in the shower. Rather than let that cold water run down the drain, we collect it in a basin and use it to water the plants in our yard.
We are reducing our streaming services
During the Covid pandemic, we loaded up on many streaming services. However, with the easing of the pandemic, we don’t have as much time to watch the programs on all of these services. Because, there are no long-term contracts, we limited our streaming services to the two or three that we use the most and cancelled the rest. We can always re-sign up if there is programming that we wish to view.
These spending reduction examples that I have outlined will help reduce the sting of inflation and help us save a few thousand dollars a year. I encourage you to look back at my previous post regarding your 8 Step Summer Financial Checkup and to examine your own household spending habits to see what you can do to lower your spending and increase your savings.
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