How to Account for Inflation in Your Budget
You went to the grocery store and saw that your favorite foods had increased in price. Again. It seems with every trip to the store you leave spending more money than you did the last time.
Inflation is impacting all of us. The prices of goods have rapidly and significantly increased when compared to the prior year. Your money does not go as far as it once did. How do you account for current and future inflation in your budget? Here are some suggestions to make your budget more intentional and get you through this inflationary time:
1. If you don’t have a budget, create one.
Inflation’s impact will be more detrimental to those who do not have a budget. Many who do not have a budget have simply grown accustomed to their current standard of living and generally know what they can and cannot afford. Unfortunately, everything is changing because of inflation.
Maintaining a standard of living that does not account for current and future inflation will lead to individuals dipping into savings or going into debt. Eventually, they will be forced to adjust. If you do not have a budget, create one. Avoid the frustration of your bank account going empty.
2. Identify your priorities.
View these times as an opportunity to evaluate what truly matters to you. Generosity is a biblical priority. Putting food on the table is a priority. But what other types of purchases are necessities, and what type of purchases give you the most happiness? For some, experiences generate more happiness than eating out. Others obtain more happiness from trying different types of foods. To them, experiences mean little.
You will likely be forced to reduce expenses in some areas. Therefore, it is important that you identify what expenses mean the most to you so that non-priority expenses are reduced before cutting into priorities.
3. Evaluate current prices.
You will need to get a good grip on today’s prices. This will be an ongoing necessity during this inflationary period. Last month’s budget may not work for this month. As you go to the grocery store, fill up your car, or purchase home improvement items, pay careful attention to the prices. This information will be essential for you next monthly budget.
4. Reduce expenses associated with non-priorities.
More than likely, you will need to reduce expenses. The hope is that you are able to maintain the expenses that mean the most to you while reducing those expenses that mean little to you. Maybe Starbucks coffee doesn’t really mean that much to you, but you buy a latte everyday out of convenience. You should probably cut or reduce Starbucks coffee costs in your budget. Why? Because it doesn’t really mean that much to you anyway.
You have already identified your priorities. Make your budget more intentional by crafting the plan around your priorities and reducing expenses associated with non-priorities.
5. Develop additional financial margin.
Financial margin is the difference between your income and expenses. You will need to consider how to increase your financial margin in preparation for additional inflation. There are two ways to increase your margin—reduce expenses or increase income. You will likely want to consider both. To increase your income, consider getting a side gig.
6. Set a new standard of living.
Your current standard of living may no longer be feasible. Trying to maintain an unrealistic standard of living leads to debt, stress, frustration, and marital problems. Reducing your expected standard of living during times of inflation can help you avoid financial, mental, relational, and spiritual struggles.
7. Pursue contentment.
Anything we possess has been entrusted to us by God. It is all His. He is the owner, and we are the managers. Instead of focusing on what you do not have, focus on the good gifts (James 1:3) God has given you. And do not consider only material possessions. Focus more on the relationships with others and your relationship with Him. Make it a daily habit to thank God for what He has provided you. Pursue contentment in Him.
Times of high inflation impact us all. Your budget is one of the most important stewardship tools you have. It is your blueprint for mission. Be proactive by developing a budget that focuses on your priorities and accounts for higher expenses.