This year, inflation has continued to influence the financial health and well-being of many Americans. Inflation, by definition, is a general increase in prices of goods with a fall in the purchasing value of money – basically, the value of a dollar is less this year than it has been in recent past years. In October, the annual total inflation rate in the U.S. was 7.7%, with energy (17.6%), food (10.9%), shelter/housing (6.9%) and heating fuel (68.5%) all increasing significantly. During times of high inflation, consumers and families usually find their expenses have increased without a matching increase to household income. In these situations, learning how to budget and plan household spending is critical to meet financial obligations and maintaining the health and well-being of your family.
The first step in financial planning is always to evaluate your household income compared to your household expenses by going through your bank statement, checkbook, credit card statement, and any other records you may have. Once you have a comprehensive list of all of your expenses, consider what may happen if you stop paying for each of them. Stop paying rent or mortgage and eventually, you do not have a place to live. Stop buying food, and your family goes hungry. As you think of each expense, rank them from most important to your families well being to least important. Typically, shelter, food, and transportation should be your most important expenses. Once you’ve looked critically at all of your spending, it’s time to make some hard choices on where to cut back- and there’s no “right” answer. Here are some tips for making your decisions:
- Involve your family. Choosing to cut back in certain areas will impact your whole family. Involving them in the decision-making process encourages buy-in and support of the plan, which can help it be more successful in the long-run.
- Eliminate unnecessary expenses. Expenses that are low on your list of importance are good targets to eliminate from your budget altogether, such as recreational spending, alcohol purchases, or family vacations. These can be painful expenditures to lose, but remember the sacrifice is temporary but necessary.
- Look for deals. Sometimes, giving up expenses isn’t a practical solution, but sometimes, finding a lower-cost option can be helpful. Looking for options to decrease spending on things like phone plans, grocery bills, streaming services, eating out, and transportation can make a big impact on overall spending.
- Economize. There are a lot of ways to economize around the home, from using less heat/air conditioning, turning off lights and electronics when not in use, meal planning, using store-name goods, and doing simple tasks yourself instead of hiring help. These little changes can have big impacts on your finances.
- Get creative. Look for community resources that can help with recreational activities like the local library or holiday events. Consider looking for resources from faith-based and public service organizations should you need aid with shelter or food resources. Also consider working with neighbors or community members to share resources when needed.
The holiday season can be a particularly difficult time to plan spending when you want to give thoughtful gifts to friends and family. With that said, remember that gifts, while lovely gestures, are not worth putting yourself or your family into debt or financial hardship. Consider looking for DIY gifts that fit your budget or simply spending time with loved ones this season in a memorable and fun way of celebrating the season. Join us next week for ideas on DIY gift giving and activities, or contact us at uge3181@uga.edu or 706-359-3233 with any ideas you’d like us to share.
Modified from UGA Publications Circular #1041-3: Planning Your Spending.
