Many of you know I’m a teacher. Most people also realize that means I operate on a limited budget. In recent years, inflation has become a hot topic that has left many individuals and families reevaluating their financial strategies, including me. It’s getting harder and harder to make things work. The rising cost of goods and services has impacted our purchasing power, making it essential to adapt and learn how to make more informed decisions.
With the holidays coming up (they’ll be here before you know it) and me always being big on gifting to my family, I am taking some measures to try and tackle the challenges posed by inflation, while still being able to make those holiday purchases. The best tool I’ve found so far is the use of financial calculators to help me create a strict budget. If I want this year’s holidays to be special (and I do!), I have to make sure I’m planning for them now. Otherwise, I could overextend myself or short my family on being spoiled on the one day of the year I get to indulge them. I am determined not to be faced with either of those situations.
As I have come to understand it, inflation is the gradual increase in the price of goods and services over time, resulting in a decrease in the purchasing power of your money. As a consumer, you might have noticed that your dollar doesn't stretch as far as it used to, impacting your ability to maintain your desired standard of living. If you live in South Florida like I do, you might have been affected even more. Rents have practically doubled here and housing prices have tripled. People with solid careers are being outpriced of communities that they love. It’s alarming. And not just that, the price of everything has gone up. The average price of a family-sized toilet paper package is $17 and the price of quality shampoo is $15 or more. Just 2 of many, many examples. And don’t get me started on groceries.
Adjusting Your Budget
So what to do?
Cut Expenses: One of the first steps we are doing to combat inflation is to review the budget meticulously and cut out unnecessary expenses. I have used an Excel chart to Identify areas where I can cut expenses we don't really need. For example, we are dining out less frequently and cooking more meals at home. We have reevaluated all subscription services and cancelled those we no longer use (sorry, Amazon Prime).
Prioritizing Needs Over Wants: We have learned to distinguish between needs and wants in the budget. I ensure essential expenses such as housing, utilities, and groceries are prioritized over non-essential purchases. Then I decide what can be cut and where I can find some extra cash to save towards holiday needs.
Emergency Fund: It's essential to have an emergency fund in place to cover unexpected expenses. Inflation can bring unforeseen price hikes, and having a financial safety net will help you stay on track. As hard as it is to have one on a limited budget, especially when you're trying to save for something like holiday shopping, but it is necessary. Insert your information into a budget calculator and see how just putting a little bit away every paycheck can add up to something substantial to have on hand for when you need it.
We recently had $800 in car repairs done and a little over $700 spent for tires. I have to rebuild my emergency fund, but I was very happy to have it.
I used to think spreadsheets and calculators to visualize my budget were not necessary. I thought I could do it on my own. And I could, for awhile, but I was living paycheck to paycheck. Making a detailed list to help me visualize where my money is going and identify areas for improvement has really helped us to have a little leftover to save. Yes, it's not a lot, but it's something and that's always better than nothing.
I use the calculators for other things too, like retirement projection. I recently plugged in some numbers and found that my retirement plan one I have been vested in for over 20 years because previous jobs have been under its umbrella) is not really going to pay all that well based on cost of living in my geographic region. It was a wake-up call to start making changes now rather than assuming my plan is going to ensure everything is okay and on the right track just because I am a regular contributor. With inflation impacting the cost of living, it's crucial to ensure a solid plan for my future is in place. But that's a story for another day, I know.
Adjusting Holiday Planning: There's no doubt that inflation is going to affect my holiday planning. Here's how I have made a plan to adapt.
- Starting Early: I decided to begin holiday shopping and planning well in advance to take advantage of discounts and avoid last-minute price hikes. I store away gifts a little at a time and they are really starting to add up. Yay!
- Set a budget: Determining what I can realistically spend on gifts, holiday activities, entertaining, etc., has been very helpful. It pushes me to creatively stretch a dollar in ways I might not have otherwise though tof before and it feels good to be spending money wisely.
- Stick to the budget: You can set a budget on paper all day long, but you have to have the determination to stick to it. Impulse purchases (unless they're a very good deal), impromptu trips, expensive groceries not really needed, etc. can all be set aside until the holidays have successfully passed. You'll be glad once the celebrations begin that you were dedicated to your goals and took the action steps to achieve them. This is harder to do than it sounds, I know, but as with most things, discipline will reap rewards.