July 23, 2021
How to Brace Yourself for Inflation
By : Ellie Brown
Inflation is inevitable, but after the pandemic outbreak, the prices are likely to hit the roof. It has recently become a hot topic, and suddenly people have realised that they should brace themselves for it. Inflation rates usually hover between 1 and 3%, but it has recently skyrocketed, and the pandemic partly blames it.
Inflation is the process of a continuous rise in the prices of goods and services every year. This whittles down the spending power of consumers. The stagnancy in pay has made it more difficult to put up with the high living cost.
Many people have lost their jobs, and companies are not ready to pay as much as they were before the outbreak of the pandemic. This is not the first time when prices have hiked. People usually do not bother about the rise in prices of goods and services, but there has been a significant rise in the prices of certain goods that it has raised alarm bells.
For instance, the cost of home renovation projects has increased by 30% due to a rise in the cost of lumber. Although interest rates of mortgages had dropped, the increase in the buyer prospects led to an increase in the prices of houses.
How to respond to inflation
When there is higher demand than the supply of something, prices will always go up, and it is not easy to establish a consistent balance between the demand and supply of a product. This is why you need to find out the best way to respond to inflation. Here is what you can do.
· Revamp your budget
If you do not have a budget, just start it because this is the only shield against inflation. If you have already a budget-liking person, you need to revamp it every time prices go through the roof. Each time a rise in prices will weaken your buying power.
For instance, if you have a monthly fuel budget is £100, and now fuel prices have increased, you will have to pull money from other categories. As a result, it will be much more difficult for you to buy it. This is why you should immediately alter your budget.
This can prevent you from mismanaging your finances. You cannot control inflation, but you can control your budget. Make a list of all basic spending categories and set the desired limit for each. You notice that you need more for any of the categories, you should pay toward that.
Since your pay has not increased, you will have to cut down on the spending in another category. You will have to evaluate all of your expenses to find out the areas where you can cut.
· Track your expenses
As the prices of goods are constantly rising, so you cannot afford without tracking your expenses. The biggest advantage of tracking your expenses is that you will know how much money you have and how much you have already spent.
This can prevent you from overspending. If you notice that you are on the verge of overspending, you can immediately take up the reigns. Most people think they have created a budget, so they do not need to track their expenses, but this is where you slip up.
If you do not keep tabs on your expenses, you will end up overspending your money. As a result, you will have to rely on guaranteed loans from direct lenders to meet your daily expenses. This can badly affect your finances because your money will go into interest.
· Increase your income sources
The best way to fight against inflation is to increase your income sources. Even though you try to adjust with your expenses, it may not be sufficient to battle against inflation. Of course, you can stretch your pound only for a certain limit.
This is why you should figure out ways to increase your income. If you can ask your employer to provide you with a hike in your pay, that is good. However, you must have done something good for the company.
If that is not the case, you should try to switch to another job with a higher pay. However, make sure that your travel expenses do not offset the hike. If you are unable to get a new job with higher pay, you should find out additional work. A side gig can help you make some money.
The final word
Inflation is inevitable, and you cannot control it, but you can take certain necessary steps to withstand its effects. To respond to inflation, you should revamp your budget and track your expenses to have a detailed insight into how much money you are spending. Try to increase your income sources. A side hustle can help you easily manage the high cost of living.