How To Save Money During Inflation

Inflation is an increase in prices of the goods and services in an economy, resulting in a decrease in purchasing power. It is measured by how fast the prices increase over a period of time. On the contrary, when prices drop, it is called deflation, which increases purchasing power.

Supply and demand for products and services greatly affect the prices and purchasing value of a country's cash. The increase in production costs, such as raw materials and employees’ salaries, even amid the same demand, can cause inflation due to the added costs passed onto the consumers. A surge in demand can also cause inflation, as consumers are willing to pay more for the product or the service.

How Does Inflation Affect Our Lives?

Most people around the world, not just those living in the Philippines, feel the increase in the cost of living in their daily lives as a result of inflation. However, the increase in prices hits the middle-income class hard and the low-income class harder.

The higher cost of basic needs such as food, transportation, and utilities results in less savings and less extra money for discretionary spending, especially when your salary isn’t increasing at a rate similar to the inflation rate. With all the price hikes in both goods and services, it is important that you plan your finances to survive economic downturns.

How To Save Money During Inflation?

Given that inflation is unavoidable, it is important that we find ways to mitigate the negative effects of the rising prices of goods and services.

Here are some tips you can consider:

Shop Smart

Shopping can be incredibly rewarding. However, in times of inflation, we need to learn how to spend our money wisely to reduce our everyday expenses.

Here are some tips to help you:

• Make a list. Be sure to list down all that you need to buy, and stick to your plan. By having a list and sticking to it, you'll be less likely to make impulsive purchases.
• Buy house brand products. When shopping for groceries, look for house brands, they are usually cheaper compared to other brands.
• Buy in bulk. Non-perishables such as detergent, shampoo, soap, and diapers can be bought in bulk and you can avail of bigger discounts.
• Shop near closing time. Take advantage of the discounts some shops, such as bakeries and cafes, offer when it’s near closing time.
• Pay using your credit card. Some credit cards give cash back rebates when used to pay when dining or shopping at participating restaurants or stores.

Save Your Money in a Better Place

While it is good to have emergency cash that you can easily withdraw, keeping the rest of your savings in your bank savings account will not safeguard your purchasing power. This is because inflation has a detrimental impact on your idle cash savings. The value of your savings today will be less in the next few years depending on how high the inflation rate is. That’s why it’s important to try to protect the value of our savings over time.

There are relatively safe ways of saving that offer higher interest rates than a regular savings account. One that you can consider is the Pag-ibig MP2 Savings Program. It’s a voluntary savings program for Pag-ibig members who wish to save more and earn higher dividends than what you can get under the regular Pag-IBIG Savings Program.

Pay Your Debts Soon

Prioritize paying off your debt so that you can reduce the compounding interest rates on your loans, which will help you save in the long run. Clearing your debt will also give you a more accurate picture of your financial standing.

Reduce Energy Bills

Inflation typically hits basic and essential goods and services the most, causing the utility rates to increase. The two basic services that are usually affected are electricity and water. Take a closer look at your bills, and find ways to cut down what you don’t need or reduce your usage. For example, instead of using the shower when taking a bath, you can use a pail and dipper.

Consider Getting a Side Hustle

Some of us may not be able to stop purchasing discretionary products or some things that aren’t really necessary. Alongside being cautious with your spending, another way to increase your earnings and budget for non-basic goods or services is to have a side hustle.

Here are some ways you can make some extra cash on your own time:

• Tutoring
• Freelance writing
• Online reselling
• Baking and selling pastries

These can be great ways to generate more income and develop your skills, especially if your side hustle is aligned with your interests.

Consider Investing

If you haven’t done any investing before, now is the best time to start! Having a long-term investment plan is one way to combat inflation.

Real estate is definitely an investment you may want to consider, as the value of properties usually increases over time. Investing in stocks is also a good idea and can help grow your money in the long run.

Bottom line

With all the price hike and interest hike in time when inflation is high, budgeting, especially, household budgeting is a challenge that leaves some frustrated. Start with reviewing and analyzing your monthly expenses including both necessary expenses and discretionary spending, and listing down what to prioritize. This will help you determine your monthly needed budget, what you can cut down and what you can save or set aside for investment.