You’ve seen the headlines – and the rising prices. Inflation is the highest it’s been in 40 years, and the conflict in Ukraine will likely drive further spikes in the cost of gas and goods.
All of this, while we are still battling a pandemic.
It’s understandable to become overwhelmed by the increasing cost of living and general uncertainty about the economy and the future. But one of the best things you can do for yourself is focus on what you can control, particularly when it comes to your finances.
That’s why we’ve created this guide on how to save money during inflation, and how to take care of your mental health while you do it.
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A’Shira Nelson, a certified public accountant who advocates personal financial literacy to more than 187,000 Instagram followers as @savvygirlfinance, knows people don’t like the word “budget.” But especially with prices rising, she says everyone needs to rethink that position.
“Try to get a better mindset: ‘OK, inflation is higher. Everything in the world costs more right now. Let me just create a plan for my money.’ Honestly, that’s the best place to start,” Nelson says.
If “budget” doesn’t sit well with you, Nelson suggests thinking of it as creating a plan for your money – where are each of your dollars going to go? Look at your pay stubs to see how much you have coming in each month, and then take it from there.
To create a budget, start with a list of your essential monthly expenses, such as:
- Rent or mortgage
- Car payment
- Health insurance
- Debt payments
Then list your non-essential expenses, which might include dining out or takeaway, streaming services, or subscriptions.
Not sure where to start? Nelson recommends checking to see if your bank offers a graph or breakdown of your spending in its app. Those graphs won’t tell the whole story, but they’ll give you a place to start figuring out your biggest monthly expenditures.
If that’s not an option, you can review your bank and credit card statements from the past few months.
“I always walk through the practice of taking a credit card statement and bank statement and highlighting all of the items that are ‘want’ items and not ‘needs,’” says Sandy Krestan, a senior loan officer with Fairway Independent Mortgage Corporation in Phoenix, Ariz. (Fairway owns Home.com.) “It is a quick way to get a visual on where money was spent and how to move that to savings. You would be surprised how much every single month we spend on items that are not a ‘need.’”
Tips for cutting back expenses
Just seeing your expenses written out might give you ideas of things to cut. But don’t assume you have to give up all luxuries.
Nelson says two of her self-care expenses are getting her hair and nails done, both of which can be costly. Rather than cut them out altogether, she extends the time between appointments if she’s trying to save. Instead of getting a manicure every two weeks, for instance, she might go once a month, cutting that expense in half.
She also suggests finding inexpensive alternatives to your activities. If you go out to eat with friends every week, switch to every other week while you’re trying to save. You still get time with friends, but you’re also taking care of your finances. Or, try out some alternatives. Plan a night in where everyone brings a dish instead of going out for dinner.
You don’t have to sacrifice your social life to save, which is important to remember if you’re feeling isolated and trying to balance your financial and mental well-being.
Pro tip: You don’t have to become a budget pro overnight. Nelson says that when she started budgeting, it took her three months to feel comfortable with the process. And even that was just a start. She continued refining her budgeting skills over time.
Don’t stress about creating the “perfect” budget. Simply becoming aware of your spending and being more intentional about where your money goes is a great way to begin. Then you can improve your strategies a little more each month.
Before we get to the next steps, let’s talk about mindset. Budgeting, saving, tracking expenses – all of that can sound overwhelming, and also like a boring chore.
That’s why Nelson suggests making it something to look forward to.
“Put time on your schedule, make yourself a cheese tray, or maybe take yourself out to lunch. Make it something where you are open and relaxed,” she says. “Remember, this is something new. New things take time to get down, and when new things get hard, we want to quit. So you want to give yourself the best possible start. You want to do it when your mindset is in a good place and a clear place.”
You can even create a ritual around budgeting or learning new financial skills. Block an hour each week or month for reviewing your expenses or watching videos on financial literacy.
Prep for that time by cooking your favorite meal, buying some chocolate or snacks, or making a good cup of coffee or your favorite pot of tea. Make these money sessions something you’re excited about so you’re more likely to stick with them.
Experts recommend having three to six months’ worth of expenses in an emergency fund. But you can build up to that. If you don’t yet have an emergency fund, aim to save $1,000 and then go from there. You don’t need to hit that number overnight, though.
Once you’ve created your budget, figure out how much you can afford to put into savings each week or month, depending on how often you get paid. Even if it’s just $20 or $50, those amounts add up.
Whatever you can save will give you more security if prices continue to rise, you lose your job, or you are unable to work for another reason.
Build your grocery list around what’s on sale each week, and get creative with the meals you make.
A few ideas on how to save on groceries:
- Look at your grocery’s store weekly deals online or in their circular and build your shopping list around the sales
- Check the clearance rack for household staples and treats that have been significantly marked down
- Switch to the generic version for pasta, sauce, ice cream, bread, and over-the-counter medicines. You can compare the ingredients to make sure you’re getting what you need. But oftentimes the ingredients are the same, the generic version is just much cheaper
If you’re stumped on how to build an efficient grocery budget, check out YouTube videos or social media accounts dedicated to budgeting and frugal living.
Seeing what other people are doing to save can inspire your own creativity, but it can also make you feel less alone. Seeing that you’re not the only one worried about the economy might be reassuring and create a sense of community, even just through a social platform.
Before buying something new, check secondhand stores or websites, including:
- Facebook Marketplace
- Local Facebook yard sale and “buy nothing” groups
- Thrift stores
- Consignment shops
- Salvage yards if you need materials for renovations
- Yard sales
- Estate sales
You may be able to find like-new or gently used options for a fraction of the price you’d pay to buy new. People often donate or sell high-quality and even brand-name clothing, furniture, smartphones, laptops, and other goods when they’re moving and have to downsize quickly.
You can find a lot of free listings when you check local Facebook groups or Marketplace posts, as people frequently give items away to anyone willing to pick them up and haul them.
If you recently bought a house, or plan to soon, and you’re on a tight budget, shopping secondhand is a great way to outfit your home. New furniture pieces can cost several hundreds and even thousands of dollars, and the cost of rugs, picture frames, and other decor adds up as well. Scoping out thrift stores, consignment shops, yard sales, and estate sales can significantly reduce those expenses.
If you have children, yard sales are a great place to find clothes, toys, and books for a few dollars or less.
We’re not suggesting you start growing all of your own food, or even the majority of it. But starting a garden and supplementing your groceries with vegetables and herbs grown at home can help you cut back on how much you need to buy from the store.
It doesn’t have to be a big garden. In fact, there’s a lot you can do indoors if you live in an apartment or have limited yard space. You can grow herbs and microgreens indoors in small pots near a window or bright lamps you already have in the home.
Or, if you have the space, you can grow some fruits and vegetables outdoors.
If you start an outdoor garden, you can do that on a budget as well:
- Start seeds in upcycled containers, such as yogurt or sour cream tubs (just make sure to cut a few holes in the bottom for drainage). The lids make great trays to catch the water
- Fill raised beds or planting containers partially with dirt you already have in your yard, sticks, leaves, and compost. Then use fertile potting soil as the top layer. This reduces the amount of potting soil you have to purchase, which helps minimize your costs
- Make your own compost using food scraps, coffee grounds, tea bags, and paper towels you’ve used in the home. You’ll want to mix that with some leaves and dirt, and you’ll need to aerate it every few days if you want the materials to break down quickly. But compost is great for plant health, and it may help you cut down on the amount of fertilizer you need to buy
Gas prices have dominated the headlines recently, and the cost of fuel is a real concern, especially if you have a regular commute.
Here are a few ways to minimize your gas costs:
- Ask for a remote or hybrid-work option. This won’t work for all professions, but if you are working on-site and could complete your job remotely, ask your employer if you can do so. Even cutting out your commute two or three days a week may help you save. Alternatively, find out whether your company offers any kind of reimbursement or assistance plan for commuting costs
- Look for fuel-efficient routes. Cnet reports that Google Maps can now recommend fuel-efficient routes that avoid traffic, hills, and other terrain that requires a higher gas expenditure
- Compare prices before you go to the pump. Use a site such as GasBuddy to find the cheapest gas stations near you
- Look for cash discounts. The Penny Hoarder notes that some gas stations offer lower prices for customers who pay in cash. Keep some cash on you in case you’re able to get a better deal by skipping the debit or credit card
- Sign up for fuel rewards. If you’re a member of Costco or Sam’s Club, you may be able to score lower gas prices by fueling up there. Check out offers at your local grocery chain as well. Companies such as Harris Teeter and Hy-Vee allow you to earn reward points when you shop there, then redeem them for reduced gas prices
- Maintain your vehicle: The U.S. Department of Energy says that getting regular tune-ups, using the appropriate grade of motor oil for your car, and keeping your tires at the optimum tire pressure can all improve fuel efficiency
Economic uncertainty is stressful, and this upswing in inflation comes at a particularly difficult time. The pandemic created enormous psychological, emotional, and financial hardships, and the war in Ukraine has brought anguish, fear, and more uncertainty.
Taking control of your finances is a way to cope with the stress, as fears about not being able to afford your living expenses can cause and exacerbate anxiety and depression. However, it is important to put your health first.
As Nelson noted, budgeting does not mean denying yourself social opportunities and self-care. If your weekly meet-up with friends or family is an emotional lifeline for you, don’t give it up.
But cut back on something else in your budget so that you are still able to save and meet your financial goals. Or, ask friends and family if they’re open to alternatives. Instead of dining out, are they willing to try a game night at someone’s house instead? Maybe you can cook a meal together, rather than go out.
Let people know what you’re going through as well. Whether you are financially secure now but are worried about the future, or you’re struggling with money, talk to someone you trust. Tell them your fears or your circumstances. You never know who will offer help, in the form of money, resources, or perspective that eases your mind and changes the way you look at these times.
If you are suffering from anxiety and depression or have had thoughts of harming yourself, there are ways to get help immediately:
- Call the National Suicide Prevention Lifeline at 1-800-273-8255
- The National Alliance on Mental Illness (NAMI) offers a helpline to connect you with mental health support groups and resources. The helpline number is 1-800-451-9682; or 919-999-6527 via text
- You can reach the NAMI crisis line by texting the word “NAMI” to 741-741
- The Trevor Project operates a 24/7 helpline via phone call, text, and chat for LGBTQ+ youth. The number is: 1-866-488-7386; the text number is 678678
If you are having a mental health emergency, you can also call 911.
The challenges of inflation are real, and so is the stress that comes with economic uncertainty. Taking control of your budget can bring peace of mind, which is hugely important to your mental health and financial well-being.
The information in this article does not constitute financial planning advice. Please consult a financial planner regarding your specific situation.