We’ve all heard a ton about it lately, but what is inflation really? To sum it up simply, inflation is basically when the prices of goods and services go up. It’s measured by how much prices inch up over time and tracks how the value of how money falls because of those price hikes.
As of February 2022, the inflation rate in the U.S. had risen to 7.9% over the previous 12 months—up 0.8% from January’s numbers. That is the largest inflation jump we have seen in nearly 40 years. There is no wonder we are hearing chatter about it constantly these days. This is because we are seeing it on sticker prices in stores and feeling it in our wallets. The State of Personal Finance 2022 annual report showed that 71% of Americans say inflation has impacted their lives with 26% saying it has had very significant impact.
Inflation happens when the price of goods goes up. But what causes the price of things to go up anyway? It all goes back to supply and demand. When people want to buy things but there aren’t enough things for them to buy, the price goes up to meet the demand. Since the economy has begun to open back up following the COVID-19 pandemic, money has begun moving and stimulating our economy. We do not experience inflation solely from government actions, we also experience it due to lack or shortages of goods. When there is a whole lot of demand (cars, homes, lumber, etc.) and not enough supply there is a perfect recipe for inflation.
How to Protect Yourself Against Inflation
1. Stay Calm
Inflation is not the end of the world! Don't hastily start filling every container you own with gasoline and hiding your money in your mattress. You can prepare without panicking and set your money up to be better protected.
2. Rework Your Budget
You are still in complete control of your money. With prices of goods on the rise, you can adjust your budget to spend more where needed and cut back on things that you don't. Use our budget calculator to help you work out a plan that best fits your needs and lifestyle.
If you’re feeling that pinch and want to save even more, look for ways to lower your grocery bill or save money on gas. Maybe it’s finally time you switch over to generic brands or carpool into work. And if you find great deals on canned food and things you can stock your pantry with (that you’ll actually use), then go ahead and stock up on food. Just make sure you’ve budgeted for that before you head into the grocery store. That way, you already know exactly what you’ll spend and won’t get swept up into the panic buying.
Inflation? Well, it’s definitely something to watch but you can be prepared with a sound money plan and smart banking tools. Visit us anytime at tcbssb.com!