How to Prepare for Inflation, Because It’s Here

Nearly everywhere you look right now, prices are rising. You go to the grocery store and your $50 groceries are suddenly $75 for the same items. You fill up the gas tank, and your jaw drops as you see the final total. If you’re wondering if it’s just you, it’s not. We’re in a period of high inflation, the highest rate seen in four decades. According to the Bureau of Labor Statistics (BLS), the consumer price index (CPI) rose 7.9% in February compared to the previous year. While much of this is out of your control, there are things you can do to try and combat higher costs. Here’s how to save money during inflation increases. 

How to Save Money During Inflation Spikes | Metromile

How to prepare for inflation in 6 steps 

Step 1: Review your numbers 

Whether you’re a personal finance newbie or professional or somewhere in-between, there’s one major thing everyone should do. And that’s reviewing their numbers. Look at the nitty-gritty and the big picture by looking at the following:

  • Your take-home pay. What you think you make and what you actually make after taxes and deductions are different. 
  • Your current expenses. All expenses including rent/mortgage, food, insurance, health, gym, etc.
  • Your current debt obligations. What are your monthly payments, interest rates, and how much do you owe?

Taking this step can help you create a plan with real numbers and can help you see where there might be spending leaks. 

Step 2: Make a budget 

After reviewing your numbers, you know your total take-home pay and expenses. Whether you have a budget or not, you can make a budget from scratch or adjust the one you have. 

A budget is a way to dictate the flow of your money. Go through each category and write down how much you want to allocate for that particular category. Some might be fixed expenses that don’t change, and others might be variable, so do your best to put a number that makes sense given your previous spending. Your total expenses should be less than or equal to your income (but make sure debt and savings are part of that!), so you’re not “living beyond your means.” 

Figuring out how to prepare for inflation can be tough. But with your budget, you can take steps to limit variable spending and cut out or reduce non-essential spending.

Step 3: Reduce expenses where you can

In most cases, your top three expenses will be housing, food, and transportation. To make the most significant dent and learn how to save money during inflation, focus on these top categories. 

That may mean trying to negotiate your rent (it’s possible and the worst they can say is “no”), downsizing, and trying to cut utility bills. You can meal prep and try to avoid higher-cost convenience foods and buy in bulk for certain items at Costco. You can look at for the most affordable gas; opt to walk, bike, or take public transportation instead. 

Also, see if there are subscriptions that you aren’t really using anymore. Cancel and free up some cash. You can see if there are barter opportunities as well, such as working the front desk at a yoga studio in exchange for classes. 

You don’t have to give up everything, but consider reducing the frequency. If you go out to eat three times a week, scale back to once a week. Reducing the major expenses and focusing on the small ones can help free up cash. 

Step 4: Think about making the switch to pay-per-mile insurance 

As noted above, transportation costs can make a dent in your budget. As part of that, there is car insurance. The good news is that you may be able to score some serious savings by switching auto insurance. 

If you’re a low-mileage driver and drive 10,000 miles or less each year, think about switching to pay-per-mile car insurance. That way you get a rate that is based on how much you drive. At Metromile, you can get an affordable base rate and pay several cents per mile you drive. You may be able to save up to $947* per year, depending on how much you drive. 

Step 5: Earn more

Let’s just say it — it sucks that your dollar isn’t going as far as it used to. It feels like your money is vanishing in quicksand. Reducing expenses where you can is key, but sometimes you cut back and hit a frugality plateau. In other words, you can’t really cut back any further. In that case, earning more can add more money to the pile. Here are some ideas:

  • Sell items you no longer use or want on OfferUp or Facebook Marketplace
  • Rent out your car on Turo or Getaround
  • Ask for a raise 
  • Pet sit on Rover or Meowtel
  • Work overtime, if applicable 
  • Freelance and leverage your existing skills (what do you do for your day job or what do people always tell you you’re good at?)

Focusing on earning more can at least help your income during times of inflation. 

Step 6: Pay off or refinance debt 

Paying debt is paying for your past choices, which can make it tough to have enough money in the present and the future. Of course, interest is what can really make the process tough. That’s why it’s recommended to pay off debt or refinance to a lower interest rate, if possible. 

This is especially the case with high-interest credit card debt. Consider a 0% balance transfer credit card, just make sure you’ve addressed what caused the debt in the first place so you don’t get stuck with more debt. 

Consider refinancing your home to get a better rate. If you have federal student loans, you can take advantage of the payment pause and consider income-driven repayment plans when payments start back up again. 

You can free up that monthly payment and reduce the total amount of interest you pay on the loan by paying down debt or getting a lower interest rate.  

The bottom line 

Dealing with prices rising right now can feel like another blow after a difficult two-year period. Learning how to prepare for inflation requires action and taking steps, both big and small to reduce costs and increase income. If you don’t get behind the wheel all that often, consider making the switch to pay-per-mile car insurance coverage. Grab a free quote to see about potential savings. 

*Average annual car insurance savings by new customers surveyed who saved with Metromile in 2018.

Melanie Lockert is a freelance writer, podcast host of the Mental Health and Wealth show, and author of Dear Debt. She’s a cat mom to two jazzy cats, Miles and Thelonious, an amateur boxer, music lover, and needs coffee to function.