Inflation is Pushing Prices. Here’s How You Can Adapt

Orignally published in the September/October 2022 issue of Wake Living Magazine. 

Inflation rates are starting to approach levels we haven’t seen since the early 1980s.  As inflation has started to dominate the news cycle and will certainly be a hot button issue as we head into the November elections, it’s worth taking a look at what it is, how it’s affecting businesses and consumers, and what, if any, steps we can take to lessen its effects. 

What is inflation?

The first step in dealing with inflation is understanding what we’re talking about. In the simplest terms, it’s the measure of how much prices are increasing year over year.  A commonly accepted indicator is the Consumer Price Index, which tracks the price of a wide variety of everyday goods and services.

In June, the Consumer Price Index rose to 9.1% above 2021, higher than expected and the steepest increase since November 1981.

There’s no one clear cause of inflation, and there are lot of contributing factors this time. We’ve seen record low interest rates on loans, manufacturing shutdowns and supply chain issues due to COVID, government stimulus money, and a “Great Resignation” as employees and companies adapt to new ways of working. As a result, there’s higher demand than available supply for just about everything, and suppliers are raising their prices in response. 

Why is inflation a concern?

We’re all familiar with the individual impact of inflation: life becomes more expensive, and prices rise faster than businesses and consumers can adapt. Gas and grocery prices shoot up faster than wages. The net effect is, your dollar doesn’t go as far as it did a year ago. On the business side, companies are seeing increases in the cost of supplies, real estate and labor. So, they’re pressured to make cuts and raise prices, and that worsens the consumer impact.

What can we do?

Inflation affects us collectively, but the individual impact can vary greatly. We all have different wants and needs, and are at different points in our financial journey. That means an individualized approach to how we react and respond to increasing prices.

For consumers and businesses alike, a big first step is to revisit your budget, especially if you haven’t in a while.  Ask yourself: Where are we seeing unexpectedly high expenditures?  Which are absolutely necessary, and which can be cut back a bit?  Are we still allocating our money to be spent in alignment with our priorities and budgeting needs?

Take time to re-evaluate your wants and needs. If the cost of what you absolutely need is on the rise, perhaps you can delay buying some of the things you want. For necessities, shop around for the best price. For things you use frequently and don’t expire quickly, consider bulk purchases.

Also consider how you’re paying for items. Look for programs that offer rewards for your spending.  Coastal Credit Union has both checking and credit card rewards programs that allow you to earn cash back from using your card. Plus, consider what rewards retailers might have. The combination of merchant savings and earning cash back can help dampen the effects of rising prices.

Interest rates on loans are starting to increase, and the Federal Reserve has indicated that additional rate hikes are planned to help counter inflationary pressures. Still, rates are below historic averages. Knowing that, if you have a major purchase planned, now might be the ideal time to make it, before prices and interest rates both climb higher. At Coastal, we’re still seeing high demand for mortgages and auto loans.

It’s also great to remember that there’s still a labor shortage, low unemployment and a strong demand for talent. At Coastal, we’ve continued to grow and frequently have several positions open, with competitive wages and great benefits. It doesn’t hurt to look for potential job opportunities and seek out a new position with higher pay to help balance your budget.

Inflation is hitting us from all directions. In the end, adapting and keeping your finances on track comes down to taking a good look at where your money goes, making changes to your spending, and planning ahead.