If it seems like your grocery bills are getting more and more expensive by the week or that you’re spending more money than ever to fill up your car, you’re not imagining things. The cost of living has spiked substantially over the past couple of months, as limited supply and high demand have caused the price of consumer goods to rise.
In fact, in June, the Consumer Price Index, which measures fluctuations in the cost of common goods and services, rose 0.9%. That’s the largest single-month increase in 13 years. Meanwhile, over the past 12 months, consumer prices rose 5.4%, which marks the biggest jump in annual inflation in almost 13 years.
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What’s costing more?
A big contributor to these recent numbers is the cost of gasoline, which is exceeding last summer’s levels. That said, last summer, the demand for gasoline was low, as many people opted to stay home and avoid traveling due to the pandemic.
This summer, there’s already a travel boom in the works. That means the demand for gas has increased, driving its cost upward — 45.1% compared to where it sat a year ago.
Food costs have increased as well: They’re up 2.4% over the last 12 months, but at restaurants, they’re up 4.2%. And while dining out is, of course, a luxury, it’s something a lot of people are interested in doing after having spent the past year cooking at home.
Of course, gas and food aren’t the only things driving the Consumer Price Index upward. Car prices have also soared, due in part to rising demand and a semiconductor shortage.
How to deal with inflation
One of the best ways to avoid getting hurt by inflation is to simply be more mindful of your spending. Set up a household budget if you don’t already have one in place so you can map out your different spending categories and see how much each one costs you. You may be able to adjust some categories to make up for rising costs in other areas that are outside your control.
For example, you need to eat. If you’re now spending $500 a month on groceries instead of the $460 you’d normally spend, maybe you can downgrade to a cheaper cable plan that costs $40 less a month.
Another smart move is to track your credit card purchases every week rather than wait for your bills to come due. If you find that your total purchases are coming in higher than expected, you’ll know to cut back for the rest of your billing cycle.
Of course, if you’re going to charge expenses on a credit card, it pays to see if there’s a better rewards program out there than the one your go-to card offers. It may be the case that there’s extra cash back to be had on your normal spending, including:
And since those items are costing more these days, you have an opportunity to score more rewards to offset that.
The good news about this latest bout of inflation is that it’s likely to be temporary. Once supply chains (many of which were halted during the pandemic) catch up to consumer demand, prices should start to come down. But until that happens, be sure to take the above steps so inflation doesn’t hurt your personal finances.