If it seems like your paychecks don’t go as far as they used to, you’re not imagining things. Rising inflation is putting a pinch on budgets nationwide.
Are you trying to figure out how to save money when inflation is up? We’re sharing our money-saving tips to help ease the pain of higher prices.
Inflation rates are rising
In simple terms, inflation is an upward trend in prices, or a decline in your purchasing power. Higher inflation can affect what you pay at the pump, the grocery store, or anywhere else you spend money. The U.S. inflation rate is tracked using different price indexes, including the Consumer Price Index (CPI).
The Bureau of Labor Statistics (BLS) releases updated price index data monthly. The latest report showed that inflation increased by 7.7% over the past 12 months.¹ That’s well above the 2% target rate the Federal Reserve wants.²
When inflation goes up, your spending power goes down. Inflation doesn’t affect the size of your paychecks, but it does determine how far your money goes.
High inflation can affect the economy if consumers cut back on nonessential spending. If high interest rates accompany inflation, that can lead to a slowdown in economic growth and possibly a recession.
How to save money this year
The best offense is a good defense, and that’s key to saving money when inflation spikes. Keep some creative savings hacks in your back pocket to help ease the financial strain.
Here are some of the best ways to save money when inflation puts your budget in a bind.
1. Shop at different grocery stores
Inflation affects prices differently, and grocery prices have seen some of the most significant leaps. Prices for food at home increased 12.4% over the past 12 months, according to the BLS.¹
If food is eating up a considerable chunk of your budget, you could save money on groceries by changing up where you shop.
Instead of limiting yourself to one store, you can shop the best grocery stores by individual food categories. For example, you might buy milk, eggs, and meat at Store A, purchase bread and canned goods at Store B, and shop at Store C for fresh fruits and veggies.
That strategy is more time-consuming, but shopping around can help you save money if you’re paying the lowest prices for each food category.
2. Meal plan around the cheapest foods
Meal planning is another helpful way to save money on groceries. When you meal plan, it’s easier to:
- Plan grocery shopping trips and only buy what you need
- Time your trips to buy what you need when it’s on sale
- Avoid impulse buys
You can step up your savings game even further by planning meals around the cheapest groceries. That includes pasta, beans, rice, and other staple ingredients that you can use to create multiple meals.
3. Join grocery store loyalty programs
Here’s another simple tip for how to save money on food: Sign up for grocery store loyalty programs.
Loyalty programs can help you save money on groceries through special promo codes, coupons, or discounts. Depending on where you shop, those coupons may be applied automatically at checkout when you scan your loyalty card or enter your phone number.
You may increase your savings by linking your loyalty card to a cash-back app. Ibotta, for example, allows you to connect your store loyalty cards and earn cash back on eligible purchases while still being able to apply coupon codes and discounts.³
4. Find cheap gas near you
Gas prices broke records in 2022, according to data from the U.S. Department of Transportation.4 While they’ve edged down slightly, you may still be paying more to fuel up than you’d like.
Locating the cheapest gas stations near you could help you pay less to fill up. For example, a free app like GasBuddy can help you locate cheap gas nearby. You could also simply search for “cheap gas near me” to find local filling stations.
5. Switch cell phone plans
Cell phones have become an indispensable part of life. That doesn’t mean, however, that you have to pay a hefty bill for service.
If you have a contract cell phone, there are a few ways you might save money:
- Eliminate add-ons or extras you don’t need (like enhanced voicemail, entertainment packages, or mobile hotspot features)
- Reduce your service package or cancel any extra lines you don’t need
- Check for any available discounts (for example, you might be able to get a discount if you’re a first responder or veteran)
You could go a step further with saving money and cancel your contract plan completely.
Switching to a prepaid cell phone plan could save you money, and you can still get many of the same features and benefits included with contract plans. Verizon, for instance, offers unlimited service plans starting at $45 with paper billing while Tello mobile’s unlimited plans start as low as $29.5,6
6. Install a programmable thermostat
Utility bills can eat into your budget when inflation rates are higher. A programmable thermostat could be the answer if you’re a homeowner struggling to save money on electric bills.
Programmable thermostats allow you to control the temperature and manage how often the heat or AC kicks on. Running your unit less often could lead to energy savings.
For example, the Department of Energy suggests setting your thermostat at 68 degrees in winter while you’re awake, then dropping it down lower at night.7
7. Switch to energy-efficient light bulbs
Whether you own your home or rent, swapping your current light bulbs for energy-efficient ones could help reduce your utility bills.
Changing up your light bulbs to LED lighting can save you approximately $225 a year in energy costs, according to the Department of Energy.8 Add to your savings by unplugging electronics when you’re not using them.
8. Ditch unused subscriptions
Subscription services aren’t immune to inflationary hikes. Netflix, for example, raised its prices across all plans in early 2022 to make up for a lack of new subscribers, according to a CNN report.9
The typical American spends $219 a month on subscriptions, according to a study by C+R Research. That’s more than $2,600 a year you could be throwing away.10
Canceling subscriptions you forgot about is another easy way to save money when inflation is high. You can make a list of your active subscriptions and cancel the ones you don’t use manually, or use an app like Trim or Billshark to cancel them for you.
9. Reduce your credit card APR
One side effect of inflation is rising interest rates. The Federal Reserve can institute rate hikes to try to curb consumer spending and bring prices back down.
When the Fed raises rates, your credit card company can raise your APR. They’re required to give you 45 days’ notice first, according to the Consumer Financial Protection Bureau. But a higher rate can make carrying a balance more expensive.11
Reducing your rate can be a money-saver if you have credit card debt. There are a few ways you can try to bring your rate down:
Ask your credit card company for a rate reduction.
Asking for a lower rate may or may not be successful, depending on your account history. But it’s still worth a shot if you’ve always been a loyal customer and paid on time.
Transfer balances to a new card with a 0% introductory APR.
Transferring balances to a new card with a 0% APR means you’ll pay no interest. It’s important to note how long the promotional period lasts. You’ll also want to research any balance transfer fees you might pay.
Consolidate balances with a low-interest rate personal loan.
Getting a personal loan could help you consolidate balances, so you have one monthly payment to make. And if the rate on the personal loan is lower than the average rate on your cards, you could save money on interest. Just be sure you’re not making new purchases with the cards you’ve paid off, as that could result in additional debt.
10. Automate savings deposits
While rate hikes can impact your finances if you owe money, they can give you a boost if you’re trying to save.
Savings account rates and certificate of deposit (CD) account rates typically go up when the Fed raises rates. That means you have more room to grow your money.
Opening an account with an automatic savings option takes the guesswork out of making deposits. For example, you can schedule a recurring transfer from checking to savings or set up direct deposit to save part of your salary automatically.
Here are some tips for automating savings:
- Review your budget to decide how much you can save
- Choose a frequency for making deposits ( weekly, biweekly, monthly, etc.)
- Decide how to make those deposits ( recurring transfer, direct deposit, etc.)
You may also have special built-in features to help you save. The Chime High-Yield Savings Account, for example, helps you grow savings automatically with round-ups12 and Save When I Get Paid.13
What's the 50-30-20 budget rule?
The 50-30-20 budget rule is a budgeting system that advocates committing 50% of your pay to essentials or needs, 30% to wants, and 20% to saving and debt repayment. The rule’s simplicity helps you track your finances and better ensures you use your money to accomplish your financial goals.
How much should I save per month?
Generally, financial experts recommend saving 10% to 15% of your monthly income. How much you should save per month can depend on your income, expenses, and overall budget. If you can only afford to save a little money to start, be consistent with setting something aside each month.
How can I force myself to save money?
Automating savings may be the best and easiest way to force yourself to save money. When you automatically deposit money from your paycheck into savings, there’s less temptation to spend it. You can also “trick” yourself into saving by rounding up your purchases and transferring the difference to savings or over-budgeting for basic expenses, then saving any money you don’t spend in those categories.
How can I save a lot of money fast?
Doing a no-spend challenge is one option for how to save money fast. In a no-spend challenge, you commit to not spending any money on nonessentials for a set period. You might try a no-spend weekend, week, or month. During that time, your goal is to spend as little money as possible and save it instead.
Inflation rates don't have to shortchange your savings
Saving money is essential for your overall financial health. Inflation can make saving feel harder, but you can still work toward your short or long-term goals. The tips we’ve shared can be a great jumping-off point for inflation-proofing your budget.
Why not make your savings work for you? Start saving more with a Chime High-Yield Savings Account.