The prices of regularly purchased items have slowly increased over the past year. This increase is due to inflation and means that the buying power of your money is decreasing, increasing the cost of living. When this happens, it is time to review your budget to make adjustments in spending.
The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. According to the Bureau of Labor Statistics, the March 2022 CPI rose by 8.5% over the past 12 months. This index measures the average change over time in the cost of food, housing, gasoline, utilities, household items and other goods or services.
If consumers are feeling as though their dollar doesn’t go as far, inflation is the reason. For individuals who are on a fixed income, this may mean being more strategic about spending and reducing and possibly eliminating some expenses.
To help combat inflation, the Bureau of Labor Statistics has developed the following tools to help consumer adjust their budgets to account for the increase in costs of goods and services.
Budget Adustment Tools
Consumer Price Index Inflation Calculator
This tool is designed to help consumers better understand the current and future impact of inflation. To use the tool, enter the monthly household expenses from one year ago (e.g. March 2021) in the space provided. Adjust the month and year, click on calculate. The figure reflects how much more consumers would pay today for the same goods and services purchased last year.
- Example: A household of three whose basic budget in 2021 included expenses of $4500 ($54,000 annually). Goods and services purchased in March 2021 for $4500 cost $4884 in March 2022. The family would have to spend $384 more for the same goods and services a year ago.
Cutting Expenses Tool
Developed by the Consumer Financial Protection Bureau, this tool can be used to help identify strategies to decrease expenses.
All expense categories may need to be adjusted, focusing on larger expenses, such as housing and transportation.
Tips for Reducing Flexible Expenses
Gasoline
- Plan and combine trips to save time and money.
- Carpool if there are opportunities.
- Walk, bike or use public transportation.
- Consider temporarily reducing some activities, such as going out to eat or driving home for lunch.
Food
- Shop with a list and commit to sticking to the list. Resist tempting purchases that can increase your bill.
- Use coupons and shop for sale items. Plan your meals around these items. Purchase extras to use later.
- Replace some meat products with non-meat protein sources. Even though prices of all foods are increasing, prices for eggs, beans and some nuts haven’t increased as much as beef, chicken, fish and pork.
Additional Tips
- Limit the use of credit cards. Interest charges can add up if you can’t pay the balance in full each month.
- Involve everyone in your family in making purchasing decisions.
- Talk about the current situation and allow everyone to give input on ideas to cut back on expenses.
For free, one-on-one financial counseling, contact Lorna Wounded Head, Family Resource Management Field Specialist, to schedule a session.