How to deal with inflation without resorting to budgeting
There’s a ton of shame-y advice out there about inflation. Here’s how to tune out budget culture and weather this economy on your own terms.
From our founder: Dana Miranda is a Certified Educator in Personal Finance® and founder of Healthy Rich. She’s written about work and money for publications including Forbes, Insider, The New York Times, CNBC, NextAdvisor and Inc. Magazine.
I got to join the radio show A Public Affair on the local Madison station WORT FM last week to talk about money — catch the interview here (and check out the host, Ali Muldrow here — she’s doing cool work!).
We got into a lot of things that plague us in budget culture, but what sparked the interview was concern over inflation and a looming recession.
A few people have reached out recently to ask me to share tips on “surviving inflation,” and I’ve got Thoughts on the matter. I’ll keep sharing those conversations as they happen, but for now, here are my tips in a tidier manner.
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1. Investigate how inflation actually affects your life
A lot of people are nervous about inflation. When I leave my liberal bubble in Madison, every conversation centers on the price of gas and groceries.
But how are price increases actually impacting our lives?
“Perceptions of inflation are not based on actual changes in prices in the market but on the changes that draw our attention,” writes Yale School of Management professor Ravi Dhar in an article for Yale Insights. “If my social media feed is all about price increases, that’ll have a negative impact on me.”
And we’ve been getting a lot about inflation in our feeds lately. Could that be because it’s an election year, and it’s convenient for Republicans to cite inflation and blame the Democrat in the White House (who has literally no control over corporate prices and isn’t even on the ballot next week)?
That’s not to say inflation isn’t real — it is quite real. Average prices for consumer goods tend to increase a little each year; economists typically consider around 2% to be normal. The year-over-year inflation rate peaked in June this year at a 40-year high of 9.1%, and it’s been at over 4% since early 2021.
Those numbers are shocking. They make great headlines. But they’re averages and don’t represent any single sector or any individual’s experience.
Before you react to the threat of inflation, pause to reflect and investigate where inflation is actually showing up in your life.
Are you struggling to eat the way you’d like to, get your kids the school supplies and clothes they need, or running out of gas between paychecks? Are you making different choices about entertainment, recreation and travel? Does the balance in your bank account feel more restrictive than you’re used to?
You might find some or all of these are true for you. Or you might discover that clenching feeling you have when you think about inflation is only fear about what could be. That fear makes sense, given the messages we’re swimming in. But reacting to fear of imagined suffering only creates unnecessary suffering within yourself.
Once you determine where price increases are affecting your life specifically, you can make choices about how to respond.
2. Ask for more money
The first place to turn in response to inflation? The companies that are responsible for it.
Inflation is a reflection of price increases on a bunch of common goods and services. Those price increases come from the companies selling those goods and services. Part of the story they’re peddling is that the cost of labor has gone up so much that they have to compensate with price increases.
Yet, the year-over-year increase in wages and salaries peaked at about 5.5% in June, when prices, remember, were up 9.1%.
Where’s the rest of that money?
It’s going into the coffers of corporate shareholders as profits (or stock buybacks). Corporate profits have been on the rise, hitting 15.5% for the second quarter of 2022, the widest profit margin since 1950, reports Bloomberg (paywall).
The messages we’re getting about inflation encourage us to see it as inevitable and tighten our belts to muscle through it. But what’s actually happening is companies are earning more and not paying workers more.
If you’re feeling a pinch because of higher prices, start by asking for your fair share of the revenue those prices are bringing in.
It might sound daunting, because companies have gotten so comfortable taking advantage of workers and customers like this for so long. Wages haven’t kept up with price inflation since about the 1970s.
But we’re in a moment where companies are being forced to recognize how much they need workers, and that gives you unprecedented leverage to ask for more.
Ask for more money.
Ask for scheduling flexibility.
Ask for remote work.
Ask for improved working conditions and corporate culture.
Ask for a union.
Look for a better job opportunity.
Before you resort to contracting your quality of life because of higher prices, take advantage of this historical moment to expand your resources as much as you can.
3. Lean on community resources
If you hit a ceiling with your income — whether you can’t or don’t want to negotiate higher pay or find a new job — and still feel a strain on your finances, look for non-income resources that can cover your needs and help you avoid restriction and deprivation.
Local, state and federal programs exist to provide a lot of necessities, and many of these programs are perennially underutilized. You might be surprised to learn what kinds of assistance you could qualify for, so they’re worth looking into.
A few to consider:
TANF (Temporary Assistance for Needy Families), a federal program that provides cash assistance to low-income families with children.
SSI or SSDI, benefits paid through the Social Security Administration to folks with disabilities or blindness, or those 65 years or older who meet income limits.
SNAP (Supplemental Nutrition Assistance Program), a debit card for groceries. You could be eligible for SNAP if you’re already receiving TANF, SSI or other assistance; or if your household income is below the threshold.
Unemployment benefits. These vary by state, but are generally available if you’re terminated from a job or your hours are reduced. Some states suck at administering them, but the income could be invaluable once you get it. I covered the basics of unemployment for The Penny Hoarder a while back (this mentions the 2020 CARES Act UI expansions, but the regular basics are in there, too).
Housing choice vouchers (Section 8), a program by the U.S. Department of Housing and Urban Development, administered locally, that helps with rent payments. Eligibility is based on your household income.
Non-government resources might be more accessible if your income disqualifies you from government benefit programs. Many of these are available without income limits or other restrictions.
Food banks. Feeding America is a great resource to find one near you, or just google “[your city] food banks.”
Borrow money directly from another human through the SoLo Funds app, and thank them with a tip. You set the terms — the size of the tip, the amount of the loan and how long you have to repay it. I’ve been on the app as a lender for a while, and I’ve seen loan requests for everything from rent to school supplies to vacation (yeah, I funded a loan for vacation).
Call 2-1-1 or visit 211.org to connect with nonprofit assistance to pay your rent, mortgage or utility bills.
Not a mind-blowing suggestion, but just in case: Shop at a local thrift store to find lower-priced (and environmentally friendly!) clothes, accessories, school supplies, furniture and miscellany.
Worried that you’re not “needy” enough to take advantage of these resources? Or that you shouldn’t take them away from someone who needs them more?
These concerns are common and, unfortunately, they keep a lot of people from accessing resources they could use. See: Nationally, only 82% of eligible households use SNAP, and participation is as low as 55% in some states.
That’s a scarcity mindset (one, frankly, driven by the competitive and individualistic nature of capitalism and budget culture).
The more you use community and government support, the more resources get directed to them, expanding their reach (shout out to this great piece on school lunch programs by Virginia Sole-Smith!). Your use can also help make these resources visible and fight the stigma that keeps people from accessing them and gives us permission to deprioritize them.
4. View debt as a neutral resource
When money is tight, debt can be a powerful resource to live your life without resorting to restriction or depending on discipline.
It’s not popular in personal finance to recommend taking on debt, because we moralize and stigmatize it so hard. But — as the wealthiest people and companies in our country know — debt is just another financial resource to help you experience the life you want.
Using a credit card or taking out a loan are among many ways to expand your resources and improve your cash flow, and they’re no less responsible or more reprehensible than any other option.
You don’t have to forgo the things you need to live a healthy and happy life just to avoid taking on debt.
The key to living a healthy and happy life with debt is understanding how your debt works. Know when and how much interest you’ll be charged when you use a credit card; the consequences of making or missing loan payments; or which student loan repayment programs you’re eligible for, for example. (There’s a lot to get into about these products and systems that I can’t cover in one piece, but I’m working on more resources to answer these questions!)
Understanding how these products work lets you make the choices that make sense for you, rather than struggling to make the moves you’re told are “right” based on someone else’s goals.
And, by the way, vote in the election on Nov. 8 if you haven’t already. Here’s how to vote anywhere in the U.S.
Legislators and other elected officials don’t have a ton of direct control over inflationary pricing, so don’t listen to anyone who blames one politician for causing inflation or claims another can end it. But electing representatives who are willing to regulate corporations and expand our social safety net could fight the impact of inflation and make economic fluctuations easier to weather.
Image by Cristiano Silva via Pexels
“You don’t have to forgo the things you need to live a healthy and happy life just to avoid taking on debt.” I love that you are saying this, but why does it seem like you’re the only person sharing this truth? Great article! ￼
I think debt is something you should only take on if it's to invest in something that will return value greater than the cost of the debt, such as a house or stocks (though the latter, only during booming markets and if you know what you're doing).
Regarding the title of this article, i would disagree... there are very few situations in which you shouldn't have a household budget, such as, if you are rich or if you have an untouched income stream that cannot deplete, such as a managed trust.
I recently wrote an article on elevating your budgeting skills into a full on financial plan. If you get the time, please take a look, perhaps i might change your view on the subject of budgeting.