My first experience with inflation came when I was about fifteen years old. I was at my great-grandparents farm one weekend afternoon. I always loved when they shared historic artifacts with me. On my last visit, my great-grandmother, who was born a few years after the Titanic sank in 1912, had previously gifted me a book written about the event a few years after it happened, knowing I was a huge fan of the movie. This particular visit, I was getting ready to take my driver’s license test. My grandfather pulled out a book from his coffee stand and handed it to me.
Inside the book was a log that went back to when he started driving, and the change in prices over the years. At the time I started driving, gas was around $2.50 a gallon and the numbers he showed me were a few cents per gallon. I remember wishing that was still the price. I didn’t understand it at the time, but I was learning the basics of inflation.
What is Inflation?
Inflation refers to the rise in prices of goods and services that have a daily use in society, such as food, clothing, houses, transportation, ect.
Inflation is defined as the rate at which the value of currency is falling, which then directly affects the rise of the general level goods and services. In my case, I was learning about how gas and oil prices grew steadily over the years due to inflation.
So What Causes Inflation?
At the root of inflation is the increase in money supply. Whenever the money supply is increased, it lowers the purchasing power of that currency.
Inflation can be viewed positively or negatively by the individual assessing the changes. For example, someone who owns property may like to see the raised value in their assets. For other individuals that are struggling to make ends meet, an increase in the cost of food could represent something much more negative.
The health crisis we have been experiencing over the past two years has put many Americans in new territory financially. The U.S. Bureau of Labor Statistics (BLS) reported that the Consumer Price Index For All Urban Consumers (CPI-U) was up by 7.5% in the 12-month period ending January 2022, the largest 12-month increase since the period ending June 1982.
Tips for Handling Money During Inflation
- For many individuals that are living on a fixed budget, one of the more fungible, or interchangeable, items on their expense list is food. If you are eating out or ordering in frequently, one of the first things you can do to start lowering your expenses is staying in and cooking more frequently.
- Right now, the prices of new cars are at an all time high according to a January 2022 article from Kelly Blue Book. If you must buy a car in the near future, check out ways to save on car expenses for tricks on how to negotiate your way into a better purchase price.
- Reassess your monthly subscription services such as streaming services, gym memberships and cell phone plans. Write down all of your recurring costs for each month and decide what you need and what you don’t.
What money saving ideas have you implemented to combat inflation? Share your ideas in the SheBanks Community!