How to budget as inflation costs households nearly $300 more a month

On Mar 14, 2022

A shopper bags fruit inside a supermarket in Chevy Chase, Maryland, on Feb. 7, 2022.

Mandel Ngan | Afp | Getty Images

Inflation is costing the average U.S. household an additional $296 per month, a Moody’s Analytics analysis found.

The figure is based on the latest reading on consumer prices, which rose 7.9% in February compared with a year ago, according to the U.S. Department of Labor.

“It is going to get worse before it gets better,” said Moody’s Analytics senior economist Ryan Sweet, who conducted the analysis.

While the pain is felt across the board, some are feeling it worse than others.

Low- and middle-income U.S. households spent approximately 7% more in 2021 for the same products they bought in 2020 or in 2019, an analysis by the Penn Wharton Budget Model found. In comparison, spending by wealthy households went up 6%.

A separate study by Wells Fargo showed the middle-class, in particular, is getting squeezed. Inflation was half a point higher for middle-income consumers than those at the highest and lowest end of the spectrum in December, Wells Fargo economists found. When broken down by race and ethnicity, Hispanics and Latinos had the steepest jump in living costs.

“The fear of inflation, the pandemic and war are challenging what future generations consider to be the American Dream,” said money expert Sahirenys Pierce, founder of personal finance blog Poised Finance Lifestyle.

Here are three ways you can try to combat inflation — and two things not to do.

1. Plan ahead

To save on gas, be strategic about the use of your car. If you have to run errands, do them in one trip and at a time when there is not a lot of traffic, suggests Misty Lynch, a certified financial planner with Walpole, Massachusetts-based Sound View Financial Advisors.

When grocery shopping, be armed with a meal plan for the week that’s already in place.

“It does help people save money if they know what they are going to eat and stick with it,” Lynch said.

Pierce likes apps such as Flipp to look up grocery store ads. She creates a meal plan for the week that incorporates items that are on sale and prepares three of those meals on Sunday. Having a plan in place for the remaining days of the week helps her avoid picking up takeout or fast food.

“This strategy has helped my family save hundreds of dollars during our debt-free journey, the pandemic and now during times of high inflation,” Pierce said.

2. Shop wisely

If you don’t need a specific brand item, you may save money at a discount grocery store. Buying items in bulk in a warehouse store, like Costco or BJ’s, may help you avoid future price hikes.

To comparison-shop, look at a product’s unit price, which is essentially the cost per unit of a particular product. For instance, canned goods may be priced per ounce and paper goods…