Financial Fundamentals Blog

Inflation Periods in the US: How to Make Smart Economic Decisions With Inflation on the Rise

Many people are currently feeling the effects of inflation, from grocery prices to the cost of gasoline, utilities and housing. Inflation is the rise in prices over a certain period of time. Prices for goods, utilities and housing have steadily risen in recent months, with the U.S. inflation rate reaching 9.1% in June. 


Many consumers are wondering which are the best financial decisions right now. Is a loan a good idea during a recession? Is investing money in a financial product a good idea during inflation? 


We’re here to set the record straight on inflation and recession, and to discuss how you can make smart economic decisions when inflation is rising.

Important Definitions to Know

First, let’s take a closer look at a couple of key terms. Inflation is measured as a percentage. It is the rate at which prices increase over a period of time. Inflation can be a broad measure, such as overall price increases or the overall cost of living in an area, or it can be a narrow measurement. Narrow measurements may include certain goods or services, such as food. 


A recession is a substantial decline in economic activity. It can last for months or years. A recession is declared when retail sales fall, unemployment levels rise and the economy has a negative gross domestic product (GDP), which is the monetary value of all the goods and services produced within a country.


How to Manage Your Finances With Current Inflation Rates

Currently, widespread inflation is affecting everyone in some way. It could be an increase in rent or gas, or it could be an increase in the cost of meat or eggs at the grocery store. When the inflation rate rises, everyone must evaluate their current spending and saving habits and make adjustments to how they manage their finances.

Open A Checking Account With 7 17

1. Review your budget.

The first thing you should do is review and adjust your budget. Take a look at “necessity” categories such as food, utilities and housing, and increase your budget for each of those by approximately 5%. After that, lower your budget on other categories, if possible, to give your budget some wiggle room.

2. Rethink how you shop.

You may have to adjust how you shop for a while. For example, you may have to go with a store brand or generic brand over name brand, or conventional vegetables and fruits over organic. Look for coupons and other deals, such as shopping in bulk for certain pricier items. Thrift stores may also be a better option for clothing or other household items instead of purchasing all new items.

3. Avoid impulse buys.

Many retailers tap into a consumer’s “fear of missing out” (FOMO) to get them to make unplanned purchases. An impulse purchase of a clothing item, expensive electronic, or another unnecessary item can make a dent in your budget. To avoid making unplanned purchases, buy only what you went into the store to get. Of course, there are some exceptions in which you may have forgotten to add a necessary item to your shopping list.

4. Invest in smart financial products.

If you’re thinking about a loan, you’ll want to decide sooner rather than later to avoid interest rate hikes. When inflation rises, it’s not uncommon for interest rates to also increase as the Federal Reserve works to keep the economy healthy. If you have any financial products with variable interest rates, such as a credit card, mortgage or student loan, it’s a good idea to consider loans or consolidation loans with fixed interest rates. These can help save you a lot of money over time.



Manage Your Finances With a One-Stop Personal Finance Tool

Making smart financial decisions is critical, especially during times of inflation. With our Money Management finance tool, you can monitor your cash flow, create a customized budget, set your financial goals, and have a clear picture of where your money goes. 


Access this financial tool by becoming a member and opening a checking account today.


Money Management Tools To Plan A Healthy Financial Future