How Can I Adjust My Spending Plan for Rising Prices? 

By: Vincenza Vicari-Bentley, AFC USU Extension Empowering Financial Wellness Program Coordinator

January 5, 2023

Did you know that the average American family spends $460 more per month to maintain the same standard of living as they did before high inflation? This increase may be even higher in Utah, where inflation is well above the national average. This article will focus on strategies to help you adjust your spending in light of rising prices.  
To get a better idea of how inflation is personally affecting you, start with comparing your spending during the first four months of 2021 with the first four months of 2022. You may be surprised to see which categories have been affected the most or perhaps not as much as you thought. It’s very difficult to stretch your dollar and save money if you aren’t aware of where your money is going. Once you know exactly how much you’re spending by category, you’ll be able to make an informed decision on what areas you can realistically cut back. This can help you prioritize your spending, or decide what’s the least amount or the most amount you can spend in each category. A budget is a very useful tool, and it is more than tracking expenses. The key is frequent interaction with your money which can lead to greater awareness about your spending habits. As a result, you’ll make more conscious spending decisions, which usually translates to less spending overall!  

Did I lose you at the word “budget”? Here is another strategy to consider: when you need to be more conscious about your spending, a simple clever trick is to open multiple bank accounts. The first checking account can cover necessary expenses such as rent/mortgage, utilities, groceries and bills. The second checking account can be dedicated to discretionary spending such as restaurants, entertainment and clothing (use a dedicated debit card or use the cash envelope system for this). The envelope system is a way to track how much money you are spending in each category by using the cash you put in categorized envelopes. You can also consider a third account that could be strictly for your savings goals. You can automate all of this either directly from your paycheck or set it up with your bank and have specific amounts transferred to the various accounts every time you get paid. Separating your money this way can help you to stay on target for your spending and savings goals. Plus, your most important expenses (your bills) are sure to get paid. This could be particularly enticing to someone that doesn’t really like to budget. The right number and mix of bank accounts for you is a personal decision.  

Regardless of your financial situation, especially during times of high inflation, it’s always a good time to reassess your spending to make sure it aligns to what is most important to you.    

Resources:

Foster, S. (2022, September 7). Red-hot inflation is raising prices on everyday essentials — here’s what’s rising the most. Bankrate. https://www.bankrate.com/banking/federal-reserve/inflation-where-prices-are-rising-most/ 

NextAdvisor. (2022, May 19). Inflation Is Hitting Everyone’s Budget. Here Are 4 Ways to Hit Back. NextAdvisor With TIME. https://time.com/nextadvisor/investing/how-to-deal-with-inflation/