Over the past couple of years, the term “inflation” has been reaching news headlines across America, not for the greatest of reasons. As of late, almost everything you can buy has gone up in price because of it. For example, items for $100 U.S. dollars in 2004 are now $166 in 2024 with a 66% increase in general pricing, according to smartasset.com.
What is inflation?
Inflation is the rate at which prices rise over a certain period. The study of inflation shows how much prices have gone up or down in the past years. A large gross amount of money causes a swelling in an economy that can not hold it. This affects nearly everything you can purchase from houses and cars, down to a box of toothpicks. In short, it is how much more expensive a set of goods and or services is over a certain period, most commonly a year, according to imf.org.
How to see inflation coming
Some ways to see if inflation is increasing is to check the consumer price index, producer price index and global economic trends as these can all point to an early warning of a price rise in purchasables. Staying informed is paramount in communicating with our economy, according to synchrony.com.
What does our government do about it?
To combat it, our government raises interest rates. An example of this is monetary policy, which is an array of tools central banks use to control money and use strategies to employ economic growth. These strategies involve changing interest rates and changing bank reserve requirements. There is also a contractionary policy that limits government spending which also aids in the lessening of the rise in prices, according to investopedia.com.
How can I save money during high periods of inflation?
Correct your interest rates – First, check what the interest rates are for your savings account at the bank. Good interest rates are passive income and should be taken advantage of. Bad interest rates will just further your progress down the inflation drain, so optimizing interest rates is valuable.
Keep investing in the stock market – The long-term strategy in the stock market is crucial. It is important to keep your stock up and not take stock out when the stock market is down or else the stock market will just get worse. You could also miss the high of the market, when it is most important to take your stock out.
Build an emergency fund – This is crucial in times when disaster strikes, you need to have some money for emergencies, like house fires and other natural disasters along with keeping up with today’s economic changes.
Update your budget regularly – With prices fluctuating, it is important to make a budget, optimize purchases and organize needs versus wants.
Coupons – Coupons that are used for businesses and consumers should be taken advantage of when given the right opportunity. However, the usage of coupons should be heavily debated before a purchase. Oftentimes, one may end up buying way too much for the average suburban household, so be sure to scrutinize the coupons in order to not get ripped off.
