Cost crisis! How to adjust your budget for inflation 📝

In March this year, the annual inflation rate in South Africa rose to 5,9%. What is the inflation rate? It’s basically a measure of how much more expensive things are getting. For example, if a quick trip to the corner store last year cost R100, that same shopping trip will now cost R105,90.

Most of us feel the effect of inflation in our daily lives. You might realise that your normal grocery budget isn’t cutting it anymore, your fuel expenses are soaring, and you just can’t seem to win financially.

That’s why it’s important to adjust your budget for inflation. Trying to keep the same budget with rising prices is like building a sandcastle at the water’s edge as the tide comes in. At some point, you have to move away from the sea!

Here’s how to do it.

If you fail to plan, you plan to fail

Planning is key to cutting costs and being budget-savvy. Let’s use fuel as an example. By planning ahead, you can save on fuel by driving when traffic isn’t as hectic, going to the grocery store closest to your home or office, or making sure you only do one or two trips a day by writing down all your errands and plotting a strategic route.

In the grocery store, you can save by planning your meals ahead. This way you won’t stroll around looking for (expensive) dinner ideas, and you won’t resort to costly takeaways when you’re feeling tired after a long day.

Change the way you buy

Yes, we know you love that specific brand of coffee, but if you can save R10 by buying a cheaper brand, it’ll go a long way in current circumstances. As economies adjust to the war in Ukraine, and with inflation at a 40-year high in America, prices are likely to keep rising.

Basics and non-perishables might be cheaper now than they will be in two months. Buy in bulk if you can and save on future costs. (Remember, this is planning, not panic buying… You don’t need 126 rolls of toilet paper!)

Eliminate the weakest link

It’s sad but true — some expenses will have to leave the building. Rethink your streaming subscriptions and other non-essential expenses, and take a good look at your insurance cover to see if you can reduce your premium. Learning to live more frugally might be what gets you through.

Review your budget monthly

Use the Budget screen on the 22seven app to compare categories and check the ones in which your spending has increased the most. (the ones hardest hit by inflation, in other words.) Check in every month so you can prepare yourself for the month to come, instead of being caught off guard when payday is still two weeks away.

Keep on investing

It might seem counterintuitive to put away some of your hard-earned money when you’re already anxious about cash flow, but investing will ultimately grow your wealth, even if it means that you have to sacrifice certain small pleasures right now.

If you’re only saving at the moment, have a serious look at investment options. Investing will help you beat inflation because long-term growth is significantly higher than what you’ll get with a general savings account.

Don’t stop swimming!

Just as you should keep putting money away, you should also keep paying off debts and contributing to your retirement. Yes, the tide might be lapping at your sandcastle, even though it’s built way back, and you might have to wade in and swim to keep things going. But keep focussed on your financial goals and you’ll stay afloat. You’ve got this!