The cost of inflation
We’ve all noticed the rising prices recently; when we’re at the gas pump and suddenly it’s an additional $20, or when checking out at the grocery store and you’re wondering if items are rung up correctly. This is the cost of inflation. Inflation measures how much prices rise over time. When prices rise, the value of a dollar falls, and your purchasing power goes down. While inflation may be a normal part of a healthy economy, it still affects prices, the value of a dollar, and your budget.
What causes inflation? There are two ways that prices typically rise – both having to do with supply and demand. When goods or services are in higher demand than usual but the supply remains the same, companies can raise prices knowing that people are willing to spend the money. Currently in the housing market, we can see demand-pull inflation where there is a very high demand to buy, thus resulting in a shortage and driving prices up. Cost-push inflation is when the supply of goods and services is limited but the demand stays the same, also contributing to a rise in prices.
The loss of purchasing power feels significant when your budget is tight. Tracking your spending and adjusting your budget to match current prices will allow you to have realistic expectations of what you can afford. While reducing your monthly expenses is a reliable way to keep more money in your pocket, getting started is easier said than done. Let’s walk through your current spending one category at a time and get an idea of where you can cut costs.
Plan ahead, analyze where your money is going,
and get creative with your budget.
Did you know that Noble Credit Union has investment services as well? Help combat inflation by building a diversified portfolio. Learn more at NobleCU.cusonet.com.
*Membership eligibility required as well as a valid CA DL or federally issued identification card. Must be 18 years or older, or have a guardian over 18 on the account. Savings account must be opened with a minimum $5 deposit. Federally insured by NCUA.