Dealing with higher prices
Fighting Today's Inflation
by Rich Finzer
My Story: The R's of Reducing Expenses
5 Ways to Beat Inflation
Tips to Tighten Your Belt in Tough Times
In the late 1970's to early 80's, Americans saw gasoline and grocery prices rising rapidly. Consumers are feeling the same pressures on their budgets today. And, although the official inflation rate is 2%, your instincts and perceptions are correct. Inflation is back.
Bureau of Labor Statistics: The BLS calculates the Consumer Price Index (CPI) which measures inflation, but over the years, the calculation has changed. Food prices and fuel costs are no longer measured. You may think that's crazy. We all eat food and the overwhelming majority of us buy fuel. Here are some examples of our current "real" inflation.
In late 2008, nationwide gasoline prices averaged $1.95 per gallon. Since then, gasoline has steadily risen. It's often topping $4.00 per gallon, meaning it's has doubled in price over the last six years (an annual compound growth rate of 15 percent)! Food costs more too, but manufacturers have cleverly concealed that fact. Remember the days when cans of vegetables held 16 ounces? Well, check the label on most cans and you'll find that it holds somewhere in the neighborhood of 14 to 14.5 ounces, or about 10% less product. The price has remained relatively unchanged, but you're buying fewer green beans. The transportation costs (read fuel) have driven the prices of everything much higher.
Admittedly, it's relatively easy to conceal costs of prepared or prepackaged foods by simply reducing the amount of product in a container. But for commodities sold by weight (read meat), prices have steadily risen over the past few years. The recent outbreak of a lethal virus in piglets has pushed pork prices to all-time highs and the California drought is predicted to raise prices of many vegetables by 15% to 22%. Drought in Brazil will raise coffee prices by an estimated 9%. Over the past year, the PPI (Producer Price Index) has risen 2.1%. Those prices will eventually be passed on to consumers.
So why would the government want a lower inflation rate? It's simple. A higher inflation rate impacts the entire economy.
- Social Security COLA payments would increase by more than the 1.5 percent retirees received in 2014. As roughly 2.4 million more folks retire every year, that's a very big number for Uncle Sam to deal with.
- Interest rates would rise, making financing the national debt more expensive.
- Employers would face even more demands for higher wages.
- Folks would cut back on purchases. As the U.S. economy is 70 percent retail sales driven, retailers would begin feeling the pinch in decreased sales, which in fact is already happening.
- Commodity prices (like coffee and bacon) would rise.
- Mortgage rates would rise, killing the recent housing recovery.
How to Fight Back: In the global sense, there's little an individual consumer can do to affect the overall rate of inflation. But, there are a few tried-and-true tactics you can employ.
- Drive smart, drive less, combine trips and ease off the gas pedal.
- If possible, join a carpool or use public transportation.
- Replace your car's air filter and check tire pressure.
- Join a warehouse buying club. Work with your neighbors. Buy case-lots, which you can split up.
- Plant a garden and grow some of your own veggies.
- Stock up on sale items. If the grocery is running a 10 for $10 deal, take advantage of the savings.
- Forego your morning latte at "Star Struck" and save the money for groceries.
- Stop using credit cards. Use cash or debit cards. Both tactics force you to shop/spend smarter.
- Visit thrift stores where new or lightly used items may be purchased for a pittance.
- For special occasions, give prepaid gift cards to friends/relatives and avoid high shipping/postage costs.
- Give up the hidden expenses of costly magazine subscriptions, premium movie channels, and dining in upscale eateries. Also, stop being a fashionista.
Rich Finzer resides in upstate New York. During his 43 years as a writer, he has published nearly 1,100 newspaper, magazine and Internet articles. His award winning book Maple on Tap is available from his publisher Acres USA. His two novels, Taking the Tracks and Julie & Me, are available from Amazon Kindle.
Take the Next Step:
- Visit the TDS library for more ways to cut expenses.
Share your thoughts about this article with the editor.
More Tips & Tools to Help You
Live Better...For Less
- How to become a millionaire in 7 easy (hah!) steps
- 5 poor ways to save (and how to do better)
- 10 places to look for $500 in savings
- 9 savvy strategies to save for a rainy-day fund
- 5 big bills you can cut fast
- Money-saving secrets of the rich and frugal
- How to stop credit card offers in the mail
- What to do when frugal fatigue sets in Readers' Solutions
- Putting last year's Christmas bills behind you
- Reduce your debt with this free debt course by The Dollar Stretcher
- Reduce your debt payoff time
- Find a better credit card rate
- Get better savings & MMA rates