Make household budget inflation-resistant
ALDRICH POLICARPIO
You’ve probably heard about it lately. The inflation rate in the country has been going up. Even if you don’t follow the news, you definitely feel it on your finances.
WHAT IS INFLATION? HOW DOES IT AFFECT YOU?
Inflation is the rate at which prices of basic goods and services are increasing. It decreases the purchasing power of peso. A high inflation rate means you pay higher for anything you buy.
If you don’t manage household budget well and ahead of time, price spikes can quickly drain your income. Below are tips to handle finances at home when prices go up:
1. AVOID LIFESTYLE INFLATION
Got a raise or a higher-paying job? That doesn’t mean your budget is inflation-proof.
It can be tempting to upgrade your lifestyle and raise your household spending with your increased income. You may afford it now but the recent price hikes will ruin your budget over time.
Live below your means. Whether you’re earning a high income or not, it’s still better to keep a frugal lifestyle.
2. KEEP A TIGHT BUDGET
Everyone in the household must stick to a budget that clearly defines the priorities and limits on spending for each area (e.g., food, groceries, entertainment, fuel, etc.).
While the household budget should be rigid in terms of allocation for savings, investments, and debt payments, it can be flexible for other spending categories. Adjusting the amount to spend for certain categories is especially necessary when prices increase.
Prices of food and utilities, in particular, have increased following the TRAIN law implementation. Adjust household budget either by allotting more funds for these expenses or controlling the cost. The right choice depends on whether the income can cover these basic necessities or not.
If you opt to cut the costs of feeding your family, there’s a need to carefully plan food budget, daily menu, grocery shopping, and cooking. The Food and Nutrition Research Institute has helpful tips on this.
A group effort in the family to lower water and electricity bills will keep utility expenses at a minimum.
3. ELIMINATE AVOIDABLE EXPENSES
Review the budget and see which expenses can be avoided or cut down. Do you drive your car to work every day? Consider carpooling to trim down fuel costs. Does your family often consume soda and alcohol? Time to slow down on these beverages.
There are many other ways a family can save money when prices keep on rising. For example, if the budget has no room for a travel or watch a movie in malls every weekend, plan a staycation like a movie marathon or a game night. It’s a lot cheaper family bonding activity.
4. MAKE A CONTINGENCY PLAN
Because of the price hikes, it’s easier to exhaust income to cover all household expenses rather than set aside money for contingencies.
Keep building an emergency fund no matter what happens so that when prices of goods continue to increase, your budget won’t be much affected. Aim to save 10% of your total budget for family emergency fund. You’ll definitely need it for the bad times.
5. TRACK EXPENSES AGAINST CURRENT PRICES
Setting a family budget isn’t enough. Monitoring it regularly will help you stay on track.
Know how much money is coming in and going out. Compile and check all the billing statements, bank statements, receipts, payslips, and other income documents. If, for instance, spending is way too much on gas, plan to reduce fuel expenses right away.
The rising inflation rate isn’t an excuse to forego investments. More investments are infact needed because it will help beat inflation in the long term. Make investments a fixed and permanent part of household budget.
FINAL THOUGHTS
During inflation, stay focused on sticking to household budget. Always keep priorities in mind. This way, one can keep the family’s finances in great shape despite the price increases.
Aldrich Policarpio is the Content Marketing Manager of MoneyMax.ph, the Philippines’ leading comparison website for insurance, credit cards, and loans. You can save money on your car insurance and get the chance to win a brand new Toyota Vios at the same time. For more information, visit https://www.moneymax.ph/learn-more/promotions.
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