Inflation, like a silent killer, is raising the prices of most essential commodities and pressurising households to rethink their monthly budgets. With inflation hovering around 7% in India, most individuals are concerned about the right steps to take while navigating through this period. Whether it is energy, food or housing, we are seeing everything get costlier with each passing day. On one hand, our monthly expenses are rising while the purchasing power of money continues to drop.
For any individual to rise above the pressures of inflation, here, we will share some important tips to make an inflation-proof monthly budget.
Track your daily expenses
The time to cut down on some of the seemingly insignificant costs is now! Going low on expenses towards daily spending, looking for cheaper alternatives, and postponing big-ticket spending can aid money control. With budget control today, we can beat inflation and also save much more for our retirement. Special focus should be on items that have been the hardest to avoid spending on. Once these are kept at bay, the budget can automatically start falling in place and in control.
Save more
Savings are also an important part of the budget. Once we know the areas that eat up most of the monthly budget due to inflation, it is easier to focus on savings.
For example, cutting back on fuel usage can be an effective strategy since fuel prices have also skyrocketed due to inflation. If using credit cards, one can try saving through various rewards programs offered by cards. Monthly electric bill is also an important area that can aid in savings and managing the overall budget. While these are just a few examples of how one can save, the underlying message here is to have fewer debits on the budget.
Explore alternatives
Although costs are rising in all areas, we can find alternatives with lower prices if we explore more. This could mean simple steps like checking out multiple websites before finalising an online purchase. Even for groceries, various portals and apps offer discounts during certain periods in a month. Keeping a track of the discounts offered or finding out the cheapest grocery platform can help save a small portion of the budget every month.
While the above examples were mainly for regular expenses, the same logic can be applied to one-off spending. Expense areas like travel too can help in saving overall cost if we look for alternatives.
Manage your debt
Those who have a home loan ongoing would know that the monthly EMI is the biggest chunk of the budget. With rising inflation, there is also the pressure of rising interest rates. It is therefore important to look for concessions from the same bank or switch to a reduced interest rate offered by another bank. A home loan borrower must also have a check on how long the loan will continue. This can help in chalking out a realistic budget for the near term.
Did you know
After the repo rate hike announced by the RBI to control inflation, home loan interest rates have risen and are now being offered in the range of approximately 7.5-10.5%.
Focus on investing
Many people assume that periods of rising prices are not the time to invest. After all, why would someone invest when there are higher costs to deal with?
The rational approach, however, is that long-term financial goals can be sustainably met only by making regular investment contributions. Also, one of the primary reasons why one must continue to invest is to deal with inflation in the long term by maintaining and even increasing the purchasing power. A diversified investment portfolio with the right risk-return balance should be one of the focus areas during inflationary periods.
Conclusion
India’s inflation is hovering around 7%, a level that the government is constantly trying to curb through interest rate hikes. With this, the prices of essentials are rising quickly and this can be a reality check for millions of Indians who often ignore the power of money management. By using the above-mentioned budgeting tips, one can aim to sail through inflation without any financial stress. Now is the right time for many to start budgeting and adjusting their priorities.
FAQs
As RBI looks to control inflation in 2022, there are higher chances of another repo rate increase, followed by a rise in interest rates by banks.
During rising interest rates, bond prices tend to fall. Therefore, one can opt for short-duration or ultra-short duration bonds, however, long-term bonds may not be profitable investments.
By choosing the right stocks, one can invest in equities to gain inflation-beating returns and manage overall portfolio risk. It is best to opt for large-cap or blue-chip stocks during inflationary conditions since these carry a relatively lower risk of capital loss.
The 50/30/20 rule of budgeting states that 50% of one’s income should go towards needs, 30% should be kept aside for wants and 20% must go into savings and investing. This helps in creating an ideal and sustainable budget.
