It’s no secret that inflation is forcing families to spend more than they used to for the things they need. But it’s also made it harder to budget, plan and prepare for the next month’s bills.
A new GOBankingRates survey of more than 1,000 American adults showed that the fluctuating costs of groceries and gas are foiling more household budgets than any other expense. One in three people struggle most with gas, and even more — 38% — find it hardest to budget for groceries.
It’s not hard to understand why.
The events of the last year have greatly impacted the price of food and fuel while the people doing the spending watched helplessly — but the good news is that they’re not totally helpless.
“You can’t control prices or price fluctuations,” said Tanya Peterson, vice president of brand for the personal finance company Achieve. “So, you work on what you can control: providing yourself some buffer so that when those price shifts happen, you’ll be better prepared.”
The Secret To Successful Budgeting Is To Have a Budget
If you don’t track your spending, you might not notice the slow, steady creep of rising prices until you’re already in a hole. The thought of examining your finances is least appealing when money is tight, but that’s the time when it’s most important to keep track of what’s coming in and going out. If you haven’t been using a spending plan to track changing costs, now is the time to start — at least on a limited basis.
“While budgets should ideally be based around short-term and long-term goals, right now it can make sense to focus on the shorter-term to determine where your or your family’s own vulnerabilities may be,” Peterson said. “Addressing these may help ease the pressure on paying for day-to-day expenses.”
If you don’t have a budget in place and you’re not used to tracking your spending, start small by focusing on gas, groceries or whatever your problem areas happen to be.
Go back through your statements over the last few months to see what you’ve been spending to get a baseline, and then keep close tabs moving forward.
“Budgeting can sometimes feel like you’re groping in the dark,” Peterson said. “Especially if you’ve not done it before or the economy is changing rapidly. Hold on to all receipts for a few weeks and keep a detailed spending log. Many people are surprised to see how much they spend each day, and on what. By doing this, you’ll know what your expenses really are, and you’ll spot areas where you can cut back or better prioritize.”
Saving receipts and tracking every dollar spent can be tedious — and tedious budgets are quickly abandoned. If your goal is to account for unpredictable prices in just one or two categories, consider a faster, more straightforward style of small-scale budgeting.
“One of my favorite ways of budgeting for fluctuating prices is to employ what I like to call a waterfall or overflow method,” said Taima Ramsey, a personal finance expert and founder of Poor In A Private Plane. “When sitting down to budget, I will take a look at how much I have spent in those areas over the last three months and set aside whatever the highest amount is in an envelope for the upcoming month. I will also create a separate envelope with a buffer or overflow amount. Whatever doesn’t get spent goes into an overflow envelope. In months when spending is lower, I will add whatever is left over to the envelope. In months when spending is higher, I will use what I need from that envelope to help with the costs. This has personally saved me from scrambling to find the extra cash when groceries are more expensive.”
People are creatures of habit that tend to return to the same familiar haunts every time they go out for gas and groceries. It’s time to reevaluate those patterns.
“With prices fluctuating so much at the moment, now is not the time to be loyal to one specific supermarket or gas station unless you really have no other option,” said Anna Barker, personal finance expert and founder of LogicalDollar.
According to Supermarket News, retailers and grocers price their products differently in different towns based on factors like competition and rent. It’s called zone pricing, and CBS News has been reporting on the phenomenon since 2010. The zones are often surprisingly small but the savings can be dramatic. Prices can vary by 40% between two different stores — even within the same chain — just a mile or two apart.
“It’s important to shop around to make sure you’re getting the best deals,” Barker said. “Luckily, there are a number of apps these days that let you do that straight from your home. GasBuddy is a great app for checking gas prices in your area, so you’ll be able to see exactly where you should go to fill up. Basket is an app that does something similar with your groceries.”
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Methodology: GOBankingRates surveyed 1,003 Americans aged 18 and older from across the country between September 19 and September 21, 2022, asking eight different questions: (1) Have you seen a rise in your household utility bills? (electric, gas, water); (2) How much has your household utility bills (electric, water, gas) gone up each month?; (3) Which expense is rising the most for your household?; (4) Which expense is the hardest to plan for each month?; (5) Have you had to adjust your monthly budget due to rising household bills?; (6) How often do you shop at a dollar store (Dollar Tree, Dollar General, Family Dollar, etc.)?; (7) If there was an additional stimulus check, what would you primarily use it for?; and (8) If you received student loan forgiveness, how will you use this extra money each month?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.