Huge Signs Your Budget Is About To Get Destroyed by Inflation
Written by
Cindy Lamothe
Edited by
Amen Oyiboke
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Ever feel like your paycheck doesn’t stretch quite as far as it used to?
You’re not imagining it. Prices are creeping up everywhere — from your grocery bill to your streaming subscriptions — and your budget might be feeling the squeeze. According to CNN, inflation has returned to 3%, which is higher than normal.
Here are some huge signs inflation’s about to take a big bite out of your spending plan.
You’re Paying Off the Wrong Debt First
According to Christopher Keane, senior vice president of Newfi Lending, one major sign he sees is people aggressively paying down their low-rate mortgages while carrying massive credit card balances — essentially choosing to pay off their cheapest debt first while high-interest revolving debt compounds daily.
“This is destroying their purchasing power during what is pretty much understood now to be, yes, inflation,” he said.
Keane recommended redirecting every available dollar to crushing your variable-rate debt in order of highest interest rate.
“Because a 3% mortgage is actually helping you during inflation since you’re repaying it with cheaper dollars, but only if you’re not simultaneously getting obliterated by expensive debt you’re ignoring,” he said.
Your Lifestyle Inflation Is Outrunning Real Inflation
Keane pointed out that if you’re still allocating the same dollar amounts to dining out and entertainment that you budgeted in 2019, you’re going to get “destroyed,” because that $800 only buys about $600 worth of 2019 purchasing power now.
“Which means that you’re either cutting essentials elsewhere or adding debt to maintain your lifestyle. So, short answer, cut your discretionary spending by 30% [to] 40%,” he said.
The problem isn’t just higher prices — it’s that our habits haven’t caught up. We’ve all gotten used to the idea that convenience and comfort are non-negotiable, but inflation doesn’t care about your favorite sushi night or streaming bundle.
If your spending hasn’t adjusted, your savings are quietly shrinking every month.
You’re Budgeting for an Economy That Doesn’t Exist Anymore
If your financial plan still assumes yesterday’s interest rates and prices, you’re setting yourself up for frustration.
“Stop building your budget around the assumption that 3% mortgage rates and 2% inflation are coming back, just accept that 6% [to] 7% rates are now going to be historically normal,” said Keane.
The faster you accept that this is the new normal, the faster you can adapt. That means adjusting your expectations, recalculating what “affordable” really means, and rebuilding your budget for today’s reality — not the economy you wish we still had.
Because denial doesn’t make inflation disappear; it just makes you less prepared to handle it.
“There’s no miracle acometh,” Keane said.
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