Fighting Inflation and the Rising Cost of Living, and What to Do About Everyday Bills like Utilities

by Elizabeth Letsou and Kaitlyn Ranze

Chances are you didn’t talk about inflation much while you were growing up. In fact, you probably didn’t really have a reason to talk about it because the overall annual rate of inflation was running at about 1.8% until 2019, according to the Consumer Price Index (CPI).

What is inflation? And why are so many noticing their budgets being busted by everyday items, like their food, fuel, and utility bills?

Let’s break it down.

Inflation 101

Okay, this can be a little tricky if you’re not an econ major — but just bear with me!

We’ll first give you the simplest possible definition of inflation: inflation is a rise in price levels. So, when inflation is high, so are prices.

But that’s not all there is to it. Strictly speaking, inflation is the measure of the rate at which prices of goods and services are rising in an economy. If the prices of those goods and services rise (because of production costs, raw materials, wages, etc), then inflation can (and often does) occur.

Additionally, if there is an increase in the demand for goods, then inflation can occur because consumers are simply willing to pay more.

How inflation is driving up your cost of living

Cost-of-living measures the change, up or down, of the basic necessities of life. Think food, housing, healthcare, and utilities. It’s how we compare minimum income needs for one location versus another.

The nav.it money app includes breakdowns of different aspects of your cost-of-living. in the Community feed.

Inflation and Utility Bills

As of June 2021, the biggest inflation of prices were for used cars and trucks (45.2%), gasoline (45.1%), fuel oil (44.5), utility gas service (15.6%), impacting daily cost of living.

Why now?

But why did this happen now?

Firstly, it’s important to keep in mind that this rise in inflation has a lot to do with the pandemic.

According to the Labor Department, inflation rose 5% from May 2020 to May 2021, marking the biggest jump since 2008 (the Great Recession). The reason for the spike is simple: the whole country was on lockdown last year, meaning that airlines and hotels were shut down, employees were laid off, and prices were down.

While rising prices doesn’t sound like a good thing, this may not be all bad news. In fact, many economists believe that these price hikes will be short-lived and, eventually, the economy will adjust completely. In other words, the situation appears to be under control, especially since the inflation spike is mostly due to the reopening of parts of the economy that were closed down during the pandemic.

However, if the situation continues to get worse, the Federal Reserve will raise interest rates in order to prevent further inflation. We are currently in an unprecedented situation, where the demand for many goods and services (which were unavailable for an extended period of time) is increasing again at a rapid speed.

Cutting corners

With prices for rent, food, and transportation increasing, many people are struggling to make ends meet. And anyone who spends most of their income on basic necessities is likely being hit the hardest. Small businesses are also concerned about adjusting prices.

So, we are going through a bit of a rough patch, with many Americans being forced to cut corners and make difficult financial decisions.

Nav.it’s here to help you cope with inflation

If you’re also concerned about inflation and how it’ll affect your day-to-day life, you’ve come to the right place. Nav.it will help get you through this. (Hey, you survived a year-long pandemic, a little inflation’s got nothing on you!)

Try a money challenge

It can be hard to make drastic lifestyle changes to cover increasing bills. That’s why we recommend short-term savings goals and challenges.

Nav.it’s challenge to its users this month: try to spend less on your utilities than you did last month. If a general goal like this feels a little overwhelming, THAT’S OK. Check out this article on small steps you can take to reduce your utility bills.

By breaking up a big goal into smaller achievable steps, you’re increasing the likelihood of accomplishing long-term goals like reducing your utility bills. In fact, breaking up your goal into monthly money challenges can help you on your long-term goal journey.

Other ways to fight inflation

Start investing

If you’re looking to insulate your savings from the effects of inflation, investing might be your best bet. Rather than letting your money sit in a savings account, you can grow your personal wealth by investing in a diverse portfolio of stocks and bonds.

And, honestly, the sooner you start, the better! That’s because the returns from investing will only grow over time. Time is an investor’s best friend!

In addition to investing in stocks and bonds, make sure you invest in yourself during this time! Coping with inflation isn’t merely about making smart financial choices, it’s also about taking care of your mental and emotional well-being.

Fixed rates are your friends!

Here’s another thing to keep in mind: when inflation is high, fixed rates are your friends. Fixed interest rates ensure your regular payments won’t rise with inflation. In other words, fixed rates keep your interest commensurate with your actual savings.

So, if you’re looking for a savings account or a future investment, make sure you find something that guarantees fixed interest rates.

All about those assets

Having concrete assets will also help improve your financial security during high inflation periods. For example, owning a property is a great way to ensure you have a concrete asset.

Investing in real estate is often seen as an “inflation hedge investment” because the value of homes will likely only increase or maintain value over time. Thus, purchasing real estate could help you fight inflation because of its appreciation.

If you fail to plan, you plan to fail

Always have a plan (and a Plan B and C!). Budgeting will help you track your spending and increase your mental accounting of your bills.

You can use the built-in “Budgets” feature inside the Nav.it app to create and categorize your spending. You can also use the FDIC insured “Auto-Save” feature, which allows you to save money automatically!

You have so many financial tools at your fingertips!

Be thrifty

One of the easiest ways to combat inflation is to minimize any frivolous spending. Inflation can often have an immediate impact on prices, taking a toll on your budget if you’re not careful.

Here are a few easy examples of how you can start saving money: carpool or use public transport to save money on gas, look out for low APRs (annual percentage rate), and be strategic about credit card usage.

Financial literacy is the greatest tool!

While you can’t prevent or change inflation spikes yourself, you can take control of your own financial situation. Need a little more personalized guidance? Chat with a money coach inside the nav.it money app.