Save money during times of high inflation with these 3 simple tips

Periods of high inflation are problematic for everyone, but they’re especially difficult for those who were already living week to week and struggling to get ahead. These days, you’re finding that although your income hasn’t changed, you seem to get less than ever for your money. Inflation is shaping up to be the main theme of the financial world in 2022, and it may be necessary for you to change your habits and re-evaluate your financial strategy if you want to get through this period without taking on massive debt and watching your savings erode.

Here are a few tips that can help you save money during the current inflationary period and perhaps even come out a bit ahead when things return to normalcy.

Quit vices or switch to cheaper alternatives

The first thing you should do is evaluate the money you spend on unnecessary vices which isn't necessarily something as harmful to your health as cigarettes or alcohol. It might be something that’s relatively harmless but still contributes to an overall drain on your finances. Either way, it’s extremely important to audit unnecessary spending during inflation. Here are just a few examples of thing you should strongly consider giving up – or at least replacing with something less expensive – until you get your finances under control.

• Smoking: Buy some disposable vapes from a company like VapeJuice.com instead. Switching from smoking to vaping can cut your cost for nicotine use to a tiny fraction of what you’re currently paying.
• Drinking: Instead of coming home with an entire case of middle-of-the-road beer every Friday night, buy one bottle of a truly premium beer – a Belgian Trappist ale, for instance – and savour it slowly.
• Gambling: Everyone loves taking a punt on the weekly football matches, but the house always wins in the long run. Stop betting on the results and just enjoy the games.
• Take-out coffee: The expensive coffee shops don’t do anything that you can’t do yourself. Instead of buying an expensive cup of chain coffee on your way to work each morning, buy and brew your own coffee. Grind the beans immediately before brewing them to duplicate the “coffee shop” flavour.
• Dining in restaurants: We all have days when we don’t feel like cooking, but restaurant food has become unbelievably expensive over the past year or two – especially if you want a delivery service to bring the meal to you. As an alternative, try ordering some frozen prepared food. Many of the country’s most famous restaurants now ship nationwide – and thanks to the economy of scale, taking advantage of those services is often much less expensive than having the food made fresh.

Reduce your dependence on fossil fuel

During times of high inflation, fossil fuels tend to go up in price more rapidly than other commodities. That’s doubly the case in 2022, as recent world events have helped to take already high petrol and natural gas prices into the stratosphere. If there’s one thing that history has taught us, it’s that oil prices eventually go down after every price spike, but they never quite reach the levels they were at prior to the spike. So, although this inflationary period will eventually pass, you’ll still be in better financial shape in the long run if you reduce your dependence on fossil fuels now.

• Buy a more fuel-efficient vehicle. If an electric vehicle isn’t in the budget right now, consider getting a used hybrid vehicle instead. If you can’t afford a new car, optimise your current car for maximum efficiency. Maintain the correct air pressure in your tires. Avoid aggressive driving. Minimise air conditioner usage when the temperature is comfortable enough that you can simply use the fan or roll down the windows.
• Install solar panels to reduce your electricity costs. Replace old incandescent and fluorescent light bulbs with energy-efficient LED bulbs. Wash your clothes in cold water. Turn off lights and electronics when leaving the house.
• Reduce your household fossil fuel usage by replacing your natural gas heating system with a heat pump. A heat pump is essentially an air conditioner in reverse; it uses refrigerant to convert cold air outside the home into warm air inside the home. Although buying and installing a heat pump isn’t cheap, it can reduce your household heating costs by over £1,000 per year.

Park your money in an investment that preserves value

One of the biggest problems during periods of high inflation is trying to figure out where to put your money. Holding too much cash isn’t a good idea because cash is losing its buying power by the day. Even if your bank happens to pay interest on standard savings accounts – which is increasingly rare – the interest won’t be nearly enough to outpace inflation. It’s wise to keep an emergency fund in the bank, but anything more than that is a waste.

If you’re a stock market investor, you may want to consider rebalancing your investments during heavy inflation. When times are good, people love to spend their discretionary income on the latest tech gadgets. When times aren’t so good, though, people don’t have the income to spend on those gadgets – and tech stocks often suffer as a result. Consider investing in consumer staples, because people need to buy things like toilet paper and toothpaste regardless of the economy’s current state.

You should also consider investing in oil companies. During periods of high inflation, fuel costs always go up. Oil companies, therefore, earn more money. The gains that you earn from investing in this segment of the market can help to offset your increased fuel costs.

Although people have long praised gold as a hedge against inflation, the fact is that gold doesn’t usually experience short-term gains during inflationary bear markets. Instead, consider parking some of your money in low-risk government bonds. Regardless of what the market does, a bond will always pay interest at a fixed rate until maturity. Although investing in government bonds will not make you rich, it will help to protect your money from market volatility. It’ll also help to prevent inflation from eroding your money’s buying power.