How Bad Will Inflation Be in 2022?
Inflation has been rampant. Will the pain continue in the new year?
- Inflation has been hurting a lot of consumers in recent months.
- Things could hold steady or even get worse before getting better.
If you're tired of paying higher prices at the supermarket, gas station, and just about everywhere, you're no doubt in good company. Inflation has been wreaking havoc on consumers since spring, and it's not showing signs of slowing down.
In October, the Consumer Price Index, a measure of the cost of goods, was up 6.2% from the previous year. And recently, investment banking giant Goldman Sachs sounded a warning that inflation could get worse before consumer prices start to come down.
Now, if you're wondering what 2022 has in store with regard to inflation, the answer is that we just don't know. It's reasonable to expect the cost of consumer goods will remain high early on in the year, especially as supply chain issues persist or even worsen thanks to the presence of the newly identified omicron variant. And while things could improve as 2022 moves along, that's not something consumers can count on.
That's why you should prepare for rampant inflation to continue into the new year. Here are some steps worth taking to keep up with inflation and avoid landing in debt because of it.
1. Rework your budget
It may have been the case that groceries cost you about $400 a month at the start of 2021. If you're now spending closer to $450 at the supermarket, that's a change you'll want your budget to account for.
Take a look at your budget and figure out how much your expenses have risen due to recent inflation. Then, adjust your spending in other categories to compensate. For example, you may need to cut back on things like cable or restaurant meals if your essential expenses have risen to the point where your paycheck can barely keep up with them.
2. Boost your income with a second job
You may already be living a frugal lifestyle, in which case there may not be much room in your budget to make inflation-fighting changes. If that's the case, then a side hustle could be your ticket to maintaining your buying power in the coming year. You can use that extra income to not only shore up your finances, but get more leeway to absorb the higher costs you face on daily expenses.
If you're not sure what sort of side hustle is right for you, think about how flexible your schedule needs to be. If you can commit to preset shifts, you may want to work retail during evenings and weekends. But if you need the option to set your own hours, you may want to find a gig that has you doing data entry from home or driving passengers around town at your convenience.
3. Beef up your emergency savings
The more money you have socked away in a savings account, the more protection you'll have in case inflation gets worse. If you're willing to cut back on spending and take on a side job, you can use some of that money to pad your savings and build yourself a cushion. That way, you'll be less likely to resort to debt if your bills continue to rise.
Unfortunately, the cost of goods could stay high well into 2022. That may not be the news you want to hear, but it's an important reality to face. These tips could help you fight inflation -- and avoid landing in debt because of it.
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