High Spirits, Higher Prices

This summer, the pain at the pump was ticking up: $4 a gallon, $4.50 a gallon, $5 a gallon, $5.50, and in some parts of the country, $6+. Groceries? What used to be $100 a week to feed a family of four suddenly became $200. Basic purchases began to feel like investments; companies wanted to reduce spending across the board. Bills seemed to clock higher, and the cost of rent suddenly spiked.

We had an unwelcome visitor: inflation!

Our current inflation problem was caused by numerous factors, not least of which was supply chain disruptions and the continuing effects of the global COVID-19 pandemic. For the past few months, we’ve been buffeted back and forth by receipts suddenly making us nervous and gas prices rising to historic highs. While gas prices have started lowering and goods and services are more temperate in their fluctuations, the fact remains that high economic uncertainty and a possible recession mean inflation might be with us for a few more months.

Inflation is felt in different ways and places by different people. Some see a larger hit to their commuting or gas, others to groceries, some to both. But one area most people seem to agree on is that their discretionary spending is one of the first places to get reined in. Recreational spending, like going out to eat, movies, travel, and the like are often cut or eliminated entirely to save money for necessities. When a nasty utility bill is suddenly 50% more, that road trip doesn’t seem so hot.

For many people, inflation at this time of year hits hardest because of the holidays. Despite our desires to give our friends and loved ones a nice holiday, we often find we simply can’t afford to buy gifts the way we used to or want to. Worse yet, the spirit of the holidays just isn’t in us, and we can’t muster the cheer to enjoy ourselves. All this can lead to deteriorating mental health and a general sense of malaise during what should be the best time of the year.

What can we do? Are we doomed to have our holidays and our fun tied inexorably to inflation and the economy, or are there paths and strategies we can take that will help us afford presents and fun while also being financially mindful?

How to Keep Our Holiday Spending in Check

Marketers are very good at getting us to want things. During the latter months of the year, between back-to-school sales, Halloween sales, and Thanksgiving and Christmas sales, we see all kinds of things we want. And why not? Holiday and event cheer are some of the best times of the year. But the problem is that those compounded expenditures one right after the other really start to take a toll on our wallet.

And in times of high inflation? Suddenly Halloween seems particularly ghoulish.

No matter what time of year, setting a budget can help. For example: take an inventory of all your monthly expenses. Break them down by wants, needs, and savings. Many people save according to the 50/30/20 rule: 50% of spending goes to needs, 30% to wants, and 20% to savings. This isn’t a hard and fast rule or anything (for example, during inflationary periods you can toggle the 30/20 and add more to savings to prepare for a possible recession), but many people find it a simple and convenient way to visualize their spending and their allocations.

No matter what we budget for the 50/30/20 paradigm, our total expenditures for the month should fit into these ratios. So even if it’s the Christmas season, smart budgeting says our total recreational spending shouldn’t top more than 30% of total spending. This can mean cutting other expenditures to make room for seasonal ones. If we’re saving money, whatever we spend must leave enough left over to fill the 20% saving amount each month.

As Grinch-like as it is, it is also possible to have a low-key holiday with less spending. A focus on family and thoughtful gifts can trump buying anything splashy or big. And while impulse-bought Halloween candy can seem like a great idea, it’s often a purchase we come to regret, especially after we’ve eaten an entire bag of Reese’s (they do go down so easily).

For an increased sense of budgeting in 50/30/20, one should also consider inflation. This can be a bit trickier, especially since prices vary by market fluctuation as well as location. For example, if you’re adding up your grocery receipts for needs, you might find $20 in one store is $22 or $18 in another. If you’re serious about fighting inflation with your budget, take these prices into account when budgeting. If you normally spend $50 on groceries but inflation makes all your products add up to $60, either cut $10 worth of groceries or find another store that is cheaper and covers the increase. Look for off-brand alternatives; use coupons and online sales as often as possible: during the holidays there are some especially good deals on foods or desserts we normally buy, so keep track of those.

It’s even possible to fight inflation increases in things we normally assume are fixed. For example, if gas is too high and breaking out of the 50% bracket, consider carpooling with a friend or maybe take public transit if available. Do it often enough to offset the increased price, at least until inflation cools down or the holidays are over, whichever comes sooner. Who knows, maybe you’ll find this works for you and you want to do it all the time! If this happens, you can start to be under your budget, which means you can allocate more money to the 20% or 30% area (savings and discretionary, respectively).

There are often state and government costs to help save on heating costs as well. To see if you qualify, visit the website of your state agency and see what’s available. During the cold winter this can be a boon. If you’re looking to keep your spending the same but would like more money in total to come in, there are a few avenues worth exploring:

  • If salaried, see if a raise is in order (you’re worth more than you think!)
  • Consider working a second job or a side gig (server/wait staff, Uber, DoorDash, etc.)
  • Sell old or unneeded things on Amazon or eBay, or possibly a yard sale or local directory
  • Look into other money-making tactics, such as freelancing
  • If you have the means, sell blood or plasma
Wrapping it All Up

Many people work extra hours or a side job during the holidays to pay for nice things for their friends and family, and frankly, we love that. It shows a commitment to giving loved ones nice things, and to improving people’s lives even a little bit. It helps make the time of year more meaningful and fun, especially for children. While it’s harder during inflation, it’s far from impossible. With smart budgeting and a financial vigilance for numbers and options, it’s possible to crunch cash while spending for a great holiday season.