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How To Adjust Your Budget for Inflation

Adapt your budget in response to higher prices by following these 12 tips from BECU's lead financial educator.

Portrait of Katie J. Skipper

Katie J. Skipper (She, Her, Hers)
BECU Community Content Manager
Updated Oct 3, 2024 in: Budgeting

Read time: 10 minutes

During periods of inflation, your finances can take a real hit.

Even though inflation has been cooling, prices are still higher than when the recession began during the pandemic. That means you've probably still been spending more on just about everything including housing, food and energy — even if your daily habits haven't changed at all.

Here are some tips to help you adjust if you find your usual budget isn't covering your higher-than-usual expenses.

Takeaways: How To Adjust Your Budget for Inflation

  • Find ways to decrease your expenses or increase your income.
  • Cut back on energy and gas, and shop around for groceries.
  • Reduce interest rates on debts
  • If you're able to make a major life change, reduce your housing costs by looking into refinancing options, downsizing or taking in a roommate.

How High Is Inflation and What's Causing It?

According to the latest Consumer Price Index, the current inflation rate is 2.5% in August 2024, the lowest since February 2021.

Considering inflation hit 9.1% in June 2022 — the highest percentage in 40 years — a 2.5% inflation rate is a dramatic step down from previous years. But several years' worth of consumer price inflation adds up to a total 20.7% increase since 2020.

What does that mean in dollars? Suppose you bought a shirt for $100 in 2020. Today that shirt would cost you $121.

Illustration of a woman walking a dog with an oversize stack of paper money and pile of coins behind her. A red arrow arcs steeply up to the right to symbolize rising costs of inflation.
Adjusting your budget for inflation can help you maintain your purchasing power and ensure your financial needs are met.

Elevated household costs, food and motor vehicle insurance are among some of the items contributing to higher prices, according to an August report from the U.S. Bureau of Labor Statistics.

"The bottom line is that you either need to make more or spend less," said BECU lead financial educator Stacey Black. 

"Most people have more control over how they spend money than over their income," Black said. "So focus on your expenses first — and look at every single item."

How To Adjust Your Budget

Big price increases mean it's going to take more than a few little tweaks to stay on target.

Black offers these tips for budgeting to offset inflation.

1. Reduce Energy Use at Home

Energy and utility costs are on the rise again in 2024, after a steep drop in 2023 from 2021-2022 highs.

Reducing energy use at home will save you money and reduce your carbon footprint. Here are a few ideas to consider:

  • Use programmable thermostats if you can and set the temperature higher when it's warm and lower when it's cold.
  • Seal cracks around windows and doors.
  • Seal holes and gaps in ductwork.
  • Install energy efficient lighting.
  • Wrap your water heater in a fiberglass insulating blanket and lower the temperature.
Illustration of a thermostat set at 72 degrees on the main floor and an energy efficient light bulb.
Reducing your energy use can save money — and it reduces your carbon footprint.

2. Stretch Your Food Budget

Though rates dropped from 4.3% in August 2023 to 2.1% in August 2024, your grocery budget is still one of the areas hit hardest by inflation.

This is an improvement from the peak in August 2022, when the price of food was up 11.4%, the highest year-over-year increase for at least 20 years.

There are some simple steps to take to save on your grocery bill. Black offered tips she picked up through her own efforts to develop healthier eating habits:

  • Check your cabinets and refrigerator before shopping.
  • Plan your menu for the week ahead so you don't waste any food.
  • Stick to your grocery list.
  • Shop around at different stores for sales.
  • Don't shop for groceries when you're hungry.
  • Buy groceries online and pick them up curbside to avoid impulse buys.
Illustration of food: a baguette, salad, burger, apple and drink carton. A gray circle with a white down arrow is in the background.
Some habits that reduce your grocery bill can help you eat healthier, too, like not shopping when you're hungry.

3. Save on Gas

Gas prices in Washington decreased by 19% between August 2023 and August 2024. Statewide, gas prices average $4.14 per gallon. Reducing the miles you drive and increasing fuel efficiency can be a big help to your budget. Bonus: Reducing fuel use is also good for the environment.

Here are a few tips Black has collected over her years helping people with budgeting and saving money:

  • Plan your errands so you can take care of several tasks in one trip.
  • Carpool with people who regularly go the same places you go.
  • Take public transportation where and whenever possible.
  • Shop for lower prices using an app like GasBuddy. (Limit the distance of your search or you'll cancel the benefits.)
Illustration of a man fueling a teal car from a red pump. He's approaching the pump to pay with a credit card.
Reducing the miles you drive and increasing your fuel efficiency can help reduce your transportation costs.

4. Slow Down Debt Repayment

If you're actively paying off debt, but you're worried about making ends meet, you might have to scale back on making extra payments for now, Black said.

That means your target payoff date might be a little farther out than you'd like, but you'll have peace of mind knowing you have money to cover basics like groceries.

"I hate to say it, but it might be worth paying just the minimum for a while to ensure you don't end up in even more debt," Black said.

Even paying just the minimum will eventually help you pay down your debt. Just remember to keep your budget for debt payment steady and pay on time.

Illustration of an orange credit card next to a bracket around a calendar. A red line snakes across the weeks, starting with a gray dollar sign on the first of the month and ending with an arrow pointing to a red dollar sign near the end of the month.
Set your debt payoff date a little further into the future, but keep paying at least the minimum and pay on time.

5. Reduce Interest Rates on Debt

If you can lower your interest rates on your credit card debt, you can also make your payments go further. Explore balance transfer options with low or no interest.

But Black says to use caution: Be sure your credit is good enough that you're likely to qualify for the offer. If you apply and don't get the new card, you might end up damaging your credit.

You'll also want to be sure that you can pay back enough of the debt in time to make the offer period worth it. If the rate jumps after 12 months, for example, does that give you enough time to pay down the debt?

A debt consolidation loan is another option to reduce your overall interest, but that option requires caution, too.

"Make sure you can commit to paying off the new loan without adding more debt to the credit cards you free up," Black said.

Use a debt consolidation calculator to be sure you will save money in the long run.

Illustration of a blue and turquoise credit card stacked on the left and single red credit card on the right. A dash-line arrow arcs from the two credit cards to the single credit card. A series of gold circles with dollar signs in the middle of each circle arc over the dashed line. The circles and dollar signs get smaller as they approach the arrow over the red credit card.
Explore balance transfer options and debt consolidation loans cautiously. Make sure you'll really save money in the long run.

6. Shop Around for Insurance

Insurance is one of those services that's easy to forget about until you need it. But Black said it's a good idea to revisit your policy at least once a year — more often during periods of inflation. The Seattle Times reports that auto insurance rates increased between 20% and 25% in the past year.

Review your policy to make sure you only have the coverage you need, then challenge a few insurance companies to win your business with new quotes.

Illustration of a checklist titled Insurance Coverage with the middle item checked off. A calculator is to the left and a coffee cup is to the right of the checklist.
Review your insurance policy to make sure you only have the coverage you need.

7. Cancel or Reduce Subscriptions

As you go through the exercise of looking at all your expenses, Black advised paying special attention to all your subscriptions, including magazines, newspapers, apps and streaming services.

Pay particular attention to your streaming services, because prices have shot up in the last few years.

Talk with members of your household to confirm how important some subscriptions are. They might no longer use the streaming service they were excited about last year.

If you have cable, think about whether you need all the channels in a deluxe package, or if a lower-priced option might work.

Image of a person sitting at a computer. The screen says Gym Membership. The mouse pointer is pointing at a red button that says CANCEL. A cat is sitting on the desk next to the monitor.
Check your expenses and cancel subscriptions and memberships you no longer use.

8. Re-evaluate Your Cell Phone Service

Cellphone service should also get re-evaluated periodically.

"Your cellphone carrier isn't going to call you and say you're not using all the minutes you're paying for," Black said. "It's up to you to make sure you're paying for what you use and make a change if you're not."

Illustration of a hand pointing at the first item of three displayed on a digital tablet. Each item in the list shows the outline of a mobile phone followed by dollar signs and lines to represent text. The top item has one dollar sign, the second item has two, and the third item has three to indicate the options are listed in order of ascending price.
Make sure you're only paying for cell phone services you use and that you're getting the best price.

9. Scale Back Vacation Plans

If you've been saving for a big trip, consider something smaller. Then, apply some of your vacation savings to essentials for a while. Instead of that spendy plane ticket, consider a staycation and other budget-friendly vacation options.

Or double down on savings.

"If that vacation is really important to you, it might be motivating to look closely at your spending and cut out more of what you don't need," Black said.
But she cautioned against cutting back too much and not giving yourself any flexibility. "If you're too strict, you might splurge and put yourself in debt."

The same goes for other big-ticket goal purchases. Those goals might have been delayed due to higher prices for things like new cars. Black said it's important to keep those goals in mind. They just should be a lower priority for a while.

And you can still take steps to include fun in your budget.

An illustration of a person driving a red motorboat under a bright sun gives a thumbs up. A dog rides in the back of the boat.
Consider local destinations instead of planning a big trip.

10. Reduce Housing Costs

Housing costs are the largest portion of most people's budgets. With an 5.2% increase as of August 2024, the average cost of shelter has increased more year over year than it has in at least two decades, according to the Bureau of Labor Statistics. Housing costs can be the most difficult to change for the better.

If you own your home, refinancing your mortgage might save you money, especially if you can get a lower interest rate. But do your homework to ensure you can recover any closing costs. Use a mortgage calculator to run the numbers, check current interest rates and talk through scenarios with a licensed mortgage loan officer.

Whether you own or rent your home, you could consider taking in a roommate, or moving to a smaller home or a lower cost-of-living area, especially if you're able to work from home.

11. Keep Saving if You Can

As you evaluate your expenses and figure out how much you can pay toward credit card and other debts, Black advised looking for ways to keep saving.
She suggested setting up automatic deposits or transfers to savings, so you're consistently setting some money aside without even thinking about it.

"Even if it's a small amount every month or every paycheck, it adds up over time," Black said. "If you have an emergency, you'll be glad you saved."

12. Earn Extra Money

Sometimes you just need extra cash. Consider these tips to help you earn more money:

  • House or pet sit: Both options can be flexible ways to make money with little to no startup costs. Rover and Housesitter.com offer great opportunities for those who are approved.
  • Sell items you no longer use: Clothes, electronics, books and furniture pile up over time. Consider selling items you no longer need on sites such as Craigslist, Facebook Marketplace or OfferUp.
  • Tap into your skills: People nearby may be looking to hire for repair or project assistance around their house. If you have experience in areas like plumbing, cleaning or painting, you can sign up for jobs or tasks on apps like Handy and TaskRabbit.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized financial, tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation when making financial, legal, tax, investment, or any other business and professional decisions that affect you and/or your business.

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Portrait of Katie J. Skipper

Katie J. Skipper (She, Her, Hers)
BECU Community Content Manager

Katie writes for BECU about personal finance and social justice topics. Her career spans reporting for newspapers and communicating on behalf of government agencies and private businesses. Learn about Katie's career and education on LinkedIn.