11 Tips for Stretching Your Budget During an Inflation Crisis

Record high inflation numbers are likely to affect the Philippines over the next two years. The Bangko Sentral

Record high inflation numbers are likely to affect the Philippines over the next two years. The Bangko Sentral Ng Pilipinas (BSP) has recently published a report indicating that above-average inflation rates are likely to persist through the end of 2023.

These high expected inflation rates have been primarily attributed to the wide-reaching effects of geopolitical conflicts outside of the Philippines, which have triggered disruptions in global logistics as well as fossil fuel, wheat, and metal prices. Local issues with transportation fare hikes and commodity shortages are also playing key roles in the overall higher cost of living.

If you’re like most Filipinos, chances are you’ve already felt the effects of these disruptions. Thankfully, there are some strategies you can try that will not only help you stretch your budget but help you thrive during an inflation crisis. Here are some ideas you can try:

Use Credit Card Rewards

Using the right credit card can give you a lot of breathing room during an economic downturn. This is especially true of cards that offer rewards on groceries, fuel, delivery, and dining out. Some credit cards, such as Robinsons Cashback, give cardholders rebates each time they use them to purchase items from participating stores.

The key is to use the cards that fit your lifestyle and spending patterns. This way, you can earn significant savings on monthly purchases you would have had to make, regardless.

Monitor Your Daily Expenses

Even without an inflation crisis, you’ll want to make sure that your expenses do not exceed or come dangerously close to your monthly income. After subtracting your monthly expenses from your income, you typically want enough cash left over to put in an emergency fund, savings, and investments.

If you use a credit card regularly, you can use your billing statements to get a good idea of your monthly expenses. Otherwise, simply list down all your household and personal expenses in the past month. After you’ve gathered data on your past spending, start logging your day-to-day spending over the next 30 days.

By monitoring your expenses this way, you not only get a good baseline for realigning your budget, but you might also identify previously unknown spending habits that you may want to change.

Create a Realistic Spending Plan

After you’ve logged your monthly expenses, it’s time to create a monthly spending plan that you can reasonably expect to follow. You don’t want to suddenly cut back on all the things you’ve enjoyed, as this may cause you to overcompensate later, rendering your spending plan unsustainable.

Take some time to consider which things you value the most and which expenses you can live without. Which expenses are considered “important” will depend on the individual. For example, a single individual living by themselves without a child will have to plan things very differently from someone who supports a typical nuclear family. Make sure to leave some wiggle room in your spending plan so that you could still enjoy yourself occasionally.

Consider Downgrading or Ending Subscriptions

Monthly subscriptions can be a major drain on your budget. We often get subscriptions because of some perceived need that existed at the time we signed up for them. However, this need may eventually disappear, rendering the subscription superfluous.

For example, video streaming services are now incredibly popular in the Philippines, partly thanks to the lockdowns and travel restrictions during the height of the pandemic. However, now that most of these restrictions have been lifted, fewer people can fully maximize these subscriptions, making them a drain on many people’s bank accounts. Cutting back on these monthly expenses may make sense, given these circumstances.

Sometimes, however, it may make more sense to simply downgrade rather than end the service. For instance, a premium high-speed internet plan might make sense for a household with 5-10 people. But if several of those people move out, then the excess capacity may no longer make sense, making a downgrade worth considering.

Continue Making Smart Investments

While cutting down on unnecessary expenses is great, the best way to beat inflation is to earn more money, especially through passive income. If you’re lucky enough to have enough cash for emergencies, make sure to put everything extra in investments with historical returns that outpace inflation.

The reason you want to invest your money rather than put all of it in a savings account is that, while convenient, savings accounts rarely earn enough interest to offset the reduction in value through yearly inflation. This disadvantage becomes more acute in the case of serious inflationary crises.

For a safe investment with reasonable returns, you can try government-guaranteed Treasury Bills or Peso Government Bonds. If you have a healthy appetite for risk, you can start investing in stocks and money markets as well.

Use Existing Assets to Increase Your Income

If you have unwanted items, unused appliances, unappreciated collectibles, or other valuable things that are merely gathering dust somewhere, consider selling them.

You will want to prioritize selling off things that do not interest you or make you happy. If you have not used that thing in the past year or so, then it’s probably a prime candidate to sell off at a garage sale or on an online marketplace.

If you have infrequently used assets that you don’t want to sell, you can consider leveraging them to earn an income. For example, if you have a spare room, you can consider renting it out or using it for a side gig or business.

In any case, to widen your market, be sure to tidy up your items, take good-quality photos, and consider posting them on more than one online platform so that you can reach more buyers.

Build Healthy Habits

Sacrificing your health just so you could save a little money is never a good idea, especially in the long term. While you could save a few pesos by watching streaming videos all day and eating nothing but cheap processed food, you might find that in a few years, you will have to pay many more times than what you saved in medical bills.

Fortunately, being healthy doesn’t have to be expensive and it doesn’t take too much time either. The World Health Organization recommends that adults aged 18-64 do a minimum of 150 minutes of moderate-intensity aerobic physical activity or at least 75 minutes of vigorous-intensity aerobic physical activity each week. That comes down to just 10-40 minutes a day, depending on the intensity of exercise, which is certainly doable for the vast majority of working-age Filipinos.

Cutting down on junk food, excessive amounts of sweets, empty carbohydrates, and overly-processed foods might also be a good idea. Not only will it save you money in both the short and long term, but it may help cut down on your potential medical bills and help you enjoy a better quality of life as well.

Consider Moving to a More Affordable Location

Housing costs often take up a considerable chunk of most monthly budgets. This is particularly true for younger people who have moved out of their family homes but are yet unable to purchase their own houses or apartment units. Even homeowners often find the monthly cost of owning their current homes difficult to maintain. In these cases, it may be best to investigate whether or not it would make sense to change living arrangements.

Before moving, make sure to take into account the cost of transportation as well as typical commute times from your new home. You might find that rough or overly long commutes may increase your overall monthly expenses, even if you may be paying less for housing.

Learn More About Inflation and Related Economic Concepts

Understanding important concepts behind inflation and other economic phenomena can help you understand the potential effects of global and national events. This may allow you to read between the lines of news and economic reports, allowing you to be proactive in your financial decisions. This, in turn, may help you avoid the brunt of future inflation events and other economic catastrophes.

Keep Yourself Insured

While you should be canceling or downgrading insurance plans that you don’t need, you want to make sure that you are receiving adequate life and health coverage from your employer or from insurance policies that you’ve purchased. Together, your insurance coverage and emergency savings fund should help your finances stay on track should you or a family member experience an unforeseen emergency.

Thankfully, finding good insurance coverage is more affordable than ever before. For example, RBank IPONsurance® is an interest-bearing savings account that comes with free life insurance coverage that’s worth up to four times the account’s average daily balance (ADB). By looking for these insurance deals, you can make sure that you and your family’s finances stay healthy, even in the event of a death or serious illness.

Consider Looking for a Better-Paying Job

Sometimes, the only way to thrive during an inflation crisis is to find another job. In most circumstances, switching jobs is quite often a much easier way to earn a significant jump in salary, compared to the raises typical with internal promotions or yearly cost of living adjustments. What’s more, organizations that are actively looking for talent during an inflation crisis may be more inclined to offer higher salaries since the baseline cost of labor also increases during these periods.

Beat Inflation with These Tried and Tested Tips

With high inflation rates predicted to persist, it’s important to try proven ways for growing, stretching, and protecting your income. By following the tips and suggestions above, you might not only survive the current inflation crisis but come out of it with fundamentally better finances as well.