Inflation is the rate at which the cost of goods and services rises. Inflation affects and is measured by the consumer price index (CPI), which monitors the average prices of goods and services across categories like food, vehicles, apparel, and healthcare services.
Due to inflation, your hard-earned money will buy you fewer groceries, gas, medical services, or anything else than previously. While inflation affects most industries, how much it affects them varies. After all, not all goods and services increase at the same percentage. Here’s a look at a few industries most impacted by inflation according to the CPI:
Food prices go up when inflation hits due to the increased costs of agriculture, labor shortages, and infrastructure issues, like a shortage of truck drivers. It should be no surprise that your grocery bill is more expensive than it used to be.
The increase in oil prices has led to a rise in fuel prices for airplanes, which eats into the earnings of many airlines. Also, since travel is often a nonessential expense, many people tend to spend less on airfare or avoid airfare costs altogether, further hurting the bottom line of the air transportation industry.
Due to the increase in the costs of wool, leather, cotton, and other materials, the clothing industry can be significantly affected by inflation. Often, apparel companies pass the increased costs on to their customers. For this reason, consumers may shop for clothing less often or buy used clothing during times of inflation.
How to Combat Inflation
Fortunately, there are steps you can take to prepare for and combat inflation affects on industries, including:
Create a budget
A budget is a spending plan that takes your income and expenses into account. It can help ensure you have enough money for your needs and wants. If you don’t already have a budget, consider the pay-yourself-first budget, zero-based budget, or 50/30/20 budget.
Cut unnecessary expenses
Likely, you may spend money on goods and services that you don’t need or want. These may include a gym membership you never use, daily trips to the coffee shop, and cable television. Getting rid of them to help free up your monthly cash flow.
Reduce or pay off debt
Debt can make it difficult for you to meet financial goals during an era of inflation. The faster you pay them off, the sooner you’ll be able to save for a house, buy a new car, build an emergency fund, or contribute to your retirement savings accounts.
Consult Your Financial Professional
A financial professional can help you determine a strategy to be financially secure when inflation is at an all-time high. Contact them today to help determine the ideal strategy for your unique situation and goals.
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