Let's Talk Inflation

lets talk about inflation

Introduction: Inflation. Everyone is talking about it. What does it mean to you?

Since fall of last year our country has experienced its highest level of ongoing inflation in 40 years. As of June 2022 inflation over the last 12 months is at 12.4% for Anchorage. The Federal Reserve has taken steps to slow down inflation with actions such as tightening the money supply and raising interest rates; however, these strategies take time.

You have probably heard the above many times in the newspaper or on the news, so why am I bringing it up?

As the proverb goes, knowledge is power.

You are not powerless. Inflation is happening to you; however, you have control over the extent to which it affects your family. With more understanding around what the inflation statistic is actually measuring you can make changes to lessen the effects of inflation on your family. 

By understanding inflation you can take actionable steps now.

Consumer Price Index (CPI): The statistic that measures inflation as experienced by consumers in their daily living expenses.

As stated previously, Anchorage’s inflation has risen 12.4% in the last 12 months; however, I want to take a closer look at that statistic since it is made up of over 200 categories. Of these 200 categories, some have declined in cost and some have risen in cost for an average inflation rate of 12.4%. I am going to dig deeper into two categories of the over 200 categories, food and energy, since we use these daily.

Food Category within the CPI: The CPI states that, for Anchorage, food jumped 35.9% in the last 12 months. Let’s break that down into usable information. Food purchased at grocery stores rose 10.5% while food at restaurants rose 88.6%.

Nope, you didn’t read that wrong.

88.6% is how much the cost of going out to eat rose in 12 months. With this information you can start taking back control by understanding where inflation is hitting you the hardest in the food category. Actions such as limiting going out to only once per week, making larger dinners at home so you have lunch the next day, meal prepping on Sundays, remembering to thaw the frozen food you need for dinner that night by setting an alarm on your phone, investing in an Instapot, are among many options to keep your family from ending up at a restaurant out of convenience.

Energy Category within the CPI: This category includes areas such as electricity, natural gas, oil, and gasoline. Just the energy category alone for Anchorage rose 32.1% in the last 12 months ending in June. Interestingly though, electricity costs have declined 4.6% and natural gas has declined 1.7%. So then how has the energy category gone up 32.1%?

Because the energy category includes oil and gas, which has risen 63.8%, hence raising the energy category as a whole substantially. You haven’t seen your electricity bill go up 63.8% (unless your
toddler decided last month the boogie man existed and every light in the house needed to be on 24/7) and you haven’t seen your natural gas bill go up 63.8%. What I have seen across client households is that their automobile fuel budget almost doubled. With that information you now can take back some control over inflation. Ride with your spouse to work. Consolidate grocery shopping trips by utilizing a list and only going once a week. Use a gas app on your phone to find the cheapest gas price. Call around to stores instead of driving around when looking for that one specific Paw Patrol toy your kid has to have for her birthday.

Summary: The point of this article is to realize that you do have some control over your individual inflation rate since you have control over how you spend your money. High inflationary periods have
come and gone over time with the average inflation rate since 1930 being 3%. Experts believe the current high inflationary period will last only until mid to late 2023. By making changes in areas that inflation is affecting you the most right now, you can reduce the effects this high inflationary period will have on your family.