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Rising inflation is hurting household budgets. Here’s how to fight back 

Rising inflation is hurting household budgets. Here’s how to fight back 

Clearly, with inflation on the rise, one of the biggest concerns is how to then manage your monthly cash flow. Experts point out several ways in which this can be done. 

The wholesale inflation has surged to a record high of 14.5 per cent in March 2022 The wholesale inflation has surged to a record high of 14.5 per cent in March 2022

Prateek Raja, 42, has been juggling the household budget for a long time now. The recent spurt in inflation rates has, however, broken his back. This is because the commuting expenses for his whole family have jumped up by 30-40 per cent over the last year while the cost of vegetables, clothes, eggs and milk have also jumped up significantly.

“My salary has not increased in proportion to the rise in inflation. The household budget has gone haywire because of the steep rise in cost of living. I have started thinking of ways to bridge the gap,” said Raja 

The wholesale inflation has surged to a record high of 14.5 per cent in March 2022. Not falling behind, the retail inflation rate, which is measured by the Consumer Price Index (CPI), has also zoomed to 6.95 per cent in March 2022.

The rising inflation has increased the cost of everyday articles. Consider this: the cost of edible oils has surged more than 30 per cent over the last year. Similarly, the price of masoor dal has increased by 21 per cent. The list goes on for petrol prices, vegetables, eggs, milk and so on.   

Clearly, with inflation on the rise, one of the biggest concerns is how to then manage your monthly cash flow. There are many like Raja who have been feeling the brunt of the rising cost of living. For them, the immediate solution looks to cut back on their savings but this could be a big mistake as it could derail their long-term financial goals. 

The best approach is to take the stock of your situation, prepare a budget and stick to it. One of the ways to fit into the budget is by reducing your discretionary expenses such as buying an expensive watch or going on a trip.  

“Estimate the inflated expenses on non-discretionary articles. If the increase is more than your wage increase, examine your ‘discretionary expenses’. See if you can postpone some or even give up on some discretionary purchases. We recommend that the savings number should not go down. Savings and investment should continue at the same pace, rather try to increase them in proportion to an increase in wages. This will help fight the ill effects of inflation in the near term and future as well,” pointed out Renu Maheshwari, Board Member, Association of Registered Investment Advisors (ARIA). 

Shweta Jain, a Bangalore-based financial planner agrees.  

“Cut out eating out budgets if you're facing a constraint, change to public transport or work from home if possible. Ensure you're not overshooting your budget massively, important to draw the line,” she said. 

Given the recent rise in prices most households may need to relook at their living expenses. As always analyse the four major numbers and readjust them according to the current situation: take home income, discretionary expenses, non-discretionary expenses and savings. 

Jain gives a solution. “Look at your needs, your grocery list, your regular expenses and see what has been impacted and how much. If you haven't been paying attention to your budget, now is the time when it will demand attention more than ever. Inflation is real and even though you may retire at some point, Inflation won't. So, time to invest and invest well.”  

Moreover, with rising inflation the real rate of interest on your fixed deposit has turned negative, with only around 5.5 per cent annual interest on your fixed deposits against the inflation rate of 7 per cent your wealth is getting eroded at a faster rate. As experts argue, one of the ways to earn inflation beating returns is by investing in the stock markets, as equities tend to give higher return in the long run. 

Also read: In Pics: WPI inflation rises to 14.55% in March

Also read: WPI inflation rises to 14.55% on-year in March

Also read: States living beyond their means, need to rationalise spending: SBI Ecowrap