It’s not just you.
Life is more expensive now that it was before the pandemic. 15.57% more, to be precise. While inflation can seem like an abstract economic statistic, it’s perhaps the more visceral of them all. When the price of your daily needs rises month after month, you notice.
I’ve certainly noticed. I’ve never fussed much about the price of groceries but even I’ve noticed prices going up. Cereal, coffee, butter, salmon and frozen fruit are some of the things I’ve felt the most. (My current obsession is to find the giant can of Tim Horton’s ground coffee on sale.) And lots of big things got more expensive too, like furniture, plane tickets, cars and houses.
Thankfully, inflation is settling down. Prices are still rising, but at a more normal rate. Since the cost of things rarely go down, we are probably at a permanently higher level of cost of living.
Many people are feeling the impact of higher prices. They are feeling it when the credit card payment is due, when they are trying to top up their savings monthly, and when deciding whether they can afford a vacation this year.
Now that there is some stability in prices, it’s time to acknowledge that $6.99 butter is here to stay and re-evaluate spending and saving. There are a few things you can do to give some structure to the process and to help you come up with a plan that will actually work for you.
Mindset is everything
Evaluate your mindset around spending and saving. What do you think of when you hear “save money”? Do you have a negative association with frugality or “reigning it in”?
Frugality has a bad reputation. It’s associated with being cheap and having no fun. As a lifelong frugal person, I don’t think this is true. Yes, frugality means you don’t spend money as freely as you would otherwise, but you can definitely be frugal while still enjoying life.
Frugality is about conscious and responsible spending, and avoiding waste. It’s not deprivation. It’s choosing those areas where you can save money to give you more freedom to use your money in ways that make you happy. For me this means not having cable TV and rarely going out for dinner, while taking a somewhat last-minute three-day trip to New York City with my kids.
Challenging yourself to save money can actually be fun and satisfying, especially if you are a goal-oriented person. Don’t worry about what everyone else is spending money on – focus on yourself.
Review your spending
So boring and so great. For most people, laying out how they spent every dollar over the past year is tedious and boring. And perhaps depressing. But I cannot emphasize enough just how important this is. When you see in black and white how you spent your money over the past year, it will change how you spend. Almost everyone is surprised – and some are shocked – by how much they are spending and on what. Small splurges can really add up without noticing. Bigger-ticket items that you put on the credit card or a line of credit can linger. Seeing a breakdown of the categories of spending can help you be more conscious about what you are spending on and choosing to cut back on things that aren’t really adding much to your life.
Assess what you can actually afford
In the past perhaps you could afford to take two vacations a year and you didn’t give it any thought. But that might not be true right now. Maybe ordering in every Friday is now too expensive. Take an honest look at whether those things you love are getting in the way of financial stability. Plan out the bigger-ticket items for the coming year or two: can you do all of things you want right now or do you have to put something off? Or even give it up altogether? In recent years there has been a lot of messages telling us to spend money on self-care and to treat ourselves because we “deserve it”. We also feel pressure to give our children the best because they “deserve it”. Of course buying nice things, going on vacation and giving our kids the best experiences are wonderful things we all want, but they aren’t essential. Sacrifice isn’t a dirty word. Sometimes it’s just reality.
Adopting a positive mindset around responsible spending, knowing exactly where you are spending, and taking a hard look at what you can actually afford can help you make sustainable changes you believe that will help you meet your goals. And remember, your current financial situation likely won’t last forever. Things change. Kids grow up. Mortgages get paid off. Look ahead and see what thing might look like a few years down the road. You may be able to get your little luxuries back again.