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According to Michael Ashton, managing principal of Enduring Investments, a consulting and investing firm in Morristown, New Jersey, the United States had not seen annual core inflation much above 3% for the better part of 25 years prior to 2021. 

Inflation, or the rise in consumer prices, is a slow erosion of your money over time, and it’s starting to bite hard. 

The recent increase in the cost of fuel, used vehicles, groceries, and just about everything else is the type of sudden and systemic increase that can jolt most people’s daily spending.

In the United States, inflation reached a national average of 7.5 percent in January, but that is unlikely to be your inflation rate, according to Ashton. In the eurozone, inflation reached 5% in the same month. 

According to Ashton, because you may consume different items than the average person and may not live in an average location, your specific rate of inflation will most likely differ from the average. 

If possible, shop strategically by purchasing more generic brand items. Use coupons and store loyalty programmes to save money on necessary expenses. For readers in the United States, using membership cards (such as Walmart+ and others) to pay 5 cents (€0.04) less per gallon of gas could help you stay on the road.

Rather than agonising over a single number as a spending power loss to recoup, use the small money moves listed below to gradually improve your financial situation. Here’s how it works: 

To begin, reduce discretionary spending, or voluntary spending in categories such as entertainment or travel, by 5%. This is one of those small changes that isn’t too difficult to implement and has a direct impact on your personal bottom line. 

Get rid of any fees you may be paying for credit cards or bank accounts (late fees, monthly or annual service fees, ATM fees, etc). Many banks waive such fees, and credit cards frequently have fee-free options. 

Re-negotiate your satellite TV, streaming, or mobile phone bill to see if you can save money.

Ashton now calls once a year and asks, “What’s the best plan you have, and should I be on it?” 

Reduce the number of subscriptions you have, even if it is only by one. 

Look for financial institutions that pay higher interest rates than you are currently earning (if you are earning anything at all). Online banks and credit unions frequently offer high-yield savings accounts, which boost returns as interest rates rise. 

Perhaps the most powerful idea of all is to request a raise at work. If you haven’t received a salary increase in a few years, you’ve likely experienced what amounts to a pay cut due to inflation, according to Ashton.

Series I savings bonds are yet another inflation-fighting strategy. According to Zvi Bodie, emeritus professor of finance at Boston University, they were created specifically to protect consumers’ purchasing power against inflation. 

Bodie has a Ph.D. in economics from the Massachusetts Institute of Technology and has become a strong supporter of I bonds. 

He points out that bond rates are linked to the rate of inflation, which has recently surpassed 7%. They are an ideal safe haven for short-term savings. And not a bad addition to your long-term savings account. 

The minimum investment in bonds through TreasuryDirect.com is $25, and individuals can invest up to $10,000 per year in savings bonds through electronic purchases.

The bonds pay a fixed interest rate plus the inflation rate, which is adjusted twice a year. 

You can withdraw your savings without penalty after one year, but if you do so before five years, you will forfeit the last three months’ interest.