Inflation is starting to rise pretty much all over the world. Cash rates have gone up, which will almost certainly be followed by interest rates on mortgages, and the cost of basic goods and fuel has increased. Inflation really starts to bite when wages don’t increase, reducing spending power.

The macro economic effects might be outside of our control, but there are a few things we can take action on to ensure inflation doesn’t throw us completely off the track to financial freedom.

I’m not a financial expert, this is just my approach and is not personal financial advice.

Re-do your budget

First things, first, tackle the issue head on. Rising costs are not going to go away and it’s much better to be prepared for what’s coming than to be taken by surprise. I’ve adjusted my budget for a more realistic spend on the essential like groceries, energy bills, fuel, and a higher mortgage minimum. This has allowed me to see the impact on my savings goals, and where I might need to make decisions on discretionary spending if I still want to achieve them. I can start to get used to paying more for my essentials, rather than going over each category every payday and feeling disappointed.

A future proofed budget may make things look quite scary, but it’s much better to be aware of the upcoming situation than just letting it creep up on you. Check out my zero dollar annual budget that helps me factor in changes in income and expenditure over the whole year.

Start planning ahead

It might take a bit more effort, but one of the easiest ways to save money is to plan more.

Fuel – Plan your errands to save on fuel and reduce the number of trips you make. Factor in the fuel costs when planning trips, especially if you are making trips to buy a cheaper product – it might not be worth it!

Food – Make a meal plan, create a shopping list and stick to it.

Make your meal plan flexible enough to adjust for seasonal fruit and veg. $6 lettuces made the headlines in Australia as an indication of food price rises. What the media neglected to mention was that the recent flooding was what was actually driving up the cost of soft fruits and leafy veg. The price of fresh fruit and veg always fluctuates with availability, and most of the time it’s because of seasonality. I always shop based on what the prices are at the time, and have a lot of dishes in my repertoire that can be interchanged with different ingredients or use frozen or canned veg. Here’s a few of my bean and legume based lunch recipes for example. My shopping list rarely mentions specific fresh ingredients (apart from maybe bananas) and instead I use more generic prompts like ‘3x veg portions’ or ‘fruit for lunch box’. This allows me to pick cheaper options for the time of year.

I generally try and eat as much fresh produce as possible, not only for my health but because overly processed snacks or pre-made meals tend to be expensive for what you get. Many of these items are empty calories and you are probably paying for convenience rather than the actual quality of the product. I try and stick to whole grains, fruit and veg, and only spend more on protein and yoghurts, and treats like hummus, olives and dark chocolate.

Finally, reducing the amount of meat you buy can reduce your grocery bill. Try swapping out meat for eggs, cheese or tofu a couple of times per week.

Socializing – Chances are if you are feeling the pinch, so are your friends. Next time you get together, plan to host an evening at someone’s place instead of splurging on a convenient restaurant meal or impromptu drinks at a bar. Eating out carries a real premium and alcohol even more so. Share the food prep with a ‘lucky dip’ style dinner, where everyone brings one dish, BYO booze and crack out the board games.

And don’t eat out when you’re not socializing! Pack a lunch, don’t forget your water bottle and try filling a thermos with home made coffee.

Ask for a pay rise

It might not be the best time right now to ask for a pay rise, but keep it in mind over the next year as the job market tightens and wages are expected to rise to meet inflation. If you haven’t had a pay rise recently, or if you’ve taken on new duties, it is worth having the conversation at your next performance review.

Take action

If you’ve re-done your budget, and things are looking really tight, shaving a few dollars off your grocery shop and fuel bill is probably not going to solve the issue. If you think you might be in trouble when interest rates rise, pick up the phone and speak to your bank to see what options you might have. It’s always better to do this sooner rather than later, and whatever you do don’t rely on credit card or payday loans to tie you over. Cost increases may be around for years and you will need a long term solution to adjust.

If you are on the road to financial freedom, see what effect inflation might have on your plans. For me, living mortgage free and earning passive income from shares are both in my long term plan. With interest rate increases on the horizon, I’ve shifted my savings focus this year to pay down my mortgage.

Are you feeling the pinch of cost of living increase?