A person creates a budget using a calculator.

How to budget during inflation

Published January 29, 2024
6 min read

Key Points About: Budgeting tips during inflation

  1. According to the Federal Reserve Board, inflation is the rising cost of goods and services over time.

  2. Times of inflation may call for more creative strategies in managing your money and credit card debt.

  3. You should avoid taking on excess credit card debt and pay your credit card bill on time.

Is the price of goods and services becoming more expensive? If you keep a budget, you may have noticed an uptick in your costs of your monthly expenses. According to the Federal Reserve Board, inflation is the increase in the price of goods and services over time. And based on information from the U.S. Bureau of Labor Statistics, in June 2022, inflation in the U.S. peaked at 9.1% (meaning that the price of consumer goods cost 9.1% more than the previous 12-month period).

The higher price of consumer goods may mean that you need to be more strategic about how you use your money and manage your credit card debt. While inflation can be unpredictable, there are simple steps you can take to help protect yourself from financial strain and stretch your income.

How to adjust your budget during inflation

While you don’t have to wait until inflation hits to start budgeting, it can be one way to maintain financial stability when prices rise.  Here are a few tips that can help you manage your spending and find more ways to save money.  

6 Best Credit Card Budgeting Tips

Track your spending
Record and categorize your expenses to get insights into your spending habits.
Prioritize essentials
Identify necessary expenses like utilities, gas, and groceries. If things are becoming more expensive than usual, see where you can cut back.
Choose a rewards credit card
Choose a credit card with a cash back rewards program that fits your spending habits.
Take advantage of promotions
Stores may have special deals to help your money go farther. Plus, you can still earn cash back rewards when you use coupons.
Increase your spending power
Redeem your credit card rewards to help pay off your credit card bill or in some cases to make purchases directly from merchants.
Practice responsible habits
Stores may have special deals to help your money go farther. Plus, you can still earn cash back rewards when you use coupons.

Track your spending: Tracking your spending is an important part of budgeting money. When you record and organize all your spending by category, you can gain valuable insights into your financial habits. 

Did you know?

If you’re a Discover® Cardmember, with the Mobile App you can gain access to the Discover Spend Analyzer, which automatically sorts your card purchases into categories. With this tool, you can gain valuable insights into your spending habits and see where your money is going.

Prioritize essentials: As you’re reviewing your expenses, and cutting back in certain areas, you may want to prioritize essentials. Things like housing, utilities, groceries, and transportation are basic needs that you may always have to pay for. When budgeting, it’s a good idea to ensure that you have enough money monthly to cover these costs. Also, see if you can find areas where you can cut spending and give yourself back a little more money every month.

Use sales and coupons: Your budget may be tight even after cutting back on some expenses. Grocery costs may also be impacted by inflation. But, with small adjustments to your grocery list, you can save more money over time. For example, you can search for cheaper options at the grocery store, use in-store coupons, take advantage of sales, or see if you can buy in bulk.

Note: With the Discover it® Cash Back credit card, you can earn 5% cash back on everyday purchases at different places you shop each quarter, up to the quarterly maximum when you activate.

Set clear financial goals: Think about the long and short-term financial goals that you have. For example, you may be working toward affording your first home, buying a new car, furniture, or appliances. When you set clear goals, you have a better idea of how and when you can afford to make major purchases. 

Build your emergency fund: You should add to any emergency savings that you have (or start building one if you don’t). The amount you’ll need to save depends on your personal situation, but you may want to think about the unexpected costs you’ve had in the past. If you experience changes in income, need a car repair, or have an unplanned medical expense, the extra money you set aside can help bring a sense of security.

Increase spending power with responsible card use

A credit card may help you boost your spending power. Your card can be a useful tool during emergencies and help you stretch your income (especially if you have a credit card with rewards or other perks). But you should carefully manage your card and use it wisely to avoid taking on more credit card debt than you can manage. Here are some tips on how you can use your credit card wisely:

Choose a low-interest credit card: If you’re in the market for a new credit card, you should try to opt for one with a lower or 0% interest rate. By selecting a card with a low or no interest rate, you may be able to better manage unexpected expenses without additional interest.

Pick a credit card with rewards: If you’ve been tracking your spending, you should have a good idea of what categories you spend the most money in. When shopping for a credit card you can choose a card with a program that offers rewards in that category. For example, with the Discover it® Chrome Gas & Restaurant credit card, you earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically.1

Use your credit card wisely: Responsible credit card usage is especially important if you are already on a tight budget. A credit card can help you cover some expenses, but it’s important you limit your card use. Not only will you avoid credit card debt, but the amount of credit you use (your credit utilization) may impact your credit score. According to information from the Office of Financial Readiness, your credit utilization makes up 30% of your credit score. Aim to avoid impulse spending and pay at least the minimum due every month (or the statement balance if you can manage). This approach will help you maintain control over your finances.

Even with unexpected price increases in inflation, there’s still a lot you can do to cut costs and make room in your budget for your daily needs. By carefully planning your savings and monthly budget, you’ll be prepared to manage during times of high inflation.

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  1. You earn a full 2% Cashback Bonus® on your first $1000 in combined purchases at Gas Stations (stand-alone), and Restaurants each calendar quarter. Calendar quarters begin January 1, April 1, July 1, and October 1. Purchases at Gas Stations and Restaurants over the quarterly cap, and all other purchases, earn 1% cash back. Gas Station purchases include those made at merchants classified as places that sell automotive gasoline that can be bought at the pump or inside the station, and some public electric vehicle charging stations. Gas Stations affiliated with supermarkets, supercenters, and wholesale clubs may not be eligible. Restaurant purchases include those made at merchants classified as full-service restaurants, cafes, cafeterias, fast-food locations, and restaurant delivery services. Purchases must be made with merchants in the U.S. To qualify for 2%, the purchase transaction date must be before or on the last day of the offer or promotion. For online purchases, the transaction date from the merchant may be the date when the item ships. Rewards are added to your account within two billing periods. Even if a purchase appears to fit in a 2% category, the merchant may not have a merchant category code (MCC) in that category. Merchants and payment processors are assigned an MCC based on their typical products and services. Discover Card does not assign MCCs to merchants. Certain third-party payment accounts and digital wallet transactions may not earn 2% if the technology does not provide sufficient transaction details or a qualifying MCC. Learn more at Discover.com/digitalwallets. See Cashback Bonus Program Terms and Conditions for more information.
  • Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.