Inflation Nation? Stick to Your Budget!

26 03 2011

Have you ever heard of the Producer Price Index for Finished Goods or the Consumer Price Index? These are two measures of inflation. The PPI measures the change in prices of domestically produced and consumed commodities; while the CPI measures how much consumers pay for a specific set of goods and services. In February PPI rose 1.6%, while the CPI increased 0.5%.

These measurements serve as official confirmation of what we are already experiencing. Prices are going up in our day to day commodities and we see that every time we get items at the grocery store. So what we need to understand is how significant are these February measurements? Is this a temporary rise in prices, or the beginning of a burdensome inflation increase?

Many would say that we are still in economic recovery at this time and it is no doubt that a constant rise in inflation could debilitate progress. The best thing that we as consumers can do is be prepared. Yes, we are on the way to recovery, but that is not a reason to stop being frugal with your income. Save money, get an emergency fund set up for yourself, and fine-tune that monthly budget so you have a bigger cushion for things like groceries and gas.

Below is a suggested budget guideline that may be helpful:

Category %  
Housing 25% Healthy amount to set aside
Food 15% Groceries & eating out
Savings 10% SAVE!
Utilities 5% Electric, water, gas, heat, sewer, trash
Gas/ Transportation 15% Gas, car maintenance & repair
Medical 5% Co-pays, emergencies
Debt 10% Work off any debt you have!
Charity 10% It’s better to give than to receive
Clothing 2.50% A need, but not top priority
Entertainment 2.50% Set aside fun-money!
Total 100%  

Remember these are just suggestions; be aware of your own financial commitments and limitations and feel free to adjust based on your own situations. Don’t be afraid to seek financial counsel if you are feeling really stuck.

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