Inflation, or an extended period of rising prices, can take a real bite out of your budget. The better part of 2021 saw inflation rising steadily, with the Consumer Price Index (CPI) up 6.8% year over year as of November.

Higher prices mean you may need to be more strategic about spending to stretch your income. Learning how to budget for periods of higher inflation can help you rethink the way you spend—and potentially find money to save.

1. Streamline Your Mortgage Costs

If you own your home, your mortgage may be one of your biggest budgeting costs. When rising inflation is accompanied by lower interest rates, you may have an opportunity to reap savings by refinancing.

So how do you determine if refinancing makes sense?

First, consider what rates you’re likely to qualify for based on your credit scores and income. Then, compare that to your current interest rate. A mortgage refinancing calculator can help you easily run the numbers.

Next, think about how long you plan to remain in the home and how much you may have to pay in closing costs for a mortgage refinance loan. If you plan to stay in the home at least long enough to reach the break-even point—meaning you recoup what you pay for closing costs in interest savings—that could make refinancing worthwhile.

If you’re not in a position to refinance your mortgage, here’s another possibility for saving: Shop around for a better deal on homeowners insurance. Finding a less expensive policy could help shrink your budget and save money.

2. Reduce Rates on Other Debts

Aside from a mortgage, you may be budgeting for debt repayment toward credit cards, student loans or other lines of credit. Paying off debt, or at least making it less expensive, can help when higher prices kick in.

If you have credit card debt, for example, you may consider a 0% APR balance transfer offer or a low interest rate personal loan from your bank. A 0% balance transfer can give you time to pay back what you owe interest-free. Personal loans, meanwhile, can help you consolidate high-interest debts at a lower fixed rate.

Even with student loan forbearance extended until May 1, 2022, you’ll need to budget for those payments as well. Refinancing student loans could help you secure a lower rate, making monthly payments more manageable. Keep in mind that refinancing federal loans into private loans means sacrificing certain benefits and protections, including coronavirus forbearance options and loan forgiveness.

3. Complete an Energy Audit

Energy prices are a major driver of inflation. When different energy sources, including coal, natural gas, heating oil and electricity cost more, the cost of producing and transporting consumer goods also goes up. The companies that produce or move those goods then pass the higher prices on to consumers.

Budgeting for higher prices means considering how much energy you’re using at home and finding ways to curb costs as much as possible. According to the U.S. Department of Energy, some simple ways to reduce energy usage at home or on the road include:

• Sealing air leaks around windows and doors
• Having your HVAC system cleaned and serviced in spring and fall
• Using energy-efficient lightbulbs
• Setting your thermostat lower in winter and higher in summer
• Unplugging electronics when not in use
• Keeping your tires properly inflated
• Carpooling to share fuel costs
• Consolidating trips in the car and driving the speed limit

These are just some of the things you can do to potentially reduce what you spend on energy and fuel to put money back in your budget.

If you’re struggling with higher energy prices, you may consider looking into the Low Income Home Energy Assistance Program (LIHEAP). This program provides eligible households with financial help in paying heating and cooling bills.

4. Save on Car Insurance

As mentioned, changing homeowners insurance is one possibility to save money when budgeting for inflation and higher prices. But you may also want to rethink your other insurance coverage.

Some ways to save money on car insurance, for example, include:

• Raising your deductible, which could lower your monthly premium
• Negotiating a safe driving discount
• Reducing coverage, if appropriate
• Comparing quotes and changing auto insurance companies for a better price

5. Eliminate Unnecessary Subscriptions and Fees

It’s possible that you may be throwing money away each month on subscription or streaming services. According to J.D. Power, the average household has 4.5 streaming services and spends an average of $55 on them per month.

This may not seem like much, but $55 a month adds up to more than $600 per year. If you’re trying to cut expenses in the face of higher prices, then ditching unused subscriptions can be a good place to start.

There are apps that can make this easier if you don’t have time to track down all of your subscriptions. Personal finance apps like Mint and Truebill link to your bank account and credit card accounts, look for subscriptions you’re paying for and may help you cancel them if you decide you no longer need or want them. Some apps can even help you negotiate better deals on cable, internet and cell phone services for added savings or reduce what you pay for bank fees.

Speaking of banking fees, switching banks is something else you might consider. On average, checking account fees may be costing you $32 per month or nearly $400 per year. So, changing banks, or finding a new checking account, could be a good way to add money back to your budget when trying to offset inflation.

6. Shop Smarter at the Grocery Store

Year over year, grocery prices rose by 5.4% between October 2020 and October 2021. Feeding your family isn’t something you can skip out on, so it’s important to find ways to budget wisely for groceries when prices are rising.

Here are some money-saving tips to help you manage your grocery budget:

• Swap out brand-name items for generic as much as possible.
• Buy in bulk if doing so would allow you to purchase items at a lower unit price.
• Incorporate more meatless meals into your family’s menu.
• Use grocery store weekly sales flyers to plan budget-friendly meals.
• Shop local farmers markets if that’s an option where you live.
• Incorporate more low-cost staple items into your meals, such as pasta or rice.

You can also use money-saving apps to reduce your grocery spending. With Ibotta, for example, you can earn cash back on grocery purchases at partner stores. This can be a simple way to combat inflation and higher prices at the supermarket.

7. Make Room in Your Budget for Investing

For some people, periods of rising prices might seem like the wrong time to invest. Why would you put money into the stock market when you’re facing higher monthly costs?

Here’s a better way to think about it: Whether you’re investing for retirement or other goals, you need to sustain regular contributions no matter what’s going on in your financial life. After all, one of the reasons to invest in the first place is to beat inflation by maintaining and growing the purchasing power of your savings over the long term.

That said, if your budget is under pressure you might consider reducing your contributions in the short term. Just make sure you restore and possibly grow contributions once the pressure’s off.

There are investments that are specifically designed to help you beat inflation. Take I bonds, an almost risk-free investment that’s paying an annual interest rate of 7.12% through at least April 2022. When inflation rises, I bonds are designed to pay you more.

You may be able to supplement your income if you’re investing in dividend-paying stocks. A dividend represents a share of a company’s profits. Some public companies actually benefit from inflation, since  they’re able to raise prices and realize larger profits, which could be passed on to you in the form of dividends.

8. Increase Your Income if Possible

One of the biggest problems with inflation and higher prices is that incomes don’t rise accordingly. While the Great Resignation of 2021 has prompted some employers to increase wages for workers, pay rates in the U.S. have remained largely stagnant for decades.

Finding ways to increase your income can make periods of extended inflation easier to get through and budget for. Some of the possibilities for increasing income might include:

• Selling things you don’t need
• Negotiating a pay raise with your current employer
• Changing jobs for better pay
• Taking on a part-time or second job
• Starting a side hustle
• Starting a small business

Each option has its pros and cons, as well as risks and rewards. But growing your income may be one of the best ways to protect yourself and your budget against the impacts of inflation over time.

Bottom Line

Inflation can make household budgeting more of a challenge, but it’s still important to stick to your spending plan as much as possible. When prices are rising, you have an opportunity to review your budget and decide which expenses to prioritize and which ones you may be able to reduce or eliminate. The more fat you can cut, the less stressful budgeting may be and the more money you may have to stash in savings.