1. What is Inflation and Why is it Rising?
Inflation,in Urdu, is an economic condition where the prices of goods increase and everything becomes more expensive. This often occurs due to financial policies, high demand, and shortages in supply. During times of inflation, people’s purchasing power decreases because money cannot buy as much as it used to. The biggest impact of inflation is on household budgets, making it difficult for people to afford basic necessities. Due to inflation, people have to spend more money on essential items, which further strains their financial situation.
There are several reasons why inflation can increase. The first reason is government financial policy, where the government prints more money, reducing its value and making goods more expensive. The second reason is imbalances in demand and supply, meaning if demand is high and supply is low, the prices of goods rise. The third reason is changes in international matters and oil prices, which directly impact a country’s economy. Inflation greatly affects people’s lives, making it essential to understand ways to manage financial matters effectively.
2. Create a Budget and Stick to It
During inflationary times, the first and most crucial step is to create a budget. When preparing a budget, first list all your income and expenses. It’s important to know how much you are earning and how much you are spending. Include necessary items in the budget, such as food, electricity, water, and rent. Try to reduce expenses that are not necessary.
Make the budget simple and practical so that you can stick to it. Many people create budgets but do not follow them, which further complicates their financial matters. When sticking to a budget, it is important to regularly check your expenses. See whether you are adhering to your budget or not. If not, find out why and consider if you need to make changes to your budget.
3. Distinguish Between Necessary and Unnecessary Expenses
During inflation, it is very important to distinguish between necessary and unnecessary expenses. Necessary expenses are those required for living, such as food, shelter, and utility bills. Unnecessary expenses are those that make life easier but can be avoided, such as going to the cinema, dining out, or buying new clothes.
Try to reduce unnecessary expenses. This doesn’t mean you should completely deprive yourself of enjoyment, but make sure that every expense is made thoughtfully. It is also essential to regularly check your expenses so you know where you are overspending and where you can save.
4. Create an Emergency Fund
Creating an emergency fund is very important during times of inflation. An emergency fund is money set aside for unforeseen expenses, such as sudden medical bills or other urgent needs. This fund is essential because, during inflation, you might face financial difficulties at any time.
Include the emergency fund as part of your budget and contribute to it a little each month. An ideal emergency fund should be equal to 3 to 6 months of your salary. This fund will provide financial assistance during tough times and eliminate the need for loans. Keep this fund in an account where you can easily withdraw money without any extra charges.
5. Avoid Taking Loans
Taking loans during inflation can become a major financial problem. Often, people take loans to cover expenses due to inflation, but it is important to consider that loans must be repaid, often with interest, which can further complicate your financial situation. During inflation, interest rates are also higher, making loan repayment even more difficult.
Before taking a loan, carefully review your financial situation and consider if you will be able to repay it. If it is not absolutely necessary, try to avoid taking loans. Instead, adjust your budget and reduce unnecessary expenses. If you do need to take a loan, only take as much as is necessary and try to repay it as soon as possible.
6. Take Advantage of Sales and Discounts to Save Money
Taking advantage of sales and discounts can be very beneficial during inflation. Markets often have sales where you can buy good-quality items at lower prices. These sales are often pre-announced, like New Year sales, end-of-season sales, and other periodic sales. By shopping during sales, you can save money.
However, be cautious when shopping during sales. Often, people buy unnecessary items under the pretext of sales. Always buy only the things that are necessary. To make the most of sales and discounts, you should plan in advance. It is also essential to know the market prices to understand whether you are getting a real discount or not.
7. Invest Your Money Wisely
Investing money wisely during inflation is crucial. It not only helps you save money but also gives you the opportunity to grow your funds. When investing, you should make thoughtful decisions and invest in safe options that offer good returns.
You can invest in stocks, bonds, mutual funds, and fixed deposits. Every type of investment carries some risk, but if you invest after thorough research, these risks can be minimized. You should diversify your investments to ensure that if there is a loss in one area, you can gain from another. When investing, consider your goals and your ability to take risks.
8. Plan Your Monthly Purchases
Planning your monthly purchases is also very important during inflation. At the start of the month, make a list of the items you need and then shop accordingly. Also, check which items are available at lower prices and which are expensive. Try to buy from cheaper places to save money.
For monthly shopping, you should take advantage of local markets, wholesale markets, and online deals. Sometimes, online shopping offers great discounts that are cheaper than local markets. It is not necessary to buy everything branded; you can also buy some local items to save money. Remember your list while shopping and avoid buying unnecessary items.
9. Set Financial Goals
Setting financial goals is very important during inflation. These goals can be both small and large, such as saving a certain amount in a year or buying a house in a few years. Setting financial goals helps you understand how to manage your income and expenses.
Keep your goals realistic and achievable. Monitor your goals every month and see if you are getting closer to achieving them. If not, adjust your budget or reduce your expenses. It is also important to write down your goals and check them regularly to track your progress.
10. Find Ways to Earn Extra Income
During inflation, relying on just one source of income can be challenging. Therefore, it is important to find ways to earn extra income. Nowadays, with the internet, there are many ways to make money from home, such as freelancing, online tutoring, or selling items online.
To earn extra income, recognize your skills and find ways to use them. It is not necessary to do something full-time apart from your regular job; you can also look for part-time opportunities to earn extra income. Extra income can bring flexibility to your budget and help you meet your needs and desires during inflation.