What Causes Inflation And How To Fight Back Against Rising Prices

The annual inflation rate as of May 2022 was 8.6%. This is the highest level since 1981 and it has caused many individuals to experience financial hardships. Can you relate?

But what is inflation and what is causing it? Inflation is something that I had a difficult time understanding. I went and learned a bit more about it and knew that you would probably want to understand it better as well. I’ll also share with you some tips on how to fight back against the rising prices today.

Here are three factors that are actively contributing to the rising prices of all our stuff:

1. Supply Chain Issues

Since the pandemic began in 2020 and the widespread lockdowns, there have been increasing shortages of workers and supplies. This has caused a bit of a domino effect. For example, there has been a decrease in available farm workers which means less food and produce grown. When there is less food this causes prices the price of something like an ear of corn to rise. Something as simple as this may in turn cause restaurant prices to rise as they now have to spend extra on ingredients. We as consumers bear the brunt of the supply chain issues.

I personally noticed this at Panera when they had to raise their prices for the 2nd time this very year!

What is inflation? Why are the prices of all products and services increasing so much? Learn 4 tips to fight back against raising prices. — PIN FOR LATER

2. Strong Demand

Again during the pandemic starting in 2020 people spent less and saved more since stores and travel were not available. We personally spent close to nothing on gas since we were not driving around as much! There was nowhere to go, and nothing to really spend money on.

Then as the country began to open up again many began to spend the money they saved creating higher demand for goods, services, and experiences. And as demand rises, prices do too. Have you noticed the price of things like flights, rental cars, and hotels? The demand has been raising prices quite dramatically. Only so many people can fit on one flight or in one hotel. Therefore, business managers raise their prices.

3. Interest Rates

Once the pandemic hit, the Federal Reserve provided record low interest rates causing many Americans to be able to spend more on interest-bearing purchases like houses or cars. Low rates on such products as mortgages made it more affordable for individuals to buy homes. This flooded the market with first-time homebuyers who could actually afford the house of their dreams. I’m sure you noticed that the prices of houses have skyrocketed – no matter which market you live in. Making money cheap to borrowers means people will use more of it.

If you’ve ever taken an economics class, this may all seem very basic to you. The general rule of supply and demand is if something is in low supply and also has high demand, prices will rise!

4 Tips to Fight Against Inflation

Track Your Spending

Know where your money is going! Track your money and possibly even start a budget for yourself. A budget will help give your money direction each month so you don’t overspend.

Grab my budget and money tracking spreadsheets here.

Use Cash Back Apps

Cashback apps are a great way to earn money back when you are making your everyday purchases.

Here are some of our favorites:

Upside: Earn cash back when you fill up your car tank
Rakuten: Earn cash back when shopping online from everything to cell phone providers, to clothing, to electronics, and more!
Ibotta: Earn cash back on grocery purchases
Fetch: Earn points to turn into cash by scanning every kind of receipt you receive

Stock Up On Bulk Items

Inflation causes something that was once only $5 to be $7 in the future. If you purchase more items today at a lower price, you will save yourself some money in the future! This doesn’t work for all items, and I wouldn’t use this as an excuse to go buy a new TV, but I do recommend stocking up on things such as canned or dried goods that will last a while.

Remember Who Is In Control

While it may be quite stressful right now, remember that God is still in control. This doesn’t necessarily mean he will work everything out exactly how you’d like it to turn out. But it does mean that you and I do not have to worry. God will use this situation for our good and ultimately for His glory. Be on the lookout for ways in which God might be trying to teach you something new. Like how we are financially dependent on Him, and not our own works.