6 Ways to Beat the High Cost of Living

Does it seem like each year the cost of living increases?  Well, you are not wrong.  According to the Bureau of Labor Statistics consumer price index, the dollar had an average inflation rate of 1.67% per year from 2010 to 2021.  This means today’s prices are 1.2 times higher than average prices in 2010.

Inflation and cost of living are not the same, but they are related.

• Inflation:  As the cost of goods and services increase, the buying power of the dollar falls.
• Cost of Living:  This is the average cost of standard living including food, housing, transportation, taxes and healthcare.

Looking back a decade we know two things.  Inflation and cost of living will increase.  How are we going to beat the ever increasing cost of living? 

Here are six steps I have taken since 2010 to beat the high cost of living.

1. Setup a budget.  Initially this was difficult for me.  How do I setup a budget and then manage budget categories?  I ended up finding a free budget tracking software program that made budgeting very easy and user friendly.  Budgeting will make your life financially peaceful, productive and rewarding.
2. Live under your means.  In my mid-twenties in 2010, I wanted to live in the coolest apartment, wear the best clothes, eat and drink at the most popular restaurants, etc.  I had to change my lifestyle if I was going to get of debt and start investing or building a financial future.  Once I made the difficult changes in living, habit, and behavior, my financial course has been on an upward trajectory.  Live under your means to get ahead and beat the annual cost of living increase.
3. Establish an emergency fund.  The first emergency fund should be small and should match one month’s rent or mortgage payment.  After this is established, work on paying off debt and investing.  Once your debt if fully paid off, kick your emergency fund up to six month of living expenses.  Keep all emergency funds liquid and preferably in a high yield savings account to help beat inflation.
4. Pay down debt.  Typically, consumer or credit card debt carries high interest rates.  If you have this type of debt, I would focus on this type of debt first.  Identify the account with the smallest balance and highest interest rate (in that order).  Pay that account off first and work backwards to your highest balance and lowest interest rate.  You can use this method on other types of debt as well.
5. Increase your income.  Did you know your income is the best wealth building tool?  At one point in my young career, I had three different jobs.  Two of the side jobs brought in an additional $2,000 per month after tax.  This helped pay the bills and pay down debt.  I did burn out after 18 month of living this lifestyle.  The situation did it force me to find one job that had a salary that equaled all three jobs.  Get out there, hustle, add value, and increase your income.
6. Always invest.  As my father in-law use to say, the turtle didn’t cross the road without sticking his head out of his shell.  Everyone should be investing a portion of their income.  This percentage will depend on several factors, but I would recommend starting at 15% of your gross income.  I recommend investing in your company 401K plan first, IRA second, real estate crowdfunding third, taxable stock portfolio fourth and opportunistic real estate investments last.  If you are limited on funds, pick the first option, go to the second, third, fourth and fifth option when you are ready.

What are some different ways you can beat the high cost of living? 

It would be an honor to receive your feedback!