How to keep on budget when nothing's cheap anymore

My wife did a Costco run after an appointment this morning. After she was done she lamented that it was going to be a big bill because meat (chicken in particular) wasn't cheap.

I said, “Nothing is anymore,” and she agreed.

How to keep on budget, then, if prices keep going up?

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A recent jump in the Consumer Price Index

Prices have risen sharply recently due to inflation. The Consumer Price Index has increased by 18% over the past three years (September 2020 to September 2023). In contrast, it increased only 11% during the previous seven years.

On the ground, this means that the increase in the prices of things has been a bit more noticeable recently than it was in the mid-2010s.

Big and little price surprises

The price of things catches you by surprise here and there.

Soft drinks. Candy bars. Eggs. Toilet paper.

And fast food, my goodness. Where the heck did the dollar menu go? It's more like the five-dollar menu now.

One of our favorite Chinese restaurants had to increase their prices. They held off as long as they could and kind of tore the Band-Aid off with a fairly large increase. When I went to pay, I didn't have enough cash! They took what I had and even refused to take the balance when I came back with it later. (Really kind of them, honestly!)

Even Maruchan ramen is over twice as expensive as I remember it! It's about $0.26 a package, but it used to be under a dime. Granted this was 20+ years ago when I was still single, but hearing that ramen was that expensive was a bit of a shock.

So we're seeing price increases in a lot of ways.

No surprise increase in paychecks, though!

Prices are going up, but paychecks usually don't rise at the same rate, and certainly not as continuously.

As a govvie, the Office of Personnel Management publishes the salary tables that determine my paycheck. There are variations in pay grade (new employee, journeyman, and so forth), the kind of job, and other things. There is also an adjustment for the cost of living in a particular area, called locality pay.

These rates are updated, or not, approximately once a year around the start of the calendar year. Barring promotion, my paycheck stays the same as it did at the beginning of the year, and may not be adjusted enough to fully account for the rise in prices due to inflation.

Private-sector paychecks may be adjusted on a different schedule, or more or less often, depending on the company. Likely, though, the paycheck will usually stay where it is as the prices of things rise most of the time.

How to keep on budget when expenses are a bigger chunk of a regular income

Left to itself, this is what it is. It's where we are.

The question is what to do about it.

Here are a few general ways to cover the rising gap in prices and wages.

Do the little money-saving things

To start off, the math is simple, but making it work sometimes is anything but easy!

You may have heard it a million times before, or only a few times, or maybe never:

Income minus expenses!

If you've never heard this before:

no judgment! and
the amount your savings account changes each month is the amount you take in (income) minus the amount that goes out (expenses).

Doing money-saving things means less is going out, and it's a great place to get quick wins. Here are some money-saving things that continue to help us keep our finances on the right track. (Especially buying cars used! We would have spent tens of thousands more if we had bought new!) And here are a few hacks to save money on groceries.

Track expenses and watch what you use

Something that is on the backdrop of spending less is tracking expenses.

After you track and look at everything going in and out of your accounts, you'll have a new appreciation for your spending. We certainly did.

We use Tiller to pull all of our transactions (income and expenses) into a single place. That, and I've also assembled all of our recurring charges in one place so that we can evaluate (for free) which ones we can say goodbye to.

Build a side income

The other way to make the math work better is to increase the income side.

This could be income from a second job, either online or offline. Or it could be a gig economy type job like DoorDash, TaskRabbit, Fiverr, or similar.

For longer-term income, it could mean learning a skill, building a following, selling products, or becoming a dealer and buying wholesale and selling retail, or some other business venture. The last one has no guarantees — here are some I've tried; not all were successes! — but as long as you start small and learn from them, you'll be in a better position afterward for the exercise.