Have you noticed that prices are going up, up, up?! Even though college students often don’t have a ton of week-to-week expenses, it’s not shocking anyone that prices are on the rise. Simply look at the gas station prices as you drive around, and you’ll see this increase. So why is this “inflation” happening? Let me provide just a little bit of insight.

First, what is inflation?  Inflation is simply an overall rise in the prices of goods and services that we frequently buy. If prices are rising, this means that a sum of money will not be able to buy as many goods or services as it did in the past. Whether you are at the grocery store, filling up your car with gas, purchasing a car, or looking for an airline ticket you have probably noticed that prices have increased within the past 18 months. Inflation is not a new topic and has occurred almost every year whether we notice it or not; therefore, the cost of goods and services today is generally more than the cost of goods and services say in the 1940s or 1950s. However, we are now experiencing a rapid jump in prices that has not been seen since the early 1980s. Inflation may cause wages to increase, but unfortunately, they don’t always increase at the same rate as the inflation of products and services.

While this may seem backwards, one of the main causes of inflation is an increase in the total amount of money in circulation. Hear me out. During the height of COVID, money was pumped into the U.S. economy. This led to an increase in the demand for goods and services as many individuals had more money in their pockets than they had originally planned. But the businesses could not keep up with the demand; therefore, prices increased. This price increase slows the purchases down to allow the companies to increase their supplies once again…and hopefully level off their supplies and prices. A recent example of this is the airline industry. Many people want to fly, but there are not enough flights available which is part of why prices have gone up. Another ripple effect impacting inflation is the cost of goods and services increasing, which then increases the costs for businesses, who in turn have to increase their goods and services. If we take another look at the airline industry, it’s easy to understand that the increase in flights’ prices is also related to the increase of gas or fuel as that is a significant cost to operate a plane. Last but not least, another potential cause of inflation we are seeing is that people want an increase in wages to help combat the rising costs they are paying for goods and services. Overall, a combination of these three causes could be why we are seeing such a quick increase in prices. During the pandemic, most businesses slowed down their production and now they are trying to get back to normal to meet the increased demand from consumers.

Now that you understand what inflation is and how it might be caused, let me explain how it is measured. You may have seen something called CPI and that it is at record highs or maybe that it hit 8.5%, but what does this mean? CPI stands for consumer price index, and it is a mathematical formula to measure inflation. CPI is released monthly, and it shows the change in price levels of goods. For example, if CPI measured 6% for the month of June this means price levels have risen 6% from June in the previous year (1-year calculation).

I couldn’t, in good conscious, tell you about inflation without telling you some ways to fight it. Life is getting more and more expensive; therefore, it is important to find a way to properly manage our cash flow. Below are some ways to help fight against inflation.

• Create a budget
  • If you haven’t already, create a budget. A budget will help you track how much your income is, so you can determine how much you can save and spend. It is vital to ensure that you are spending less than you make, even more so when our expenses are higher.
• Be a thrifty spender
  • Before going to stores make a list of what you need and only buy from the list to avoid compulsive spending. You could also look for generic or cheaper alternatives to what you are buying or create meal plans based off of the items on sale. If you want to buy something, try waiting a few days and reflect on if you still want to buy it.
• Trust that God will provide
  • Inflation can bring uncertainty or worry, but it is important to remind ourselves about who is in control. God is in control, and he owns everything including our finances. While paying more for items or having a tight budget may not be fun, we can know that we can trust God in times of uncertainty.
  • Matthew 6:25 – “Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food and the body more than clothes?” (NIV)

Resources:

Consumer Price Index 1913-. (n.d.). Retrieved from Federal Reserve Bank of Minneapolis: https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1913-

Fernando, J. (2022, September 13). Consumer Price Index (CPI) Explained: What It Is and How It’s Used. Retrieved from Investopedia: https://www.investopedia.com/terms/c/consumerpriceindex.asp

Fernando, J. (2022, September 13). Inflation: What is It, How Can it Be Controlled, and Extreme Examples. Retrieved from Investopedia: https://www.investopedia.com/terms/i/inflation.asp

Waugh, E. (2022, April 27). 6 Ways to Fight Inflation and Save Money Now. Retrieved from Experian: https://www.experian.com/blogs/ask-experian/how-to-save-money-now-to-fight-inflation/