Lifestyle Choices as a Hedge Against Inflation

Balloon inflation by grahammclellan on Flickr!Depending on what sources and metrics you use, the annual inflation rate in the United States right now is somewhere between 6% and 11%. That means, if this trend continues, prices will double in roughly nine years, then double again nine years after that. No matter how well you’ve planned for the future, when the cost of everything increases at that rate, it’s worthwhile to at least consider some options for hedging against it.

Here are some small – and some very big – lifestyle choices you can make to help protect your budget from some of the inflationary pressure around you.

10 Lifestyle Suggestions to Protect You from Inflation

1. Start a garden

A garden hedges against inflation in food prices, particularly if you focus on perennials (like asparagus) and on heirlooms that you pollinate yourself (like tomatoes). Once you’ve invested the initial cost and develop a system for replenishing things (composting, etc.), you can drastically and permanently cut your vegetable costs.

2. Learn how to make as many meals as possible from basic ingredients

The inflation effect multiplies when it comes to prepackaged foods – each middleman will have to bump up their costs to both account for increases from their provider and maintain their own profit margin. Thus, it’s a net benefit for you to cut out as many food middlemen as you can. Learn how to make basic foods, like homemade bread, and buy the staple ingredients you need in bulk, like giant bags of flour that, if kept in a dry place, will last for a very long time.

3. Make most or all of your beverages from the tap

Instead of following the spiraling costs of beverages at the store, focus on drinking more water from the tap. While you’re still going to face some inflation here, an inflationary increase in a gallon of tap water is a lot less painful than the inflationary increase in virtually every beverage you might buy at the store. Or, you can get more extreme…

4. Drill your own well

If you live in a more rural area, you may be able to drill your own well and almost completely eliminate your water costs. While the startup cost might be fairly high, you’ll have a steady supply of essentially free water. We had a well when I was growing up, and my parents still use it for outdoor use, such as watering the garden.

5. Reduce your home energy use

Every little choice you make to reduce your home energy use hedges against inflation. As prices for energy go up, the savings that devices like LED light bulbs, ceiling fans, and programmable thermostats contribute to our bottom line increase as well. Every little bit helps, especially if it’s a “do once, use for a long time” solution like a ceiling fan. If you want to go really big, though…

6. Invest in solar panels or a small wind turbine

These devices can drastically reduce or even eliminate the amount of energy you need to pull in from the electrical grid. Here in Iowa (and in many places across the Great Plains), wind turbines are becoming something of a common sight along the horizon, and solar panels can be put into use almost anywhere. Even in the simplest scenarios, where solar power is used for the energy for outdoor lighting or for other small things, can reduce your energy costs over the long haul.

7. Drive less – walk, share rides, and bike more

The less you drive, the less you’re affected by escalating gas prices. Finding new routines that involve less driving are thus going to make you more independent of inflationary pressures. For example, if you start carpooling with the guy down the block, you’re suddenly reducing your gasoline usage for commuting by half, which means that the effect of inflation will be less. Move to public transportation and the effect is even lower.

8. Buy a more fuel-efficient and reliable automobile

The next time you have to purchase an automobile, don’t focus on the pleather seats. Instead, focus squarely on two factors: reliability and fuel efficiency. These two factors will make your car far less dependent on If you take some giant steps and have an electric car and power your own home with solar and wind … well, then inflation is leaving you alone.

9. Buy plenty of “forever stamps”

This is a very simple method to handle inflation, as a few books of “forever stamps” will weather any postage rate changes that might occur. Buying a sufficient amount now – particularly just before a rate change – can hedge against inflation for a long while.

10. Learn to entertain yourself with open-ended materials

If you’re a member of a bridge-playing group, guess what? Your entertainment is not going to be affected no matter what inflation does. If you like to read and can walk to the library, inflation’s not going to affect your hobby. Love to write and have a functional old computer? Your passion is going to be unaffected by inflation. There are countless hobbies that don’t require much financial contribution at all – find one that sticks with you and you’ll not be bothered by inflation much at all for your entertainment needs.

The best part about these inflation hedges? They’ll save you a lot of money even if inflation isn’t an issue at all. So start hedging inflation by making a few strong lifestyle choices – your future wallet will be glad you did.

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  1. K says:

    While I agree with the money saving tips, I am surprised at the inflation numbers you have presented. The government states that the consumer price index was 5% higher in June 2008 than in June 2007. Specifically 5.3% for food, and 2.4% for all other items except energy.
    http://www.bls.gov/news.release/pdf/cpi.pdf

    While popular opinion is that the official numbers are underestimated, you imply that there are statistics to back up your 6-11% range, but do not cite your source. From reading your other material, I would think that you would be less swayed by sensationalist reports from the media that predict doom and gloom.

  2. andrew says:

    I came about this site about two weeks ago, and have read most of the site. I like what you have to say, and the way it’s presented – but it certainly is directed either towards very rural areas or places with plenty of public transportation.

    What happens if you’re in neither of those, and moving is not a viable option?

  3. Mo-Town says:

    I think you make a good point. When we think about saving money by gardening, commuting, switching to alternate energy ect., we often calculate the savings based on current prices without considering the effect of inflation.

    Have you ever thought of doing a cost/savings analysis of alternate energy sources like solar and wind (sort of like your recent post about used fuel efficient vehicles vs. new hybrids)? I’ve been seriously looking into solar, and even with the credits California provides, the startup costs for a solar system are extremely high. I’d definitely be interested in hearing your thoughts on “frugal” ways to go solar.

  4. sir jorge says:

    I’m tired of people saying to make a garden. I don’t know anyone in my fair city that lives in a house, or has a place for a garden.

    I’m trapped in an urban setting, really urban.

  5. liv says:

    These all sound like things I have seen in your previous posts.

    I just got this emailed to me…what a way to save on driving!

    http://www.zipcar.com/index

  6. Andy says:

    These are great tips.

    One question/comment though. I read an article here explaining that forever stamps aren’t a good deal because a bill prohibits stamp increases at a rate greater than inflation. I don’t know enough about economics/time value of money to evaluate this. But it is interesting.

  7. Steve says:

    We have a yard for a garden but it’s on the wrong side of the house or something, because nothing seems to grow there. When we got herbs on clearance for less than they would have cost in the grocery store, great. But other than that we’ve spent way more on seeds and started plants than it would have cost to buy the 5 tiny tomatoes and 3 compact cucumbers we got in return. I don’t mind since my wife finds it a fun enough hobby, but it’s not proving to be a money-saving move.

  8. justin says:

    Can you do a post about the LED light bulbs?

  9. Charlotte K says:

    Aren’t public libraries wonderful? But if you think they are a hedge against inflation please support them when times are tough. Libraries are closed by towns and cities every day as budget busters. Do what you can to ensure yours survival.

  10. Shevy says:

    @sir jorge
    You live in a city with no houses? Seriously, even apartment dwellers can grow a few pots of herbs and some tomatoes on a sunny windowsill or on even a tiny balcony.

    In our downtown area they’re starting to talk about green roofs (although there are a number of insurance considerations).

  11. Trent says:

    “Can you do a post about the LED light bulbs?”

    Forthcoming. I’m having some difficulty with the photography, to tell the truth, but when I get that resolved, it’ll be posted.

  12. Mo-Town says:

    Steve:

    If your garden gets plenty of sun, the problem may be your soil rather than the garden’s location. A $10 DIY soil test kit should be able to tell you whether you need to amend your soil.

    Alternatively, you can just build raised beds and fill them with compost. Compost can be expensive if you purchase it by the bag, but many counties offer free (or cheap) compost in bulk quantities. For example, where I live, it’s $15 for a cubic yard (about a truck bed full). Half of my garden is planted in pure compost with the other half planted in my back yard’s natural soil. The portion planted in compost has been far more productive and healthy.

  13. jb says:

    Mostly good exceptions. But I would owning a well unless you really need it. Putting aside the initial expenses, consider these drawbacks:

    * They are something else to maintain, and cost money to maintain.

    * You would likely need a water softening system, which requires adding salt periodically. (I’m pretty sure the cost of salt alone for the softener at my mothers’ house costs much more than I spend on water bills.)

    * Electric water supplies don’t work when the power goes out. (When I was growing up we had two several-day power outages after hurricanes.)

    I am a huge fan of relatively fuel efficient cars. I don’t think hybrids are worthwhile yet. But my last car got well over 35mpg, and my current car gets roughly 33mpg. I’m also seriously considering commuting by bicycle, at least occasionally.

    Gardening might be worthwhile if you have a big family. Its a great hobby, but I’m not sure you really save money with it if you’re just feeding one or two people.

  14. shari says:

    The forever stamps are not a hedge against inflation, because the USPS is required to raise rates more slowly than the rate of inflation. See this article: http://www.slate.com/id/2166475.

    It’s still a great idea to pick up a pack or two just before rate increases go into effect, but unless you use stamps very, very quickly, inflation will catch up.

  15. constant learning says:

    Additionally, Trent, would you address the differences in light quality from various CFL bulbs?

    I have tried several CFL bulbs that give a yellow dingy look and one “natural light” that felt cold and icy. The LED “warm light” bulb I tried did not give off enough light and also felt cold and blue.

    I am sure the brand makes a difference, but I am having trouble finding the right one without buying one of each! (Somehow, that does not seem frugal!)

  16. Trent says:

    K: the “except energy” part is the kicker. Without any energy costs, the CLI went up 5% in June. Over the last year, gas prices have climbed 36% – http://www.fuelgaugereport.com/ – and other energy prices have climbed significantly.

    That’s a real part of inflation whether the CLI wants to include it or not. It’s hard to get a bead on how much of an impact that really has, so I tried to put as wide of a range as possible (6% – 11%).

  17. Old Lady says:

    “Start a garden” I guess you don’t have hungry deer in Iowa. Anything you like to eat, they like better, except for herbs, which is what I grow.

  18. Walt says:

    Buy plenty of forever stamps?

    I disagree. It’s much smarter to just STOP using stamps.

    I pay all of my bills online (including the ones that require checks…my bank sends them paper checks and it’s all free).

    I’m almost 30 and I’m very confident that in the rest of my life I won’t use more than 50 stamps total. If I bought forever stamps, I guarantee that I’d lose them within a year.

  19. caryn verell says:

    for those who need to have their dirt (soil) tested, have it done for free at you state ag extension ofc. same with water. hell, the ag rep will even come out to your residence and give you tips on where to plant and what to plant if you want them to. afterall, these guys are paid by us taxpayers, duh! and for the rest of the commentators who begin with “cant”- change the attitudes folks and find a way…

  20. caryn verell says:

    also, it is not about the price of a gallon of gas but more about what you can do with that gallon. and maybe the rising cost of bread will get us finally on that diet we have been meaning to go on….don’t throw out the crusty ends-makes good dressing, croutons, and bread puddings. call your old aunties and uncles who lived the depression years and pick their brains…they are a lot smarter that we think they are and they are full of good ideas that kept them alive and well.

  21. Shellie says:

    I love your ideas. We live in a rural area with no public transportation and absolutely nothing within walking/biking distance. We have made some changes, though, such as eating healthier. Wow, you never realize how much you spend on prepared foods! We are eating healthier, spending less, and never had more food in the fridge! Keep it going, Trent. :-)

  22. You’ve got to rememeber that a lot of companies give cost of living/inflation raises to their employees regularly. But that is certainly not to take away from your article…these are all wonderful ways to battle inflation. If you are getting cost of living raises but still living conservatively, that’s free money, right?!?!?!?

  23. Cathy Braun says:

    I’ve been doing the “basic ingredients” bit for quite some time. When I was getting out of debt and changing my expensive consumer habits, I decided I would take lessons from my depression era grandmother. I learned how to cut up a whole chicken into parts, and use every part of it in some way. When I’ve sliced off all the meat, I make chicken broth. I use that chicken broth in everything from rice to stews. Trying to cut up the chicken the first time was quite intimidating, and I got a lot of funny looking pieces, but now I’m quite skilled with it. It takes me just a couple of minutes now, and I have butcher looking chicken pieces!

  24. Brandon says:

    Buy plenty of “forever stamps”

    I read an analysis somewhere that shows that stamp prices have increased slower than the price of inflation, and that legislation prevents them from increasing faster than it. Thus, it seems like it would not be the best hedge after all.

  25. Jesse says:

    @Mo-Town, our soil is very much clay so we’re thinking of building some growboxes — what would you suggest as far as material? Will wood go south too quickly?

    We’ve got a great spot picked out and are excited to start a garden for next spring.

  26. Sunitha says:

    Your ideas are great. It only shows that if we have the will, we can be in control of our lives. We always blame the external factors for any disruptions in our lives but very few like you look within one’s self to help ourselves. In the part of the world I live in we have abundant sun and we have installed a solar water heater which takes care of water heating for about 310 days in a year. Needless to say our electrictiy bill is half of what it was before and we always have hot water regardless of whether there is electcity city or not. To add to this the power company gives us a small rebate on our electicity bill for using solar water heater.

  27. Sam says:

    Nice tip. As for me, I’ve converted my gas powered Honda City 1.5 to use LPG. Save me some $300!

  28. LL says:

    Inflation is the increase in the supply of money. Price inflation as often referred as the inflation is merely an effect of the supply increase, not its cause. And yes, we have been having double digit inflation for many years.

    Here’s one recent article about inflation: http://mises.org/story/2989

  29. Kate says:

    I used to have the “best” price for almost everything that I bought at the grocery store in my head. Not so anymore–I realized the last time that I went to the store that prices are changing so rapidly that I need to start a price book again.

  30. steve says:

    Yes, I agree with Trent: Definitely going down the consumption chain to the bottom basics is helpful on the budget. My last trip to the grocery store showed a pound of dry beans going at $1.00 instead of $0.79–across the board. While that’s an astonishing 27% jump in cost, it’s still based on a low amount because it’s a staple food item, not a “convenience” food item. The more you can make your food based on the staple items, the better off you will be.

    Some ideas that I’ve been putting into action:

    I’ve been making my own tortillas instead of buying them (takes about 10 minutes and saves me about $2.00 per pack, plus I never run out!)

    I buy the gallon size of milk, keep half of it for milk, and make my own yogurt from a half gallon. (again, saves $2-3 per large tub of yogurt, or $6 for the whole 1/2 gallon batch)

    Bake a dessert or cookies once every week or two to take as a snack for work to go with my brown bag lunch.

    Have been working at building the habit of eating ALL the food in the fridge & all the leftovers.

    Learned to make better stock with leftover chicken bones. After LONG simmering even the cartilage turns into stock. Also, it’s supposed to be good for your joints.

    These habits go right to my bottom line and actually they are pretty easy and convenient in their own way.

  31. Tess says:

    Hi Trent!

    Thank you for all your wonderful postings.
    Am a young mom of 8month old Florian.
    Very happy but unhappily unemployed.

    You are an inspiration both on a practical level: householdmanagement/frugality/food, and on a lifehacking level: how can I combine my newfound mommy happiness with a way to generate a healthy income, without either infringing on the other.

    Thank you, thank you, thank you!

    Tess
    Amsterdam, NL

  32. K says:

    Trent – the 5% DOES include energy. The average would be closer to 3% without energy. I still don’t see any statistics for your 6-11%. I’m just saying that those numbers scare a lot of people and I don’t think they are that realistic. I haven’t noticed much difference at all in my spending recently. The prices of many things (clothes, electronics) have actually gone down.

    But in either case, these are good suggestions.

  33. K says:

    Jesse -
    We built our raise beds with cinder blocks. Works out nice because we can grow herbs in the little holes around the edges. Wood would probably work as long as it is untreated so that there aren’t any chemicals. We just use Miracle Grow potting soil in ours but compost works too. Here is a pretty good instruction:
    http://frugaldad.com/2008/03/03/how-to-build-a-square-foot-garden/

  34. Regarding stamps…I just try to use almost none of them. I only just now used up the book of stamps that I bought at Christmastime. I pay everything possible online, and I write my letters almost entirely online as well.

    I like the main idea here, though…it’s sort of my philosophy as well. I can’t really do a lot about inflation, but I can work hard at controlling my spending.

  35. This is a great post and a great way to hedge your bets. Thanks for all of the posts. Your blog is incredible

  36. Liz says:

    There’s book that’s probably out of print now (but maybe not) that I found at a library bookstore, published in the 70s, called “The Apartment Farmer” by Duane Newcomb. Great book on growing food in urban settings. I found it on Amazon used: http://www.amazon.com/Apartment-Farmer-Duane-Newcomb/dp/0874770475

    If you have a window, a fire escape, a small patio, a back porch … you can have a garden. And if your yard’s soil is bad, that’s easily fixed.

  37. SWH says:

    Inflation remains in the range of 3-ish%. If it were 6% we would be howling in pain and if it were really 11% things would be unlike what any of us has seen in our lifetimes.

  38. Zach says:

    Trent,
    From a Canadian perspective I would add “Make your own wine” because it cuts costs here by ~75%. If you are Canadian and in the 18 to 30 bracket, alcohol is a significant portion of your budget. (we are heavy drinkers)

    For example:
    My favorite store wine is a dry, oaky merlot from S. Africa
    Cost: $12.30 / 750mL
    Making a “kit” and customize it with extra oak
    Cost: $3.30 / 750mL

    When I go to big bashes I always bring the stuff, we make big batches of sangria and every one gets smashed for ~$4.50 a person rather than ~$16 a person, across 30 people that’s a savings of $345.

    This difference is only going to increase with rising shipping costs.

  39. Great ideas, Trent! I want to add that I’m joining all the folks who menu plan and grocery shop once every 4 weeks. Shopping less saves gas and for many people, cuts down on their grocery bills. A lot of folks told me buying a double stroller was a splurge. I got mine second hand and walk more than ever to save gas and lose weight, LOL! And Steve, where were you when my husband convinced me not to buy milk by the gallon last Sunday??? Sure, we don’t use that much milk. However, drinking half and making the other half into yogurt is exactly what I intend to do from here on out. Thanks for the tip!

  40. Mo-Town says:

    @ Jesse:

    When I made my raised beds, I used three pine fencing panels for each. One panel was cut in half to make the short sides of the bed, and the remaining two were used for the long sides. The beds have held up for two years so far, and they’re still in pretty good shape. So if you if you decide to go with wood, you can use whatever’s cheapest. Just make sure it isn’t treated wood, as some of the chemicals used to treat the wood could leach into the garden bed.

    If you have access to inexpensive cinderblock or stone, you could use this for the beds as well, and the beds would probably outlast you. ;-)

    One final thought … if you’re looking to build deep beds, it’s easier to do this by removing the clay soil beneath your beds than it is to build your beds twice as high.

  41. Kevin says:

    Who the heck uses stamps anymore?

    But seriously, if I had a nickel for every time I’ve seen this list regurgitated, I could retire and not have to worry about hedging against inflation.

    How about a more in-depth post about one or two of these topics – like the food from basic ingredients – since that’s something everyone can use?

  42. jm says:

    Here’s a way to find recipes based on what you have on hand: http://www.supercook.com/

    I have been meaning to try this out but have been really busy at work lately.

    I’m not affiliated with that site, by the way, although I had the exact same idea about 13 months ago.

  43. Dan says:

    Kevin has a point – how about a nice post on compost…I can see where your own compost is a good idea, since you know what is in it, but I am less sure about the compost you get from the city.

    It seems to me that fertilizing your garden with municipal compost would be a good way to get contaminated food (metals, pcbs, etc)…Is there any sort of testing, etc that goes on in these programs?

  44. Rob in Madrid says:

    Just commented to that effect on JW’s blog, healthy eating doesnt’have to be expensive, if anything you can eat better and reduce your shopping budget at the sametime. Inspite of inflation running at 5% in the euro zone we’ve actually managed to reduced (ourside of gas up 35%) our overall budget. Best part is, thanks to Trent, is we eat way better. I love cooking! Baking is another story, but maybe someday!

  45. battra92 says:

    What about just taking on a second job?

    A well is not a good idea. Our municipal water supplies are being paid for in taxes so you may as well use them. The EPA regulates the hell out of them as opposed to your well which you have to pay someone to check every year and pay to pump it out.

    Thanks to the commenters for the nwt suggestion on eBay, though I doubt they can beat Wal*Mart for their $15 Wranglers. After losing 30+ lbs my jeans are all huge on me and falling down so I need to get a new wardrobe ASAP.

  46. Scott says:

    A healthy/easy/cheap cookbook for life is “American Wholefoods Cuisine” See amazing comments on amazon

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