- Date : 02/10/2022
- Read: 3 mins
Do you ever wonder about the impact of inflation on household budgets? During rising inflation, lower and middle-income groups' household budgets suffer a significant blow. With increased costs, the household budget needs to be closely monitored along with your spending.
Many Indian households struggle to fit everyday items into the housing budget amid the inflation crisis. Rising inflation is a significant cause of concern and has increased the cost of living. Below we talk about the definition and the impact of inflation on household budgets.
What do you mean by inflation?
In simple terms, inflation is an increase in the price of goods and services. The rise in prices results in decreasing the purchasing power of the consumer. As the cost of everyday items increases, the home budget is affected. Ultimately, consumers have no choice but to buy less and less.
Increases in public spending, population growth, shortage, trade unions, etc., are some of the causes of inflation.
Impact of inflation on the household budget
From biscuits and oils to LPG and fuel, the cost of everyday items has increased a lot in the past few months. The rapid increase in consumer costs is due to soaring inflation. The global pandemic and the Russia and Ukraine war have affected the supply chain of commodities like crude oil, contributing to inflation.
Retail inflation was at a 17-month high of 6.95 percent in march 2022. The inflation of food & beverage, which was about 5.24 percent before, has alarmingly increased to about 7.47 percent. Inflation is not only limited to food & beverage; fat and oil costs have also gone up to 18.79 percent.
According to an official survey conducted by LocalCircles, it was found that the household expenses of about 92 percent of average Indian households have surpassed the usual expenses budget for the particular month. The sudden increase in monthly expenses has affected the money management of households.
The survey also found that 70 percent of households claimed that their household budget has increased upto 10 percent over the past few months. At the same time, a minority of 15 percent claimed that during inflation, their expenses have risen up to 30 percent. Inflation has also affected home buying, making it hard for people to buy property.
The increase in the cost of living leads to financial stress. Households that have to pay EMIs to banks suffer more as there is an increase in interest rates in the banks. Loans put a lot of pressure on the family budget. Inflation also results in difficulty in managing monthly cash flow, which affects personal finance.
Tips for managing the home budget to tackle inflation
Following are some tips that can help you manage your home budget during inflation:
• Make a well-thought budget for household expenses and stick to it.
• Spend wisely.
• Reduce unnecessary expenditures like eating out and movie nights.
• Compare prices from different places before buying.
• Use public transportation instead of your vehicle for travel.
Also read: Tips to navigate uncertainty during raising inflation
As the prices of necessities increase, the household budget is impacted in many ways. Everything is affected, from transportation to food, resulting in a reduced standard of living.